Ending an employment relationship in Kenya involves more than handing over a letter. The country has a structured legal framework that sets clear obligations around notice, severance, documentation, and process, and courts take those obligations seriously. If you’re a foreign employer with staff in Kenya, understanding what the law requires before you act is the difference between a clean separation and a costly dispute.
Termination framework in kenya
Kenya’s employment law is governed by the Employment Act 2007, which applies to all employees working in Kenya regardless of the employer’s country of incorporation. The Act covers the full employment lifecycle, including termination, and it establishes both substantive and procedural requirements.
Substantive fairness means you need a valid, recognized reason to terminate. Procedural fairness means you need to follow the right process. A termination can fail on either ground, so both matter. Kenya’s Employment and Labour Relations Court has jurisdiction to hear disputes, and employees who believe they’ve been dismissed unfairly can bring claims within three years.
Valid grounds for termination
The Employment Act 2007 recognizes four main grounds on which an employer can lawfully terminate a contract:
- Poor performance: the employee has failed to meet a required standard of work, typically after warnings and an opportunity to improve
- Misconduct: covers serious breaches of workplace rules, dishonesty, insubordination, or behaviour that undermines the employment relationship
- Incapacity: the employee is genuinely unable to perform their duties due to illness, injury, or disability
- Redundancy: the role itself no longer exists due to business restructuring, closure, or reduced operational need
Termination must be for a valid and fair reason. A dismissal that can’t be tied to one of these recognized grounds is likely to be treated as unfair, and the employer bears the burden of showing that grounds existed and were followed properly.
Notice periods
Probationary employees
If an employee is still within their probationary period, either party can terminate the contract with seven days’ written notice. This shorter period reflects the nature of probation as a trial phase.
Employees past probation
Once probation ends, notice entitlements depend on length of service:
- Up to five years of service: at least one month’s written notice
- More than five years of service: at least two months’ written notice
In all cases, the employer can choose to pay wages in lieu of notice rather than require the employee to work through the notice period. If you go that route, the payment must cover the full value of what the employee would have earned during the notice period.
Redundancy
Redundancy in Kenya carries specific legal requirements set out in Section 40 of the Employment Act 2007. It’s not enough to tell an employee their position has been eliminated. You need to follow a prescribed process or expose yourself to liability.
The key requirements are:
- Written notice to the Labour Officer and the affected employee: both must receive written notification before the redundancy takes effect
- Prior consultation: you must consult with the employee (and their union, if applicable) before finalising the decision
- Fair selection: selection must be based on objective criteria; the default principle is last-in-first-out, taking into account length of service and skills
- Qualifying period: an employee must have worked for at least 12 months to qualify for redundancy severance pay
- Severance pay: the minimum is 15 days’ basic pay for each completed year of service
If a court or tribunal finds that a redundancy was procedurally or substantively unfair, the employer can be ordered to pay compensation of up to 12 months’ salary. Skipping consultation or failing to notify the Labour Officer are the most common procedural failures and are taken seriously in disputes.
Service pay and severance
Service pay
Kenya’s Employment Act includes a lesser-known obligation called service pay. If your employee isn’t enrolled in the National Social Security Fund (NSSF), an approved occupational pension scheme, or a gratuity scheme, they’re entitled to service pay on termination, for any reason, not just redundancy. The rate is 15 days’ basic pay for each completed year of service.
This isn’t optional. If you’ve been employing someone in Kenya without enrolling them in a qualifying scheme, service pay is a liability you need to account for at the point of separation.
Final payment
All outstanding amounts must be settled on or before the next payday following termination. That includes all outstanding wages, accrued leave pay, and any severance or service pay owed. Delayed final payment creates additional legal exposure.
Tax treatment of severance
The first KES 200,000 of any compensation paid for loss of employment is exempt from PAYE. Any amount above that threshold is subject to income tax in the normal way and needs to be processed through payroll accordingly.
The certificate of service
One obligation that surprises many foreign employers is the mandatory certificate of service. Under the Employment Act, any employee who worked for more than four weeks is legally entitled to receive a certificate of service when their employment ends. You must issue it upon termination. It’s not optional and doesn’t depend on the circumstances of the departure.
The certificate should confirm the employee’s name, job title, period of employment, and the nature of work performed. Failing to issue it isn’t just a civil matter: it’s a criminal offence. An employer who doesn’t comply can face a fine of up to KES 100,000, imprisonment of up to six months, or both.
Unfair termination
If Kenya’s Employment and Labour Relations Court finds that a termination was unfair, the employer can be ordered to pay compensation of up to 12 months’ salary. The court considers both the substantive reason for dismissal and whether the correct procedure was followed.
Common grounds on which terminations are found to be unfair include: dismissing without a recognized reason, failing to give the employee a chance to respond to allegations before dismissal, selecting redundancy candidates arbitrarily, and not following the Section 40 process for redundancy. Employers who document their process carefully are in a much stronger position if a claim is brought.
How an Employer of Record (EOR) manages terminations in kenya
For a foreign company without a local entity, terminating a Kenyan employee without in-country support is high-risk. Local employment law nuances, the Labour Officer notification requirement, service pay calculations, and the certificate of service obligation all require on-the-ground knowledge.
An Employer of Record is the legal employer of your Kenyan staff, which means termination is handled within a compliant local framework. When you need to end an employment relationship, the EOR manages the statutory process: calculating all final payments correctly, issuing the certificate of service, notifying the Labour Officer where required, and ensuring proper PAYE treatment of any severance. If your employee holds a work permit, the EOR also handles the immigration notification requirement, since employers must notify immigration authorities when a foreign employee’s contract ends and their visa or work permit is tied to the employment.
Using EOR services doesn’t just reduce administrative burden. It gives you confidence that every statutory requirement has been met, reducing the risk of a successful unfair dismissal claim.
Terminating employees in Kenya doesn’t need to be complicated, but it does need to be done correctly. If you’re hiring or managing staff in Kenya and want a compliant, low-friction setup from day one, talk to RemotePass.
