SHIF : Social Health Insurance Fund

What is the Social Health Insurance Fund (SHIF)?

Kenya’s healthcare system is undergoing a transformative shift with the introduction of the Social Health Insurance Fund (SHIF), a significant move that replaces the National Health Insurance Fund (NHIF). This change marks a pivotal moment in the country’s healthcare journey, reflecting a dynamic response to the evolving healthcare needs of its population. The SHIF aims to bolster healthcare accessibility and affordability for all Kenyans, mainly focusing on those in the informal sector and the economically vulnerable.  Our payroll experts are ready to answer any questions you might have after reading this article.

Tracing the Roots: From NHIF to SHIF

Kenya’s healthcare system has a rich history. It evolved over time. The NHIF was a crucial part of this history for over five decades. Its goal was simple: provide health insurance to the employed. Yet, as Kenya grew, so did its healthcare needs. NHIF did not cover many Kenyans in informal jobs or without jobs. This coverage gap was a growing concern.

Enter SHIF: This new fund is a response to these changing needs. It aims to cover everyone, not just the formally employed. This is a big step for Kenya. It shows a commitment to inclusive healthcare. SHIF’s approach is different from NHIF’s. It uses a percentage-based contribution system. This system is fairer. It considers different income levels. Everyone contributes, but according to their ability.

Comprehensive Overview of SHIF and Its Structure

This initiative is not just a solitary fund but a constellation of funds, each with a specific purpose. Understanding the structure and components of SHIF is crucial to grasp its potential impact on healthcare in Kenya.

The SHIF structure

The Structure of SHIF

SHIF encompasses three primary funds:

1. Primary Healthcare Fund

  • Purpose: This fund is dedicated to purchasing primary healthcare services. It is the cornerstone of preventive and basic healthcare.
  • Funding: It receives appropriations from the National Assembly, ensuring a consistent flow of resources for primary healthcare services nationwide.

2. Social Health Insurance Fund (SHIF)

  • Mandatory Registration: A key feature of SHIF is the mandatory registration of every Kenyan citizen, including children born after the Act’s commencement.
  • Inclusion of Non-Kenyans: Non-Kenyan residents who have been in Kenya for more than 12 months are also eligible for registration and liable for contribution.
  • Funding Sources: SHIF’s capital is derived from various sources:
    • Contributions as outlined in the Act.
    • National Assembly appropriations, specifically for indigent and vulnerable persons.
    • Contributions from national and county governments for compulsory public service employee insurance benefit schemes.
    • Contributions from other employers broaden the funding base.

3. Emergency Chronic and Critical Illness Fund:

  • Focus: This fund targets financing healthcare services for chronic and critical illnesses, a vital aspect of healthcare that often entails high costs.
  • Scope: It aims to provide a safety net for those facing serious health issues, ensuring they can access necessary treatments without prohibitive financial barriers.

Contributions Regulations to SHIF

The contribution structure of SHIF is designed to be inclusive and equitable:

  • For Salaried Individuals: They contribute 2.75% of their gross salary, ensuring their contribution is proportionate to their income.
  • For Non-Salaried and Unemployed: The contribution is calculated as 2.75% of the household’s income, with the minimum amount being Ksh 300 per month. This approach considers the varied economic situations of Kenyan households.

Contribution Comparison between NHIF and SHIF

Broad Coverage and Benefits

SHIF is designed to provide comprehensive coverage:

  • Family Coverage: It includes coverage for the contributor’s family members, such as spouses, children, and disabled dependents.
  • Educational Support: Students up to 25 years old in full-time education are covered, recognizing the importance of healthcare for young adults in education.

Impact of Social Health Insurance Fund (SHIF) on Employers 

Payroll Adjustments for Employee Contributions

Businesses must modify their payroll systems to manage the deduction of SHIF contributions, which is 2.75% of each employee’s gross salary. This requires careful administration and potential updates to payroll software to ensure accurate and compliant deductions.

Employee Net Salary Considerations

The introduction of SHIF contributions directly affects the net salary of employees. Businesses may need to address employee concerns regarding the decrease in their take-home pay and possibly reassess overall compensation strategies to maintain employee satisfaction and morale.

