Navigating employment compliance in Kenya can be challenging for foreign businesses looking to hire employees without setting up a company in the country. With constantly evolving labor laws and regulations, staying informed and ensuring compliance to avoid penalties or legal issues is essential. This is where we come in as an employer of record Kenya.
From understanding the requirements for hiring and onboarding employees to managing benefits and handling terminations, we’ll guide you through the entire employment lifecycle. For more information, click on the video to learn how our employment of record in Kenya works.
What Is an Employer of Record (EOR)?
An Employer of Record is a third-party service provider acting as your workforce’s legal employer. While your company retains full control over daily tasks and work assignments, the EOR handles essential employment functions.
For businesses expanding in Kenya, Kenya employer of record is the best choice as it simplifies compliance and employment without needing a physical office. This arrangement allows you to focus on core business activities while ensuring compliance with employment laws and regulations in the country.
Understanding Employment Compliance in Kenya
Employment compliance in Kenya encompasses various regulations and requirements that employers must adhere to. These include laws related to hiring, onboarding, employee management, payroll, taxes, benefits, and terminations for all Businesses and companies in Kenya.
Failure to comply with these laws can result in severe consequences for employers. Below are the essential regulations employers must follow:
1. Employment Contracts in Kenya
- Permanent (Indefinite) Contracts; No fixed end date, offering long-term job security. Typically includes benefits like paid leave and statutory deductions.
- Fixed-Term Contracts: Employment for a specific period (e.g., six months or one year). Ideal for project-based roles or temporary staffing needs.
- Probationary Contracts: It usually lasts up to six months but can be extended to 12 months. It allows employers to assess an employee’s suitability before offering permanent employment.
- Casual Contracts: Employees work on a day-to-day basis (not exceeding 24 hours at a time). Payment is made daily, with no long-term obligations.
- Part-Time Contracts: Employees work fewer hours than full-time staff. Suitable for flexible work arrangements and specific business needs.
2. Employee Leave & Benefits in Kenya
Employees in Kenya are entitled to five types of leaves under the Kenyan law:
- Annual Leave: Employees receive 21 days of paid annual leave after completing one year of service. Leave accrues at 1.75 days per month over 12 months.
- Sick Leave: Employees qualify for seven days of full-pay sick leave after two months of continuous service. An additional seven days at half-pay is available within a year.
- Maternity Leave: Female employees are entitled to three months of fully paid maternity leave. They must notify their employer in advance.
- Paternity Leave: Male employees receive two weeks of fully paid paternity leave.
- Pre-adoptive Leave: The government of Kenya amended the Employment Act in 2021 to establish a pre-adoptive leave entitlement. This leave ensures that employees planning to adopt can spend quality time with their adopted children.
Other leaves not mentioned in the Employment Act:
- Compassionate Leave: Employers may grant leave for personal emergencies, such as a family member’s death or illness. The duration depends on company policy.
- Leave of Absence: Employees may take unpaid leave for personal matters at the employer’s discretion.
- Compulsory Leave: This leave usually comes before an investigation into an employee’s misconduct and is often followed by disciplinary actions. The length of the leave will depend on your company’s policies.
3. Termination and Probation Guidelines in Kenya
- Termination Process: Employers must hold a hearing before terminating an employee due to misconduct or poor performance. Employees have the right to a representative (union or colleague) during the hearing.
- Final Wages: Employers must issue a termination letter and pay final wages on the termination date.
- Notice Period: No notice is required for daily wage employees, but a 28-day notice is necessary for monthly wage employees, or payment in lieu can be given.
- Severance Pay: Generally, it is not mandated unless there is a case of redundancy, which is calculated at 15 days’ wages for each year of service. For example, if an employee has worked for 9 years, they would qualify for severance pay equivalent to 9 months’ worth of their last earned salary. If the employee’s final monthly salary amounted to KES 50,000, their severance pay entitlement would total KES 450,000.
- Probation Period: The standard probation period is six months, and it is extendable once. Employers must give a seven-day notice for dismissal during probation.
