Using an employer of record in Kenya

Kenya is leading East Africa’s economy, with a strong focus on agriculture, services, and a rapidly growing tech sector. As the nation can still draw foreign investment and innovation, the problem of unemployment persists. 

Engaging talent through an EOR in Kenya can be a strategic path to market entry. EOR Kenya enables companies to access local talent and align compliance with labor laws, manage statutory contributions, and handle payroll, all without setting up a local entity.

Go through this guide for detailed information on Employer of Record in Kenya. Explore the Payoneer Workforce Management platform for EOR in Kenya.

How to hire employees in Kenya

Engaging employees in Kenya requires a basic understanding of the legal framework, taxation, and administrative requirements governed by Kenyan law. Here are the primary ways to do it.

1. Setting up a local entity 

Setting up a local entity suits only the firms that are thinking of long-term business in Kenya. When it is set up, a foreign or local business can hire directly and maintain control of the workforce. For more information, you may check the government site for registering a business. 

However, this may not be ideal for companies exploring quick expasion of team and operations as setting up an entity involves critical paperwork, and demands a lot of time and money.

2. Hiring independent contractors

Independent contractors are not classified as employees under Kenyan law, but are great for short-term and project-based roles. However, they are ineligible for statutory benefits. So, while hiring them, consider a few things:

• Tax and social security payments by contractors have to be made separately.
• Employers are not required to cover NSSF, NHIF, or leave for independent contractors.
• Service agreements should state the relationship and the type of work involved to prevent a legal misjudgment.

Moreover, employers must be careful with worker types as misclassification may lead to penalties.

3. An Employer of Record

A streamlined way to engage talent in a foreign country, such as Kenya, is by partnering with an EOR.

Partnering with an employer of record in Kenya

Partnering with an EOR in Kenya supports your business in growing and developing within the country. It simplifies the process of engaging local employees, including payroll, local labor laws, HR administration, benefits, and more. 

Payoneer Workforce Management supports engaging talent in over 160 countries and facilitates payments in 70 currencies. If you are looking to scale your international team, Payoneer Workforce Management offers a streamlined solution. 

Payroll in Kenya

Paying employees in Kenya requires following local payroll laws, income‑based tax rules, and mandatory social security and health insurance contributions. Salaries are typically paid monthly in Kenyan Shillings (KES).

Kenya’s statutory payroll deductions include:

• PAYE (Pay As You Earn): Employers are required to compute, deduct, and pay employees’ income tax every month (on or before the 9th day of the next month) as per KRA’s iTax system, on a graduated annual scale from 10 to 35%.

• NSSF (National Social Security Fund): Both employers and employees pay 5% of their pensionable earnings, up to 1,080 KES per month, based on the new NSSF Act.

• Affordable Housing Levy: A part of the gross salary is contributed towards this by both employees and employers as per the Affordable Housing Act, to be paid by the 9th working day after the month end. 

Minimum wage

Kenya sets sector‑specific minimum wages. The highest rates apply to roles such as Artisan Grade 1, Cashier, Driver, and Salesperson, at KES 36,360.92 per month.

Income tax

Employers must apply a progressive tax system when calculating monthly Pay‑As‑You‑Earn (PAYE):

• Up to KES 24,000: 10%
• KES 24,001–32,333: 25%
• KES 32,334–500,000: 30%
• KES 500,001–800,000: 32.5%
• KES 800,001 and above: 35%

Social security contributions (NSSF)

Kenya’s National Social Security Fund (NSSF) requires both the employer and employee to contribute 6% of the employee’s monthly salary, up to a statutory ceiling. These funds support retirement, disability, and survivor benefits.

Public health insurance (NHIF)

Public health coverage is provided through the National Hospital Insurance Fund (NHIF). It covers inpatient and outpatient services, maternity care, essential medications, and some specialized treatments such as cancer care and dialysis.
Contributions are income‑based.

