New PAYE bands, NSSF and shift hours for hotel and restaurant staff

Hotels and restaurants employ people in shifts, pay many of them close to the tax threshold, and run payroll in the week when the month's takings are being counted. Three rules changed or were restated this year that the owner needs to apply before the next pay run.

PAYE: new bands from 1 July 2026

On 7 September 2026 URA published a notice that the PAYE return form had been updated to reflect the Income Tax (Amendment) Act 2026, with the new resident rates "effective from 1st July 2026". The monthly bands for resident individuals on URA's PAYE rates page are now:

Monthly chargeable income (UGX)	Tax
0 to 335,000	Nil
335,001 to 410,000	20% of the amount over 335,000
410,001 to 485,000	15,000 plus 25% of the amount over 410,000
485,001 to 10,000,000	33,750 plus 30% of the amount over 485,000
Above 10,000,000	as above, plus 10% of the amount over 10,000,000

The tax-free threshold has moved from UGX 235,000 to UGX 335,000. URA's own example: a July 2026 salary of UGX 500,000 attracted UGX 52,000 under the old rates and UGX 38,250 under the new ones, an overpayment of UGX 13,750.

URA's notice asks employers who filed July or August 2026 returns before the form was updated to amend them using a fresh template from the portal, to apply any credit against the next PAYE return, and to pass the overpayment back to the affected staff, for example as an adjustment in the next payroll. For a restaurant with fifteen waiters and cooks on UGX 300,000 to 500,000, that is a real amount of money owed back to the team.

PAYE is withheld by the employer and both the return and the payment are due by the 15th of the following month, according to URA's hotel sector guide.

NSSF: 5% plus 10%, by the 15th

The National Social Security Fund states that it "covers all employers, irrespective of the number of employees between 16 and 55 years of age", excluding employees under the government pension scheme. The employer "must deduct 5% from the employee's total gross monthly wage and add 10% of the total gross monthly wage", a total of 15%, and "the payment of contributions must be paid by the 15th day of the following month". Casual kitchen staff and part-time waiters who are on your payroll are employees for this purpose.

Hours, overtime and rest for shift workers

The Employment Act 2006 is the rulebook for rotas. Section 53 sets maximum working hours at forty-eight a week. Employer and employee may agree to more, but under section 53(4) hours "shall not ... exceed ten hours per day or fifty six hours per week". Section 53(5) is written for hotels and restaurants: where staff work in shifts, they may work more than ten hours in a day or forty-eight in a week "where the average number of hours over a period of three weeks exceeds neither ten hours per day nor fifty six hours per week". Where the working day is at least eight hours, section 53(6) requires a thirty-minute break.

Overtime, under section 53(8), is paid in the absence of a written agreement to the contrary "at the minimum rate of one and a half times of the normal hourly rate" on normal working days and "at two times the hourly rate" on gazetted public holidays. Section 54 adds that an employee who works on a public holiday either receives a paid day off on another working day or, if paid at least double the normal rate for that day, is not entitled to the day off in lieu.

For a restaurant, the three-week averaging rule is what makes a busy weekend legal, provided the quiet Monday and Tuesday that follow bring the average back down. The record that proves it is the attendance sheet.

What to do this month

1. Re-run July and August 2026 payroll at the new PAYE bands, amend the returns, and refund the difference to staff in the next pay run.
2. Check that everyone aged 16 to 55 on the payroll is registered with NSSF and that the 15% is being remitted by the 15th.
3. Put each employee's weekly hours against the three-week average and confirm nobody is above 56 hours or ten a day on average.
4. Pay public holiday shifts at double or give the day off; write down which you do.
5. Keep payslips, attendance and the PAYE and NSSF receipts together. URA's sector guide asks for business records to be kept for five years.

Payroll in hospitality is rarely complicated per person, but it is many people, many shifts and two government deadlines on the same day. The month the rates change is the month to get the routine right.

Sources

1. https://ura.go.ug/en/changes-to-paye-return-form-following-the-income-tax-amendment-act-2026/
2. https://ura.go.ug/en/domestic-taxes/paye-rates/
3. https://www.nssfug.org/about-us/membership/
4. https://natlex.ilo.org/dyn/natlex2/natlex2/files/download/74416/UGA74416.pdf
5. https://ura.go.ug/wp-content/uploads/2024/01/TAXATION-OF-THE-HOTEL-AND-ACCOMMODATION-2023-24-Folder.pdf