4. Working Hours & Overtime in Kenya
- Regular Working Week: A standard week consists of 45 hours, spread over 5 days (Monday to Friday) with 8 hours per day and an additional 5 hours on Saturday as specified by sector-specific orders.
- Overtime Regulations: Overtime is capped at 15 hours per week, with employees earning 1.5 times their regular wage for those hours.
5. Observed National Holidays and Vacation
Paid holidays include:
- New Year’s Day
- Good Friday
- Easter Monday
- Labor Day
- Madaraka Day
- Mashujaa Day
- Independence/ Jamhuri Day
- Christmas Day
- Boxing Day
- Eid-Ul-Fitr, and any other day gazetted by the government occasionally as a public holiday.
6. Payroll Taxes and Statutory Deductions
- PAYE (Pay As You Earn): Employers must deduct and remit PAYE to the Kenya Revenue Authority for employees earning Kshs.24,000 and above, typically by the 9th of the following month.
- SHIF (Social Hospital Insurance Fund): Contributions are deducted from employee salaries, 2.75% of the gross pay based on monthly earnings.
- NITA (National Industrial Training Authority): Employers contribute Kshs.50 per employee for approved training programs.
- NSSF (National Social Security Fund): Payments must be remitted by the 9th of each month. Here is an updated table for 2025 NSSF rates:
Here is an updated table for 2025 NSSF rates:
| Lower Limit (Tier 1) | KES 8,000 |
| Total Contribution by Employee | KES 480 |
| Total Contribution by Employer | KES 480 |
| Total Tier 1 NSSF Contributions | KES 960 |
| Upper Limit (Tier 2) | KES 72,000 |
| Contribution on Upper Limit (6% of Upper Limit less Lower Limit) | KES 64,000 |
| Total Contribution by Employee | KES 3,840 |
| Total Contribution by Employer | KES 3,840 |
| Total Tier 2 NSSF Contributions | KES 7,680 |
| Total NSSF Contributions | KES 8,640 |
Requirements for an Employer of Record Kenya Service
To successfully engage an EOR service provider, you must provide specific information and meet certain requirements. Below are the key aspects:
1. Business Information
Provide your company’s legal name, registration details, and nature of operations.
Ensure your business complies with Kenyan laws and can operate in the country.
2. Employee Details
Share information about the employees you want to hire through the EOR, including:
- Job roles and descriptions
- Compensation and benefits packages
- Work locations and contract duration
3. Compliance and Regulatory Requirements
Identify industry-specific regulations for your business and ensure compliance with Kenya’s labor laws, including statutory benefits and tax obligations. The EOR will manage legal compliance to prevent risks related to employment laws.
4. Payroll and Compensation Structure
Provide salary structures, payment schedules, benefits, bonuses, and other compensation-related data necessary for the EOR to manage payroll effectively.
5. Contractual Agreements
Work with the EOR to draft employment contracts that align with Kenyan labour laws.
Define terms such as probation periods, termination conditions, and leave entitlements.
6. Company Policies and Guidelines
Provide any internal policies or procedures you want the EOR to integrate, such as:
- Code of conduct and workplace ethics
- Remote work policies (if applicable)
- Confidentiality agreements and non-compete clauses
7. Cultural Considerations
Highlight any cultural factors affecting employment practices, ensuring the EOR aligns with local workforce expectations and norms.
8. Work Permits for Foreign Employees
If hiring expatriates, the EOR will assist with work permits and visa processing, ensuring compliance with Kenya’s immigration laws and avoiding legal issues.
Services Offered Under Afrisetup Employer of Record Kenya
The Kenya employer of record typically provides services such as:
1. Hiring and Onboarding
We assist with the recruitment and onboarding process, ensuring compliance with labor laws, verifying worker eligibility, and handling necessary documentation.
2. Payroll Processing
We manage payroll calculations, deductions, and statutory contributions, ensuring accurate and timely employee payment while complying with tax regulations.
3. Tax Compliance
We take care of tax-related matters, including filing tax returns, remitting taxes on behalf of your company, and ensuring compliance with tax laws and regulations.
4. Benefits Administration
We administer employee benefits, such as health insurance, retirement plans, and other statutory benefits required by law.
