Effortless Hiring in Kenya

Employment Laws

Kenya's employment framework is governed by key legislation, including:

• Employment Act, 2007: Establishes minimum conditions of employment and protects employee rights.
• Labour Relations Act, 2007: Governs the registration and relations of trade unions and promotes freedom of association.
• Labour Institutions Act, 2007: Regulates the creation of labor institutions and ensures compliance with labor laws.

These laws ensure:

• Contracts exceeding three months must be in writing.
• Protection against discrimination based on race, sex, pregnancy, marital status, disability, religion, political opinion, ethnicity, or HIV status.

Onboarding Process

• Employment contracts should include details such as:
• Job description and duties
• Compensation
• Working hours
• Leave entitlements
• Termination procedures
• For foreign employees, employers must obtain valid work permits and demonstrate that the role cannot be filled by a Kenyan citizen.

Types of Employment Contracts

1. Fixed-Term Contracts: For specified durations or projects.
2. Indefinite-Term Contracts: Ongoing roles with no set end date.

Probationary Periods

• Probationary periods cannot exceed six months, extendable by an additional six months with mutual consent.
• Either party may terminate the contract during probation with a notice period of seven days.

Working Hours

• Standard working hours are set at a maximum of 52 hours per week, typically spread over six days.
• Overtime is compensated at:
• 1.5 times the hourly rate on weekdays.
• 2 times the hourly rate on public holidays and rest days.

How Cadana Simplifies Hiring in Kenya

Cadana ensures compliance with Kenya’s labor laws by:

• Drafting compliant contracts tailored to Kenyan labor regulations.
• Streamlining onboarding for local and international hires.
• Managing payroll, benefits, and statutory contributions to ensure smooth hiring processes.

Payroll Frequency

The standard payroll cycle in Kenya is monthly, with salaries typically disbursed at the end of each month.

Minimum Wage

• The minimum wage varies based on industry, job category, and geographic location. As of 2022, the minimum wage for general laborers in Nairobi is KES 13,572.90 per month.
• The minimum wage was increased to KES 15,201 for cities as of May 1, 2022, reflecting a 12% increase from previous levels due to rising living costs and inflation.

Overtime Pay

• Employees are entitled to overtime compensation for work exceeding the standard working hours:
• Weekdays: Paid at 1.5 times the normal hourly rate.
• Public Holidays and Rest Days: Paid at 2 times the normal hourly rate.

Payroll Deductions

Employers are required to make several statutory contributions on behalf of their employees:

• National Social Security Fund (NSSF):

• Tier I: 6% of the employee's monthly earnings up to KES 6,000.

• Tier II: 6% of the employee's monthly earnings between KES 6,001 and KES 18,000.

• Both employer and employee contribute equally.

• National Hospital Insurance Fund (NHIF):

• Contributions are based on a graduated scale relative to the employee's gross monthly income, ranging from KES 150 to KES 1,700.

• Pay As You Earn (PAYE):

• A progressive income tax system with rates ranging from 10% to 30%, depending on income brackets.

• National Industrial Training Authority (NITA) Levy:

• Employers contribute KES 50 per employee monthly to support industrial training programs.

Payroll Compliance

• Employers must ensure timely remittance of all statutory deductions to the respective authorities to avoid penalties. Accurate record-keeping and adherence to Kenya Revenue Authority (KRA) guidelines are essential for compliance.

Payslips

• Employers are obligated to provide employees with detailed payslips outlining gross earnings, deductions, and net pay for each pay period.

Cadana's Role in Simplifying Payroll Management in Kenya Cadana offers comprehensive payroll solutions that ensure compliance with Kenyan labor laws, accurate calculation of salaries and deductions, and timely remittance of statutory contributions. This streamlines the payroll process for businesses operating in Kenya.

Employee Income Tax in Kenya

Kenya employs a progressive income tax system for individuals, with rates effective from July 1, 2023, as follows:

• Annual Taxable Income (KES):

• Up to 288,000: 10%

• 288,001 – 388,000: 25%

• 388,001 – 6,000,000: 30%

• 6,000,001 – 9,600,000: 32.5%

• Over 9,600,000: 35%

• Monthly Taxable Income (KES):

• Up to 24,000: 10%

• 24,001 – 32,333: 25%

• 32,334 – 500,000: 30%

• 500,001 – 800,000: 32.5%

• Over 800,000: 35%

Residents are entitled to a personal relief of KES 2,400 per month, which reduces taxable income.

