A Bonus Is Taxed on Top of the Salary, Not Beside It
The board approves a bonus after the month’s payroll has gone out. Paying it should not mean reopening a paid run — and it should not mean taxing the bonus as if it were the employee’s only income that month. Since 14 October an off-cycle run does the first, and the tax engine refuses the second.
A Nairobi distribution company pays its October payroll on the 25th. On the 30th the board approves a Q3 performance bonus for six drivers. The regular run is approved, paid and posted; the bank file has gone. Every payroll team has met this moment, and most solve it one of two ways: reopen the paid run, or wait and pay the bonus with November. One breaks the record of what was paid. The other breaks a promise to six people.
The short version
Pay anything extra in a month — bonus, correction, commission, missed pay — in an off-cycle run, and leave the regular run alone. The tax on that run will usually look higher than the bonus deserves on its own. That is correct: the month is taxed once, as a whole, and the bonus sits on top of the salary that has already used the lower bands.
An off-cycle run, and what goes on it
Open Human Resources → Payroll → New Payroll Run and choose the Off-cycle tab. You pick a reason — Bonus, Correction, Missed pay, Commission or Other — the period, the work country and the standard working days. The run starts empty. Nobody is paid until you add an amount for them, which is the point: an off-cycle run pays chosen people, not the whole payroll.
| Field on each line | Choices | Why it matters |
|---|---|---|
| Pay or recover | Pay as an earning, or Recover as a deduction | An overpayment from last month comes back on the same run |
| Kind of pay | Bonus, Commission, Arrears / missed pay, Correction, One-off allowance, Other earning | The payslip and the reports say what the money was |
| Description | Free text | “Q3 performance bonus” beats a bare amount at audit |
| Taxable | On or off | Decides whether PAYE is charged on the line |
| Pensionable | On or off | Decides whether pension contributions are worked on it |
Lines can be added and removed while the run is a draft or calculated. From there it follows the same life as a regular run: calculate, approve, post. A posted run is locked, and each net payment appears in the Payments Register beside the regular run’s. A run that was never approved can be discarded from its Related menu, which removes its payslips and amounts.
Why the bonus payslip shows more tax
Kenyan PAYE bands are monthly: 10% on the first KES 24,000 of taxable pay, 25% on the next band up to KES 32,333, then 30% up to KES 500,000, with personal relief of KES 2,400 a month. If an off-cycle payslip were taxed on its own, a KES 40,000 bonus would start again at 10% and take the KES 2,400 relief a second time. The month would be under-taxed, and the employer would find out at the next PAYE review.
So AWRA taxes each payslip on the employee’s combined approved and paid pay for the month, minus what that month’s other payslips have already deducted. Bands, relief and contribution caps apply once per month, however many runs the employee appears in.
Otieno’s October, simplified
An illustration of the stacking only. A real payslip also accounts for contributions and any other reliefs; the engine works on the actual figures.
Two consequences follow, and both are worth telling employees before they read their payslip. First, an off-cycle payslip usually shows more tax than the bonus would attract in isolation — correctly. Second, a later run never refunds tax. If a correction reduces a month’s pay that has already been taxed, the later payslip shows no negative tax; the difference is for HR and the payroll adviser to settle.
Order of approval matters
A run counts toward the month only once it is approved or paid. If two off-cycle runs for the same month are both calculated, the one approved first is taxed against the regular run alone; the second is taxed on top of both. Approve in the order you want the payslips to read.
One row per person on the return
The month is merged again on the way out. The Kenya filing files on a run — the P10 PAYE return, the NSSF return and the SHIF schedule — and the employee’s P9 combine each person’s payslips for the month into one row, which is how KRA, NSSF and SHA expect to see them. AWRA produces the files ready for upload; your organization uploads them to each portal and pays. Running Kenyan payroll without surprises covers the regular month those files start from.
A month is taxed once. The number of runs in it is an administrative fact, not a tax one.
Recover lines, and the other uses
The same run takes money back. In the distribution company’s case a seventh line recovers KES 4,000 overpaid to one driver in September, entered as Recover with the kind Correction. A school uses an off-cycle run for a marking allowance in exam season; a sales team uses one for quarterly commission; HR uses one for the week of pay that a new starter’s late paperwork kept out of the regular run. None of them reopens a run that has already been paid.
Fewer lines to type
Today each off-cycle line is entered by hand, which suits a handful of people. For larger rounds, two additions come up.
A bonus pool by rule
A pool shared out as a percentage of basic or by review rating band, written onto the off-cycle run as lines HR can still edit.
Commission from posted sales
Commission lines worked out from each salesperson’s posted sales for the period at the rate you set.
Send us how your bonus or commission is calculated today and we will return a written scope and cost.
Scope a pay ruleWhat AWRA OpsHub does today
- Off-cycle runs for chosen employees with a reason, period, work country and standard working days, starting empty.
- Pay and Recover lines with a kind of pay, a description and Taxable and Pensionable switches, editable while draft or calculated.
- The calculate, approve and post lifecycle, net payments in the Payments Register, and discard for a run never approved.
- Tax on each payslip worked from the month’s combined approved and paid pay, less tax already deducted that month, with bands, relief and caps once per month.
- P10, NSSF, SHIF and P9 files that merge an employee’s payslips for the month into one row.
More we can add to your workspace
- A bonus pool shared out by a rule into off-cycle lines.
- Commission lines calculated from posted sales per salesperson.
Where we point you to a specialist
- Refunding tax already deducted in a month is a decision for HR and your payroll adviser; a later run records what was agreed rather than deciding it.
- Uploading the returns and paying KRA, NSSF and SHA stays with your organization.
Ask your payroll provider
How is a mid-month bonus taxed?
A good answer sounds like
On the month’s combined pay, minus tax already deducted.
What it tells you
Anything else under-taxes the month or double-counts relief.
Do I have to reopen a paid run to add one person?
A good answer sounds like
No — a separate run pays just them.
What it tells you
Reopening a paid run rewrites what the bank already paid.
How does the P10 show someone paid twice in a month?
A good answer sounds like
One row with the combined figures.
What it tells you
Two rows for one PIN is a return KRA will query.
Off-cycle runs, step by step
The help docs cover creating the run, every line type, and the rules for tax across runs.
Read the off-cycle guideFrequently asked questions
What is an off-cycle payroll run?
A run that pays chosen employees something extra in a month — a bonus, a correction, missed pay or a commission — without touching the regular run. It starts empty and only pays the people you add amounts for.
Why is the tax on my bonus payslip so high?
Tax is worked out on the month’s combined approved and paid pay, so the bonus sits on top of the salary that already used the lower bands. Bands, personal relief and caps apply once per month across all runs.
Can an off-cycle run recover an overpayment?
Yes. A line can be entered as Recover, which takes the amount as a deduction on that run.
Does a later correction run refund tax?
No. A later run never shows negative tax. If a correction reduces a month’s pay, the difference is for HR and the payroll adviser to settle.
How does the P10 show an employee paid in two runs?
As one row combining that employee’s payslips for the month. The NSSF and SHIF files and the P9 do the same.
