Payroll & Employment Guide Kenya

Kenyan law permits various types of employment contracts, including indefinite employment, fixed-term employment, contracts for specific tasks (also known as piecework), and casual employment. While open-ended agreements are the most commonly used, employers can choose the contract type based on the nature and duration of the work.

The Labour Act permits employment contracts to be either oral or written, but it’s recommended that employers provide written confirmation within two months of the employee’s start date.

Notice periods:

• Daily-paid — At least one day’s notice
• Weekly-paid — At least seven days' notice
• Fortnightly-paid — At least two weeks' notice
• Monthly-paid — At least one month (28 days) notice

Termination of employment: An employment relationship in Kenya can end through mutual agreement, automatic termination, resignation by the employee, or dismissal by the employer.

Kenya has a structured tax system that applies to both individuals and businesses, with employers playing a key role in tax compliance. Employers are responsible for withholding income taxes through the Pay-As-You-Earn (PAYE) system and remitting social security contributions to the National Social Security Fund (NSSF) and health insurance payments to the Social Health Insurance Fund (SHIF).

Personal income tax rate:

• On the first 288,000 — 10%
• On the next 100,000 — 25%
• On the next 5,612,000 — 30%
• On the next 3,600,000 — 32.5%
• On income over 9,600,000 — 35%

VAT: 16%

Tax allowances: Meals offered to employees at work and other benefits whose total value does not exceed 3,000 KES.

Additional tax reliefs: Members of retirement benefits schemes enjoy monthly tax relief on their contributions of up to Kshs 20,000.0 per month, Kshs 240,000 per annum or 30.0% of their monthly salary, whichever is less.

In Kenya, employers are required to pay salaries in accordance with the terms outlined in individual or collective employment contracts, and these salaries must be at least the minimum wage set by the government.

Salary payment deadline: On the last day of the month.

Taxes and contributions payment deadline: By the 9th of the following month.

Payroll declarations deadline: Monthly, aligning with the payment of taxes and contributions

Payroll currency: KES

Kenya’s Employment Act, 2007, governs employment relationships by defining the rights of both employers and employees, setting standards for work conditions, leave, and wage protections, and prohibiting unfair dismissal, discrimination, and forced labour. Employers and employees have the freedom to enter into contracts, as long as those contracts meet the minimum requirements set by the Act.

Total employment cost:

• Employer’s contributions to the National Hospital Insurance Fund (NHIF): 2.75%
• Employer’s contributions to the National Social Security Fund (NSSF): 6%
• Employee’s contributions to the National Social Security Fund (NSSF): 6%

Minimum wage: KES 15,201 per month

Probation period: six months, but can be extended for a further six months

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