• Formal sector employees: 2.75% of basic salary
• Civil servants: 2%
• Self‑employed individuals: 3% of annual income

Employment laws in Kenya

Kenyan employment practices are largely regulated under the Employment Act, Cap 226, which governs minimum employment terms, protection of employees, and duties of employers. The Act covers all individuals who work under a contract of service, including those in the public sector, except the armed forces and police services.

• Occupational Safety and Health Act: This Act governs workplace safety and health standards, outlining the duties of both employees and employers.

• Work Injury Benefits Act: This Act provides compensation for employees who suffer work-related injuries or occupational diseases.

Working hours and overtime

The Employment Act, however, does not specify hours per day or week, but rather stipulates that every worker shall have at least one day of rest within any seven days.

However, the law allows for contractual flexibility; in practice, many formal employers align with the standard 8-hour workday and 45-hour workweek, especially in line with sector-specific wage orders. 

Probation period

In Kenya, the probation period typically lasts no more than six months, during which a seven-day notice or payment is required if the employee is terminated.

Minimum wage in Kenya

The minimum wage in Kenya is expected to reach 36,360.92 KES/Month. However, Kenya’s minimum wage system is differentiated by sector, occupation, work of nature, and region. 

Employment contracts in Kenya

Kenyan employment agreements can be either verbal or written, as stipulated under the Employment Act, 2007. However, for any contract lasting longer than three months, a written request must be submitted within two months of the start date of employment. These agreements must contain several elements, such as:

• Name and address of the employer and the employee
• Job title, description, and location of work
• Terms of employment (fixed or indefinite)
• Hours of work, overtime, and pay structure
• Dedications, leaves, and notice provisions
• Disciplinary procedures and termination details

Employers who use an EOR in Kenya benefit from professional guidance to draft and legally update contracts that are tailored to comply with local labor regulations, thereby avoiding the need for manual contract management. 

Leave policy in Kenya

Employees in Kenya are granted the following kinds of leave: 

• Annual leave:
• After working for 12 consecutive months, an employee is entitled to at least 21 working days of paid leave.
• If an employee leaves the job after working for at least 2 months in a year, they should get 1.75 days of paid leave for each month worked. This leave must be taken in one go.
• Employers and employees can agree to split the 21 days of leave into smaller parts, taken at different times.

• Maternity leave:

A female employee is entitled to 3 months of maternity leave with full pay. After the leave is over, the employee has the right to return to her old job or a similar job with the same or better terms. The other considerations are

• If maternity leave is extended with the employer’s approval, or if the employee takes other leave (like sick or annual leave) right after it, the 3-month maternity leave period is considered to end when the additional leave ends.
• The employee must provide at least 7 days’ written notice (or a shorter notice period if necessary) before starting maternity leave and upon returning to work.
• Taking maternity leave does not affect the employee’s right to annual leave.

• Paternity leave: A male employee is entitled to 2 weeks of paternity leave with full pay, as per Kenya’s Employment Act.

• Sick leave: 
• In Kenya, after working for two consecutive months, an employee is entitled to at least 7 days of sick leave with full pay. After that, they can receive an additional 7 days of sick leave with half pay for each of the 12 months, provided they submit a doctor’s note.
• The 12-month period for sick leave starts from the employee’s hire date and continues on each anniversary of their start date.

• Public holidays: Kenya has approximately 11 national public holidays celebrated throughout the country, with an additional day for Eid-ul-Azha for Muslim Employees and Diwali for Hindu employees.

Here are the main public holidays in Kenya:

Date	Name
January 1	New Year’s Day
Varies	Good Friday
Varies	Easter Monday
May 1	Labour Day
June 1	Madaraka Day
Depends on the sighting of the moon	Eid al-Fitr
Depends on the sighting of the moon	Eid al-Adha
October 10	Mazingira Day
October 20	Mashujaa Day
31st Nov	Diwali – optional
December 12	Jamhuri Day
December 25	Christmas Day
December 26	Boxing Day

An Employer of Record in Kenya has a thorough knowledge of the country’s local employment laws. The EOR is also well aware of the practices and policies that must be followed to remain compliant.

