The DMS supports flexible employee deductions that can be applied during payroll processing. Deductions allow you to subtract statutory contributions, taxes, or internal charges from an employee’s gross pay in a controlled and auditable manner.
The deduction workflow is done in two main steps:
- Define deduction types
- Assign deduction values to employees
Step 1: Define Deduction Types #
Before deductions can be applied to employees, they must first be defined in the system.
Go to: Payroll → Deductions
Each deduction represents a deduction category that can later be assigned to one or more employees.
Common Deduction Examples (Kenya) #
You can define deductions such as:
- Pay As You Earn (PAYE) – Income tax deducted based on taxable pay
- National Social Security Fund (NSSF) – Statutory pension contribution
- Social Health Authority (SHA) – Health contribution (formerly NHIF)
- Housing Levy – Statutory housing contribution
- Lost or Damaged Items
Deduction Fields Explained #
- Deduction Name
The name of the deduction (e.g. PAYE, NSSF, Lost Items). - Tax Deductible
Indicates whether this deduction reduces the employee’s taxable income.- If enabled, the deduction is applied before tax calculation.
- Common examples: Pension contributions, NSSF (depending on rules).
- Description
Optional explanation of what the deduction is used for or how it is applied.
Once saved, the deduction becomes available for assignment to employees.
Step 2: Assign Deductions to Employees #
After defining deductions, you can assign them to specific employees with custom values.
Go to: Payroll → Employee Deductions
Each record here links:
- An employee
- A deduction
- A calculation rule
Employee Deduction Configuration #
When assigning a deduction to an employee, you define how it should be calculated:
Rate Type #
Determines how the deduction amount is calculated:
- Flat Rate – A fixed monetary amount (e.g. KES 2,000)
- Percentage – A percentage of salary or taxable income (e.g. 6%)
Rate #
The actual value:
- For flat rate: currency amount
- For percentage: percentage value
Duration #
Controls how long the deduction applies:
- One-time
- Recurring
- Fixed period (depending on configuration)
Model Type & Scope #
Defines what the deduction is linked to (e.g. a product that is lost).
Description #
Optional notes specific to this employee’s deduction (e.g. Loan repayment for January–June).
Payroll Impact #
- Employee deductions are automatically applied during payroll processing
- Tax-deductible deductions reduce taxable income before PAYE is calculated
- Non-tax-deductible deductions are applied after tax
- All deductions are tracked, auditable, and visible in payroll records
Access Control & Visibility #
- Users with payroll permissions can view and manage all employee deductions
- Employees may only see deductions assigned to them (depending on role permissions)
