PAYE for Construction Workers
PAYE is the deduction contractors ask about most, and the one most often handled by habit rather than rule. On a construction site the maths is not complicated — gross pay, a few qualifying deductions, graduated bands, then personal relief — but the details are easy to get wrong when you are paying daily casuals from a cash box. This guide explains how PAYE works for construction crews, how casual wages are treated, and the mistakes that show up in most site payrolls.
Updated October 17, 2026 · Guides
How PAYE is calculated
PAYE is charged on taxable pay: gross earnings less qualifying deductions such as NSSF. The result is taxed through graduated monthly bands, and then the monthly personal relief of KES 2,400 is subtracted from the tax due. Whatever remains is the PAYE you deduct and remit. The bands are progressive — only the income within each band is taxed at that band's rate.
- 10% on the first KES 24,000 of taxable pay.
- 25% on the next KES 8,333 (24,001 to 32,333).
- 30% on earnings between KES 32,334 and 500,000.
- 32.5% between KES 500,001 and 800,000.
- 35% on everything above KES 800,000.
Casual daily wages are not exempt
A common myth on site is that casuals paid by the day fall outside PAYE. They do not. A casual worker is still an employee for tax purposes, and where their earnings cross the taxable threshold the employer must deduct PAYE and remit it, using the worker's KRA PIN. Paying a crew in cash with no deduction does not remove the obligation — it just moves the problem to the next audit, where the employer carries the exposure. Where a casual earns below the taxable threshold for the month, no PAYE arises — but the attendance and wage records still have to exist, because that is how you prove no tax was due.
Where construction payrolls go wrong
Most PAYE errors on Kenyan sites are not exotic; they repeat. Fixing them is a matter of process, not of tax expertise.
- Paying cash with no PAYE deducted, then having no way to prove otherwise.
- Treating long-serving casuals as self-employed consultants to skip the deduction.
- Forgetting to apply personal relief, so workers are overtaxed.
- Deducting PAYE but filing the return late, triggering penalties.
- Basing deductions on a guessed figure rather than a locked muster roll.
Filing and the monthly deadline
PAYE is a monthly obligation. The return for the month is due by the 9th of the following month, and it must reconcile to the wages you actually paid. FundiPay calculates PAYE per worker as the payroll runs, applies relief correctly, and produces the figures you need for the return — so the return and the payroll tell the same story when the two are placed side by side. Keep the wage records and the return together; an assessment that matches the two is the fastest way to close a query.
Frequently asked questions
Do I deduct PAYE from casual construction workers?
Yes, where their earnings cross the taxable threshold. Casuals are employees for PAYE purposes, and the employer must deduct tax and remit it using the worker's KRA PIN. Daily pay does not make a worker self-employed.
What is the monthly personal relief?
Personal relief is KES 2,400 a month, subtracted from the tax calculated on taxable pay. Applying it correctly means a worker is not overtaxed — forgetting it is one of the most common payroll errors.
When is PAYE due?
The PAYE return for a month is due by the 9th of the following month. File and pay on time to avoid penalties and interest, and make sure the return reconciles to the wages you actually paid.
Can I work out PAYE myself on a spreadsheet?
Many contractors do, and many get it slightly wrong — usually on relief or on casuals. FundiPay applies the bands, qualifying deductions and relief automatically as payroll runs, which removes the arithmetic and the risk of an under-deduction.
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PAYE (Pay As You Earn)
Pay As You Earn — the income tax an employer deducts from a worker's wages and remits to the Kenya Revenue Authority each month.