Employer Contributions

Employers in Kenya are mandated to make several statutory contributions on behalf of their employees:

1. National Social Security Fund (NSSF):

• Tier I: 6% of the employee's monthly earnings up to KES 6,000.
• Tier II: 6% of the employee's monthly earnings between KES 6,001 and KES 18,000.
• Both employer and employee contribute equally.

2. National Hospital Insurance Fund (NHIF):

• Contributions are based on a graduated scale relative to the employee's gross monthly income, ranging from KES 150 to KES 1,700.

3. National Industrial Training Authority (NITA) Levy:

• Employers contribute KES 50 per employee monthly to support industrial training programs.

4. Pay As You Earn (PAYE):

• Employers are responsible for deducting PAYE from employees’ salaries based on the progressive tax rates and remitting it to the Kenya Revenue Authority (KRA).

Types of Leave in Kenya

1. Annual Leave

• Employees are entitled to a minimum of 21 working days of paid leave after completing 12 months of continuous service with the same employer.
• The leave is calculated at a rate of 1.75 days per month of service.
• Employees may carry forward unused leave days, but they must be taken within 18 months after the year in which they were accrued; otherwise, they are forfeited.
• Employers cannot offer compensation for unused leave except upon termination.

2. Parental Leave

• Maternity Leave:

• Female employees are entitled to three months (90 days) of maternity leave with full pay.

• Protection against dismissal during maternity leave is guaranteed under Kenyan labor law.

• Employees must notify their employer at least seven days before starting maternity leave.

• Paternity Leave:

• Male employees are entitled to two weeks (14 days) of paid paternity leave following the birth of a child.

3. Sick Leave

• Employees are entitled to a total of 14 days of sick leave per year after working for at least two months with the same employer.
• The first seven days are paid at 100% of the employee's salary.
• The next seven days are paid at 50% of the salary, provided a valid medical certificate is submitted.

4. Public Holidays

• Kenya recognizes 13 public holidays, including:
• New Year’s Day (January 1)
• Madaraka Day (June 1)
• Mashujaa Day (October 20)
• Jamhuri Day (December 12)
• Christmas Day (December 25)

5. Special Leave

• Employees may qualify for other types of leave, such as:
• Compassionate Leave for family emergencies.
• Study Leave, which is subject to employer agreements.

Mandatory Benefits

1. National Social Security Fund (NSSF):

• Both employers and employees are required to contribute to the NSSF, which serves as a retirement savings scheme.
• The standard contribution rate is 6% of the employee's monthly earnings, with contributions capped at specific limits.

2. National Hospital Insurance Fund (NHIF):

• This is Kenya's primary health insurance scheme, providing access to healthcare services.
• Contributions are based on a graduated scale relative to the employee's gross monthly income, ranging from KES 150 to KES 1,700.

3. Annual Leave:

• Employees are entitled to a minimum of 21 days of paid annual leave after completing one year of continuous service.
• This leave can be accrued monthly at a rate of 1.75 days per month.

4. Sick Leave:

• After two consecutive months of service, employees become eligible for sick leave.
• They are entitled to 30 days of paid sick leave at full salary, followed by an additional 15 days at half salary within a period of 12 consecutive months of service.

Supplemental Benefits

Beyond statutory requirements, many employers in Kenya offer additional benefits to attract and retain talent:

1. Health Insurance:

• Employers often provide private health insurance plans that offer more comprehensive coverage than the NHIF, including outpatient services, dental care, and optical services.

2. Retirement Plans:

• Some employers establish occupational pension schemes to supplement the NSSF, enhancing employees' retirement savings.

3. Life and Disability Insurance:

• Group life insurance and disability coverage are common, offering financial security to employees and their families in case of unforeseen events.

4. Professional Development:

• Support for further education, training programs, and certifications to foster career growth.

5. Wellness Programs:

• Initiatives such as gym memberships, mental health support, and wellness workshops to promote overall well-being.

6. On-Site Amenities:

• Some companies provide on-site amenities such as childcare facilities or meal provisions to enhance the employee experience at work.

Process

• Termination due to misconduct, performance, or incapacity requires the employer to:
• Conduct a hearing where the employee has the right to a representative.
• Provide a termination letter detailing the justification for termination.
• The employer must notify the employee of the intended termination and explain the reasons in a language they understand.

Notice Period

• Daily Wage Employees: No notice is required; however, payment for one day's wage should be made.
• Monthly Wage Employees: Employers must give a 28-day notice or provide payment in lieu of notice.

Severance Pay

• Severance pay is not mandatory, except in cases of redundancy.
• In redundancy situations, employees are entitled to 15 days of wages for each year of employment with the company.
• Employers must follow specific procedures when declaring redundancy, including notifying affected employees and providing severance pay.