Enhanced Employee Healthcare Benefits

With SHIF, employees gain access to broader healthcare coverage. This can be a positive aspect for businesses, potentially leading to improved health and well-being of their workforce, reduced absenteeism, and enhanced productivity.

Compliance with Healthcare Regulations 

Businesses must ensure full compliance with the SHIF program. This includes accurate calculation, timely remittance of employee contributions, and adherence to any other regulatory requirements associated with SHIF.

Impact on Recruitment and Retention

The introduction of SHIF might influence a company’s ability to attract and retain talent. Prospective and current employees may view comprehensive health coverage as a valuable benefit that can decide their employment choices.

Impact of Social Health Insurance Fund (SHIF) on Employees 

Decrease in Net Salary

Employees will notice decreased take-home pay due to the 2.75% SHIF contribution. This reduction may impact their monthly budgeting and financial planning.

Improved Access to Healthcare

SHIF ensures employees have better access to healthcare services. This expanded coverage is beneficial for their health and well-being, leading to potentially lower personal healthcare expenses.

Healthcare Security for Dependents

The SHIF coverage extends to employees’ dependents, offering a significant benefit by ensuring family members access to necessary healthcare services.

Reduction in Out-of-Pocket Health Expenses

With SHIF, employees are likely to see a decrease in their out-of-pocket expenses for medical treatments, contributing to overall financial savings in healthcare.

Enhanced Financial Planning

The introduction of SHIF contributions emphasizes the importance of effective financial planning for employees. They might need to adjust their budgets to accommodate the reduction in net income.

What Next For Kenyan Employees and Employers? 

As we’ve explored in this article, introducing the Social Health Insurance Fund (SHIF) in Kenya is a pivotal change for businesses and employees. From the perspective of businesses, it introduces new challenges in payroll management, impacting operational costs and employee compensation. For employees, while there’s a noticeable decrease in net salary, the benefits of improved healthcare access and coverage, particularly for dependents, are significant.

The critical takeaway is balancing the immediate financial implications and the long-term benefits of a more inclusive and equitable healthcare system. It highlights the importance of effective financial and health planning in this new landscape.

The Best Payroll Outsourcing Services in Kenya 

Navigating these changes, especially in complying with statutory deductions and tax remittance, is where our expertise at Flexi Personnel comes into play. We provide comprehensive payroll management services to support your business in adhering to the new SHIF requirements. We aim to make this transition as smooth as possible for you, ensuring compliance and ease in managing these new responsibilities.

In the journey towards universal health coverage in Kenya, staying informed and prepared for these shifts is essential. With Flexi Personnel by your side, you have a partner committed to supporting you through this transformative phase in healthcare financing.


What is the Social Health Insurance Fund (SHIF)?

The Social Health Insurance Fund (SHIF) is a new healthcare financing system in Kenya, replacing the NHIF. Designed to ensure universal health coverage, SHIF aims to provide equitable and affordable healthcare to all Kenyans, regardless of their employment status.

Who is eligible for SHIF coverage?

SHIF eligibility is broad and inclusive. Every Kenyan citizen is mandated to register for SHIF, along with non-Kenyan residents who have been in the country for more than 12 months.

What are the key components of SHIF?

Primary Healthcare Fund: This fund is allocated for purchasing primary healthcare services, focusing on preventive and basic healthcare needs.
Social Health Insurance Fund: Central to SHIF, it requires mandatory registration and contributions from all Kenyan citizens and eligible residents. It is funded through individual contributions, government appropriations, and other employer contributions.
Emergency Chronic and Critical Illness Fund: This fund is specifically aimed at financing healthcare services for chronic and critical illnesses, ensuring those facing serious health issues.

How are contributions to SHIF calculated?

Salaried individuals contribute 2.75% of their gross salary to SHIF. This percentage-based approach ensures that the contribution is directly proportional to the individual’s income, making it fairer than a flat rate.
Non-salaried and unemployed individuals contribute 2.75% of the household’s income. This considers the household’s total earnings, thereby tailoring the contribution to the family’s financial capability.


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