County governments can no longer withhold taxes, pension contributions or other statutory deductions, as the national government has linked payroll processing to the Integrated Financial Management Information System (IfMIS).

The Controller of Budget, Margaret Nyakang’o, confirmed that the reform became operational on 1 July and is intended to curb the buildup of arrears, which were estimated at about Sh100 billion.

Nyakang’o explained to the Senate Labour Committee that the integration ensures mandatory deductions are paid at the moment a county presses ‘pay’, routing PAYE to the Kenya Revenue Authority, pensions to the relevant schemes and other statutory amounts to their recipients.

The linkage works by mapping IfMIS to the payroll module, allowing salaries and statutory payments to be processed together rather than leaving counties to remit deductions later.

The upgrade follows earlier improvements to the Human Resource Information System, with support from the Ministry of Public Service to connect payroll to IfMIS.

While the new system is expected to stop the creation of fresh arrears, it does not erase debts that accrued before 1 July; those remain the responsibility of individual counties.

Nyakang’o urged counties to eliminate any arrears less than one year old by the close of the 2026/27 financial year, noting that any failure would likely indicate a system malfunction rather than a policy breach.

She highlighted budgeting weaknesses where some counties allocate funds only for net salaries, ignoring the full cost of employment, which has historically prompted the withholding of statutory deductions to cover other expenses.