Work permits in Kenya

A work permit in Kenya is regulated under the Kenya Citizenship and Immigration Act 2011, administered by the Directorate of Immigration Services within the Ministry of Interior and National Coordination.

Businesses must always refer to the official site for specific details like types of work permits in Kenya, processing timelines, pricing etc.,

Background checks in Kenya

Background checks can be conducted before engaging an employee and typically include criminal history, employment and education history, and social media screening. 

Employers typically need employee consent to conduct checks and will likely need to disclose what they’re checking. Always check local regulations before conducting any background checks in Kenya.

Employment termination in Kenya

In Kenya, both employees and employers have specific rights and procedures to follow when terminating a job. The key rules are:

• Notice period:
  • If the contract doesn’t specify a particular job or timeframe, employees may be dismissed or leave the job with notice.
  • For daily wage workers, the contract can be ended at the end of any day without notice.
  • For employees paid monthly or weekly, either the employer or employee must give 28 days’ notice.
  • If an employer or employee decides to terminate the job immediately, they may be required to pay for the notice period.
• Severance pay:
  • A severance pay of 15-day salary for each year of service is applicable for open-ended contracts or permanent employees.

• Redundancy:
  • If an employer needs to reduce the workforce (for example, due to financial problems), they must follow a procedure. They must notify the employee and the labor officer at least a month before making them redundant.
  • Employees affected by redundancy must receive a notice and be paid severance pay.

• Summary dismissal: An employer can dismiss an employee immediately (without notice) if the employee has committed a serious offense. Some examples of serious misconduct include stealing, being intoxicated at work, or refusing to follow a lawful order.

• Unfair dismissal: If an employer fires an employee unfairly, the employee can challenge the decision. The employer must provide a valid reason for the termination and demonstrate that the termination process was fair.

• Termination during probation: 
  • During a probationary period, either the employer or the employee can end the contract with just 7 days’ notice. 
  • Probationary contracts cannot last for more than six months, but they can be extended for an additional six months if both parties agree.

Employers must explain to employees the reasons for their termination in a manner that the employee can understand. The employee may have another person present, such as a coworker or union representative, during this explanation.

Company registration in Kenya

You can also register a company in Kenya. The cost of it depends on the type of business and the share capital. 

For more information, businesses may consider visiting Kenya’s government website.

PEO in Kenya

A Professional Employer Organization (PEO) in Kenya shares the HR function of your business via your local entity, while you still control the day-to-day activities of your employees. The PEO may support compliance with the Kenya employment laws and handle important HR tasks on your behalf. 

However, for companies looking for support with quick expansion into the Kenyan market without setting up a local entity, an EOR in Kenya, like Payoneer Workforce Management, can help.

Explore Payoneer Workforce Management services in Kenya 

If you are looking for business expansion in Kenya, Payoneer Workforce Management is ready to be your Employer of Record in Kenya. 

With Payoneer Workforce Management, you can engage talent in 160+ countries and pay in 70 currencies. The platform enables the quick onboarding of international talent, secure payroll processing, tax filing, and a range of other services.

Book a demo today!

FAQs

1. What are the benefits of hiring an EOR in Kenya?

By partnering with an Employer of Record in Kenya, they will offer support with compliance, local benefits, payroll, taxes, employment contracts, onboarding, offboarding, and more. The EOR helps handle HR responsibilities, allowing you to focus on your business’s growth and development.

2. Does the EOR Kenya conduct background checks on employees in Kenya?

An employer of record may conduct background checks on employees in Kenya as an additional service as part of their broader employment services. However, the employer and employee may have to mutually consent to conduct the background check.

3. What is the probation period for employees in Kenya?

The probationary period in Kenya typically spans 3-6 months, with a seven-day notice requirement or payment in lieu if termination occurs during probation.

4. What are the mandatory contributions employers must make in Kenya?

In Kenya, employers must make contributions to the NSSF (National Social Security Fund) and NHIF (National Hospital Insurance Fund), and ensure that proper PAYE tax deductions are made for their employees.