Kenya Labor Law Guide for Hiring Employees and Contractors
Kenya, with its diverse economy, has seen robust growth in recent years, with a reported GDP of approximately $110 billion for the full year 2023.
Key sectors contributing to the economy include agriculture, manufacturing, services, and increasingly, information and communication technology (ICT). The country’s agricultural sector remains a significant contributor, particularly in tea, coffee, and horticulture. The manufacturing sector is growing, particularly in food processing and textiles, while the service sector, especially finance and tourism, also plays a crucial role.
Kenya’s currency is the Kenyan Shilling (KES).
Minimum Wage
KES 15,201 per month
Overtime Wage
1.5 times the regular hourly rate
Meal Breaks
1-hour unpaid meal break
Rest Breaks
15 minutes
Working hours
8 hours per day, 48 hours per week
Salary Payment Cycle
Monthly
Payroll Taxes
PAYE, NSSF, NHIF, HELB
Paid Vacation
21 days
Overtime Hours
More than 48 hours per week
Night Shift Hours
1.25 times the regular hourly rate
Holidays
13
No Work Days
Sunday
Businesses in Kenya must register locally to hire employees, which involves setting up a legal entity or registering as a branch of a foreign company. The process of incorporating a business typically takes about 21 to 30 days, with costs varying depending on the type of entity and legal services involved.
Employment contracts must be in writing, specifying terms such as job description, salary, work hours, leave entitlements, and termination conditions. Employment agreements in Kenya must also include clauses regarding dispute resolution, confidentiality, and non-compete where applicable.
Contractors and employees are treated differently under Kenyan labor laws, with employees enjoying more protections, including mandatory benefits and protections against unfair dismissal.
Kenya has a statutory minimum wage, which as of 2024, is KES 15,201 per month for general workers, though this rate varies by industry and region. The minimum wage is set on a monthly basis, and there are exceptions for certain types of workers, including those in agriculture, domestic workers, and apprentices, who may have lower rates.
Currently, there is no differentiation in minimum wage across states within Kenya. Employers are not required to pay additional holiday pay beyond the standard wage for working on public holidays.
The standard working hours in Kenya are set at 8 hours per day and 48 hours per week. Overtime is applicable for hours worked beyond 48 in a week and is compensated at 1.5 times the regular hourly wage. Night shift work, which is defined as work done between 10 p.m. and 6 a.m., is compensated at 1.25 times the regular hourly wage.
The minimum legal age for employment in Kenya is 18 years, and the country has strict laws against child labor, with specific protections in place to prevent the exploitation of minors in the workforce.
Employers in Kenya are required to make several payroll deductions, including:
PAYE (Pay As You Earn): Income tax deducted from employees’ salaries.
NSSF (National Social Security Fund): A mandatory contribution towards retirement benefits.
NHIF (National Hospital Insurance Fund): A mandatory contribution towards health insurance.
HELB (Higher Education Loans Board): Deduction for repayment of student loans, if applicable.
The PAYE tax is progressive, with rates as follows:
Income Level (KES) | Applicable Tax Rate |
Up to 24,000 | 10% |
24,001 to 32,333 | 15% |
32,334 to 48,000 | 20% |
48,001 to 64,000 | 25% |
Above 64,000 | 30% |
Employees in Kenya are entitled to various types of statutory leave, including:
Paid Vacation: 21 days of paid leave annually, which accrues after 12 months of continuous service.
Maternity Leave: 3 months of fully paid leave, available after serving for a minimum of 2 months.
Paternity Leave: 2 weeks of fully paid leave.
Sick Leave: 30 days of sick leave annually, with the first 7 days fully paid and the remainder at half pay.
Adoption Leave: 3 months of leave under similar conditions as maternity leave.
Mandated public holidays in Kenya are:
Holiday Name | Date |
New Year’s Day | January 1 |
Good Friday | Varies (March/April) |
Easter Monday | Varies (March/April) |
Labour Day | May 1 |
Madaraka Day | June 1 |
Idd-Ul-Fitr | Varies (Islamic Calendar) |
Idd-Ul-Adha | Varies (Islamic Calendar) |
Mashujaa Day | October 20 |
Jamhuri Day | December 12 |
Christmas Day | December 25 |
Boxing Day | December 26 |
Huduma Day | July 7 |
Utamaduni Day | October 10 |
Employers in Kenya must provide several employee benefits, including:
NSSF (National Social Security Fund): Retirement benefits funded through employer and employee contributions.
NHIF (National Hospital Insurance Fund): Healthcare coverage for employees, funded through mandatory contributions.
Gratuity: Some employers offer gratuity, which is a lump-sum payment made to an employee upon termination after a long period of service.
Annual Bonuses: While not mandatory, many companies offer performance-based bonuses.
Severance Pay: Mandatory in cases of redundancy, calculated at the rate of 15 days’ pay for each year worked.
Kenya does not follow At-Will Employment laws. Employment termination must be based on valid reasons, and employers are required to follow a fair process. This includes giving a notice period, which is typically one month for employees under permanent contracts unless otherwise specified in the employment agreement. Termination benefits, such as severance pay, are mandatory in cases of redundancy or unfair dismissal.
Legal challenges are available to employees who believe they have been unfairly dismissed. These disputes can be settled through labor courts or mediation. An employer can legally terminate an employee under specific conditions, including gross misconduct, poor performance, redundancy, or due to the closure of the business. Proper documentation and adherence to legal procedures are crucial to avoid legal repercussions.