New bid to end delay of county salaries, statutory remittances row
Financial Standard
By
James Wanzala
| Oct 13, 2026
Controller of Budget Dr Margaret Nyakang’o said the new system will integrate salary payments and automate statutory deductions. The remarks come at a time when a recent COB’s report showed counties owe staff Sh100.44 billion as at June 30, 2026 in statutory deductions and salary claims, with some dating back more than 10 years since devolution started in 2013.
Nyakang’o said the new system under the Integrated Financial Management Information System (IFMIS), which does deductions at source and started being operational in July this year, integrates Social Health Authority (SHA), the National Social Security Fund (NSSF), Pay As You Earn (PAYE), pension deductions, National Industrial Training Authority (NITA) and others.
“It is something that has been happening since July 1, this financial year. The IFMIS has been mapped to the Collective Bargaining Agreement (CBA), such that when my office authorises a withdrawal, the payees are already marked so that the moment the pay is processed, the net pay goes to the employee, PAYE to Kenya Revenue Authority, pensions go to the Retirement Benefits Authority (RBA), etc since all statutory deductions are already marked,” said Dr Nyakang’o.
“The scenario at the end of this financial year will be very different from what we have been having. This is because if counties have inadequate funds, they would rather choose to pay salaries and leave out statutory deductions, and that is what I have observed for the last seven years.”
READ MORE
How the global oil crisis has increased Kenya's fuel import costs
Tea farmers queue at banks for bonuses as low payouts spark tax protests
Firewood, charcoal dominate kitchens despite big investments in clean cooking
How StanChart deliberately became a tier-two lender
Kenya Airways to spend Sh45b bailout on grounded jet repairs
Local firms eye Sh3.4 trillion construction pipeline as sector grows 6.8 per cent
Imports drive KRA customs revenue growth to Sh90 billion
Deposit-taking Saccos' assets hit Sh1tr as loans outpace deposits
Of VAT and fuel; Inside William Ruto's gamble to keep pump prices low
The COB said she has started doing first quarter reports since the system became operational to monitor the direct payment impact it has had and hopes the scenario at the end of this financial year will be different.
The COB was speaking on Friday at a hotel in Nairobi, when she met Standing Committee on Labour and Social Welfare members in Nairobi on county governments’ compliance with statutory deductions and contributions. Present was also RBA chief executive officer Charles Gichira. The Committee, led by Chairman Senator Julius Murgor (West Pokot) and Vice Chair Crystal Asige (nominated), had requested to know from COB the county government’s budgetary provisions and expenditure implementation in relation to pension obligations, and the extent to which counties have provided for and remitted pension contributions.
Others were any relevant observations or trends regarding outstanding liabilities, financial management and expenditure control challenges affecting timely remittance, measures that can strengthen budgetary planning and prioritisation of statutory obligations and recommendations for addressing outstanding pension arrears and ensuring timely remittance of current contributions.
According to the COB’s report for the financial year 2025-2026, county executives accounted for Sh98.44 billion, while county assemblies accounted for Sh180 billion and included contributions to the Local Authorities Provident Fund (Lapfund), NSSF and Local Authorities Pensions Trust (LapTrust).
According to the COB, Nairobi, Kajiado and Machakos are leading in accumulated salary arrears and unremitted statutory deductions.
Nairobi’s stood at Sh44.36 billion, with a liability of Sh49 billion that had remained unpaid for more than three years, while another Sh13.53 billion was between two and three years old. A further Sh11.89 billion had been outstanding between one and three years, while Sh11.36 billion was less than a year old.
The Nairobi County Assembly has Sh1.62 billion in similar obligations. Machakos had the highest county executive liability at Sh1.95 billion, where Sh1.69 billion has been outstanding for less than one year while Sh325.51 billion remained unpaid for more than three years. Mombasa followed with Sh1.33 billion.
According to COB, as of June 30, 2024, unremitted contributions to retirement benefits schemes by the public sector accounted for 98 per cent of the total arrears of Sh51.8 billion, with over 90 per cent of the outstanding contributions due from universities, county and national governments.
The pre-devolution debt relates to four schemes, namely Lapfund, LapTrust, County Pension Fund (CPF) and NSSF and amounts to Sh21.3 billion, comprising the principal amount of Sh4.3 billion; penalty and interest accrued of Sh15 billion; and Sh2 billion of actuarial deficit owed to LapTrust and CPF.
The senators were surprised to hear from Dr Nyakang’o that the penalties and interest accrued do not go to retirees but to the schemes.
It was noted in the report that from 2015 to 2024, penalties and interest have been growing to now Sh51.8 billion. The COB blamed counties for not having budgetary provisions to pay for statutory deductions despite sometimes receiving all their equitable share from the National Treasury, as in 2025-2026, and even being given time to settle the liabilities.
“What I advise them is to use a forecasting model that has already been tried and tested by the Communication for Revenue Allocation (CRA), but a lot of counties use the Own Source Revenue (OSR) model, and that is how they get it wrong because they exaggerate figures,” she said.