36 months at 31% of a KSh 60,000 basic salary gives gratuity of KSh 669,600 before tax.
How gratuity is calculated
Gratuity is a percentage of basic salary for each month of a contract. Public service contracts commonly use 31% of basic pay; private employers set their own rate in the contract. Gratuity is different from service pay and severance, which are set by the Employment Act.
If your contract says gratuity is 31% of basic salary and you worked 36 months on KSh 60,000 basic, the gross gratuity is 0.31 × 60,000 × 36.
Is gratuity taxed?
Yes. Gratuity is employment income and goes through PAYE. Paid as a lump sum, most of it lands in your top tax band. Gratuity paid into a registered pension scheme is treated as a pension contribution and can be tax-free up to the annual limit, which is why many employers offer that option.
Rates used in this calculator
Contract gratuity (public service default)
Public service contract gratuity
31% of basic salary per month
PAYE bands & personal relief
First KSh 24,000 of taxable pay
10%
KSh 24,001 – 32,333
25%
KSh 32,334 – 500,000
30%
KSh 500,001 – 800,000
32.5%
Above KSh 800,000
35%
Personal relief
KSh 2,400 a month
Insurance relief
15%, up to KSh 5,000 a month
Pension contributions deductible up to
KSh 30,000 a month
Mortgage interest deductible up to
KSh 30,000 a month
Frequently asked questions
What is the gratuity rate in Kenya?
There is no single legal rate. Civil servants on contract usually receive 31% of basic salary for each month served. Private sector rates depend on the contract or CBA.
Is gratuity the same as service pay?
No. Service pay is a statutory payment of 15 days per year for employees not in NSSF or a pension scheme. Gratuity is a contractual benefit agreed with your employer.
How can I reduce tax on my gratuity?
Ask your employer to pay it into a registered pension scheme. Contributions are deductible up to KSh 360,000 a year, and the amount grows tax-free until you withdraw it.