5. Legal Compliance
We ensure that all employment-related legal obligations are met, including compliance with labour laws, immigration support for expatriates, workplace health and safety regulations, and employment contract requirements.
Why Choose Afrisetup as Your Kenya Employer of Record
As your EOR provider, we’ll alleviate the burden of employment compliance for your business operations in Kenya. Here are 5 key benefits of choosing us:
1. Expert Guidance
We are up to date with Kenya’s latest labour laws and regulations. We provide expert advice and guidance on employment compliance, ensuring that employers remain compliant and minimize the risk of penalties or legal issues.
2. Streamlined HR Processes
We handle all employer responsibilities, including employee management, payroll, taxes, and legal compliance. This allows you to focus on your core operations while leaving the HR functions in the hands of professionals.
3. Risk Mitigation
By outsourcing employment compliance to us, you mitigate the risk of non-compliance. We have the knowledge and resources to identify and address compliance gaps, reducing the likelihood of penalties or legal disputes.
4. Cost Savings
Partnering with us results in cost savings for businesses. Instead of investing in building an in-house HR department, companies can leverage our services, often providing cost-effective solutions tailored to their specific needs.
5. Tailored Solutions for Your Business
Whether onboarding your first employee or overseeing a sizable workforce in Kenya, our Employer of Record (EOR) services are designed to cater to your unique requirements. We recognize that each business is different and provide personalized solutions that facilitate seamless operations.
6. Training and Education
Through our employer of record services, we offer your company’s HR team training and educational resources, empowering them with the knowledge and skills necessary to ensure ongoing compliance.
FAQs on EOR in Kenya
FKE provides a platform for employers to promote solid industrial relations and fair labour standards.
The main difference between the two is that an employer hires and supervises workers directly, but an Employer of Record (EOR) acts as a middleman for another company, taking on legal responsibility for employment-related duties on its behalf.
Using Kenya employer of record method ensures that payroll and other employment obligations are processed seamlessly and in compliance without establishing a company.
Yes, companies must ensure that the EOR complies with all Kenyan labor laws and regulations. This includes adhering to minimum wage requirements, statutory benefits, and termination procedures. Additionally, the EOR must ensure proper tax reporting and social security contributions.
The EOR processes payroll according to Kenyan laws, including calculating salaries, withholding taxes, and ensuring timely employee payment. They also handle statutory contributions such as the National Social Security Fund (NSSF) and the National Hospital Insurance Fund (NHIF).
Employees in Kenya are subject to Pay As You Earn (PAYE) tax, which the employer deducts from their salary. The EOR ensures these taxes are correctly calculated and remitted to the Kenya Revenue Authority (KRA).
An EOR manages statutory benefits such as social security and health insurance and any additional benefits the client company offers, such as private health insurance, pensions, or other perks.
EOR costs depend on employee numbers, payroll complexity, and service levels. Typically, fees are either a percentage of the employee’s salary or a flat monthly rate per employee.
An Employer of Record (EOR) and a Professional Employer Organization (PEO) both help businesses manage employees, but they differ in key ways:
- EOR: Acts as the legal employer, handling payroll, taxes, and compliance while the client manages daily operations. It is ideal for businesses hiring remotely.
- PEO: Co-employs workers, sharing HR responsibilities with the client while you remain the primary employer. The business must have a local entity. It is best for companies looking for HR support while retaining employee oversight.
In Kenya, severance pay is only applicable in cases of redundancy. Employees qualify if:
- Their job position is legally declared redundant.
- They have worked for the employer for at least one year.
- The employer provides proper notice as per Kenyan labor laws.
- Severance pay is calculated at 15 days’ wages for each year of service.
Other types of termination, like resignation or dismissal for misconduct, do not qualify for severance pay.
Conclusion
Remember, employment compliance is not just about avoiding penalties and legal issues. It is also about safeguarding the rights and well-being of both employers and employees, fostering a fair and supportive work environment, and contributing to the overall growth and success of businesses in Kenya. By partnering with our employer of record Kenya services, you can focus on your core business operations while ensuring full compliance with the country’s employment laws.
Contact us today for more information.