How to Set Up Payroll in Zambia — Employer's Complete Guide (2026)

Before Your First Payroll: Register With Three Bodies

Before paying a single employee, you must register with:

1. ZRA — For PAYE

Register for Pay As You Earn (PAYE) through the ZRA Tax Online portal. You need:

• A valid corporate TPIN (see our TPIN Registration Guide)
• Estimated number of employees
• Estimated monthly payroll amount

When to register: Before hiring your first employee. Do not wait until the first salary payment.

2. NAPSA — For Pension Contributions

Register as an employer with the National Pension Scheme Authority. You need:

• PACRA Certificate of Incorporation
• TPIN certificate
• List of employees with NRC numbers

When to register: Within 30 days of hiring your first employee.

3. NHIMA — For Health Insurance

Register with the National Health Insurance Management Authority. You need:

• Company details and TPIN
• Employee details and dependant information (spouse, children under 18)

When to register: Within 30 days of hiring your first employee.

See our NAPSA & NHIMA Compliance Guide for the full registration process.

Gather Employee Information

For each employee, collect:

Important: Verify TPIN numbers with ZRA before adding employees to payroll. Incorrect TPINs cause filing errors and ZRA queries.

The Payroll Calculation — Step by Step

Here is the exact sequence for calculating an employee’s monthly pay:

Step 1: Determine Gross Salary

Add up all components:

• Basic salary
• Housing allowance (taxable unless specifically exempt)
• Transport allowance (taxable)
• Other allowances (lunch, communication, etc. — generally taxable)
• Overtime pay
• Bonuses and commissions (taxable in the month earned)

Gross salary = basic salary + all taxable allowances + overtime + bonuses

Step 2: Calculate NAPSA Employee Contribution

• Rate: 5% of basic salary (not gross salary)
• Cap: K1,861.80/month (based on insurable earnings ceiling of K37,236/month)
• Formula: Min(basic salary × 5%, K1,861.80)

NAPSA is deducted from gross before calculating PAYE. This is critical — it reduces the taxable income.

Step 3: Calculate Taxable Income

Taxable income = gross salary − NAPSA employee contribution

Note: NHIMA is not deducted before PAYE. Only NAPSA reduces taxable income.

Step 4: Calculate PAYE

Apply the 2026 progressive tax bands to the taxable income:

See our PAYE Rates Guide for worked examples at multiple salary levels.

Step 5: Calculate NHIMA Employee Contribution

• Rate: 1% of gross salary
• No cap
• Formula: Gross salary × 1%

Step 6: Calculate Net Pay

Net pay = gross salary − NAPSA employee − PAYE − NHIMA employee − other deductions

Other deductions may include: loan repayments, salary advances, union dues, voluntary pension contributions.

Step 7: Calculate Employer Contributions (Not Deducted from Employee)

These are additional costs the employer pays on top of gross salary:

Total employer cost above gross salary: 6.5% (with NAPSA capped).

Payslip Requirements

Every employee must receive a payslip showing:

• Employee name and employee number
• NRC number or passport number
• TPIN
• Pay period (e.g., “April 2026”)
• Earnings: Basic salary, each allowance separately, overtime, bonuses
• Deductions: NAPSA employee, PAYE, NHIMA employee, other deductions
• Net pay
• Employer contributions: NAPSA employer, NHIMA employer, SDL (recommended to show for transparency)
• Employer PAYE registration number
• Employer NAPSA registration number

There is no prescribed format — payslips can be printed, emailed, or accessed through payroll software. The critical requirement is that every deduction and contribution is clearly itemised.

Remittance Schedule

Filing PAYE Returns with ZRA

1. Log into ZRA Tax Online → Returns Filing → PAYE
2. Upload or enter the PAYE schedule — listing each employee, their gross pay, taxable income, and PAYE deducted
3. The system calculates the total PAYE due
4. Submit the return and make payment
5. Download and save the acknowledgment receipt

Filing NAPSA Contributions

1. Complete the NAPSA Schedule of Contributions — listing each employee, basic salary, and contributions
2. Submit via the NAPSA portal or in person
3. Make payment via bank transfer or NAPSA-approved channels
4. Retain the payment receipt

Record-Keeping: 7-Year Retention

ZRA requires all payroll-related records to be retained for a minimum of 7 years. This includes:

• Employment contracts
• Monthly payslips (all employees)
• PAYE calculation workings
• NAPSA contribution schedules
• NHIMA contribution schedules
• ZRA return acknowledgments
• NAPSA remittance receipts
• Bank payment confirmations
• Leave records
• Overtime records

Digital records are acceptable provided they are stored securely and can be produced for ZRA audit. If you use payroll software, ensure regular backups.

Common Payroll Mistakes to Avoid

1. Wrong Deduction Order

The most common error. NAPSA must be deducted before calculating PAYE. If you calculate PAYE on gross salary without deducting NAPSA first, employees overpay tax.

2. Applying NAPSA to Gross Instead of Basic

NAPSA is calculated on basic salary only. Allowances are excluded. NHIMA, by contrast, is calculated on gross salary including allowances.

3. Forgetting the NAPSA Cap

For employees earning above K37,236/month basic salary, NAPSA contributions are capped at K1,861.80 per side. Failing to apply the cap means over-deduction.

4. Missing Different Deadlines

PAYE and NAPSA are due by the 10th. NHIMA is due by the end of the month. Mixing these up results in penalties.

5. Not Filing Nil Returns

If you have no employees in a given month (e.g., between staff), you must still file nil returns for PAYE if you are registered. Failure to file — even when the amount is zero — attracts late-filing penalties.

6. Treating All Allowances as Tax-Free

Housing, transport, lunch, and communication allowances are taxable unless a specific statutory exemption applies. Very few allowances are genuinely tax-free in Zambia.

Payroll Software Options

For businesses with more than 5 employees, manual payroll calculations become error-prone. Consider:

Contact M&J or the respective vendors for current pricing.

See our Best Accounting Software Guide for a full comparison.

When to Outsource Payroll

Consider outsourcing if:

• You have fewer than 20 employees and no dedicated HR/accounts person
• Your payroll is complex (multiple allowance structures, expatriate employees, multi-currency)
• You’ve received ZRA penalties for late or incorrect filing
• You’re a foreign-owned company new to Zambian payroll regulations
• You want to focus on running your business, not calculating tax bands

M&J manages payroll for businesses ranging from 3 employees to 200+. We handle the calculations, generate payslips, file PAYE returns with ZRA, remit NAPSA and NHIMA contributions, and provide monthly payroll reports.