The landscape of work is rapidly evolving, and the rise of independent contracting is reshaping the way people engage in business around the world. Kenya, with its vibrant economy and entrepreneurial spirit, presents a wealth of opportunities for individuals seeking the freedom and flexibility that comes with being an independent contractor. Whether you are considering a career change or exploring new avenues for professional growth, understanding the dynamics of working as an independent contractor in Kenya is essential.
In this article, we’ll cover what you need to know when working as an independent contractor in Kenya, providing you with all the essential information to navigate this exciting career path. From legal considerations and registration processes to tax obligations, we’ll cover the key aspects that will empower you to embark on a successful journey as an independent contractor in Kenya.
What is the Definition of an Independent Contractor Under Kenyan Law?
Under Kenyan law, an independent contractor is referred to as a "service provider" or "supplier." The legal definition of an independent contractor in Kenya is not explicitly outlined in one specific law or legislation. However, independent contractors can be understood as individuals or entities that provide services to clients or companies under a contractual arrangement.
Kenyan labor laws primarily focus on the distinction between employees and employers, but they do not provide a specific legal framework for independent contractors. Instead, the categorization of an individual as an independent contractor is based on the specific contractual relationship and the nature of the work performed.
In practice, the determination of independent contractor status in Kenya relies on factors such as:
- The presence of a formal written contract defining the terms and conditions of the engagement.
- The level of control exercised by the contractor over the work performed.
- The ability of the contractor to work for multiple clients simultaneously.
- The provision of specialized skills, tools, or equipment by the contractor.
It is important to note that the actual working relationship and the specific details of the contract will be taken into consideration by Kenyan courts if any disputes or legal issues arise. Courts may analyze the degree of independence, control, and economic reality to determine whether an individual should be classified as an independent contractor or an employee.
Getting Set Up as an Independent Contractor in Kenya
Getting set up as an independent contractor in Kenya involves several important steps. Here's a general outline of the process:
Determine Your Business Structure
Decide on the most suitable legal structure for your business. You can choose to operate as a sole proprietorship, a partnership, or a limited liability company (LLC) depending on your needs and preferences.
Business Name Registration
Register your business name with the Registrar of Companies. This is done at the Kenya Business Registration Service (BRS) or via their online portal. Ensure that your chosen business name is unique and complies with the requirements of the Registrar.
Register for tax purposes with the Kenya Revenue Authority (KRA). Obtain an eleven-digit, alphanumeric Personal Identification Number (PIN) and register for Value Added Tax (VAT) if your annual turnover exceeds the threshold set by the KRA.
Open a Business Bank Account
Open a separate bank account for your business transactions. This will help you keep personal and business finances separate, making it easier to manage your finances and track your income and expenses.
Contracts and Agreements
Prepare comprehensive contracts and agreements for your clients. Clearly outline the scope of work, payment terms, deliverables, and any other relevant details. Having written contracts in place helps protect your rights and minimizes potential disputes.
Payment Methods for Independent Contractors in Kenya
Payment methods for independent contractors in Kenya vary depending on various factors, including the nature of the work, the agreement between the contractor and the client, and technological advancements. Here are some common payment methods used by independent contractors in Kenya:
- Bank Transfers: This is one of the most popular payment methods. Contractors provide their bank account details to clients, who then transfer funds directly into their accounts. It is a secure and convenient option, particularly for larger payments.
- Mobile Money Services: In Kenya, mobile money platforms like M-Pesa have revolutionized the financial landscape. Independent contractors often receive payments through these platforms, which allow for easy transfer and withdrawal of funds using a mobile phone. This method is widely accessible and efficient.
- Payment Gateways: With the growth of e-commerce and online freelancing platforms, payment gateways like PayPal and Skrill have gained popularity. Independent contractors can receive payments from international clients through these platforms, which provide a level of security and facilitate cross-border transactions.
- Cash Payments: In certain cases, especially for small-scale or informal arrangements, independent contractors may receive cash payments. However, this method has its limitations in terms of security and record-keeping.
- Purpose-Built Platforms: Platforms like RemotePass enable contractors a combination of flexibility and control over how they get paid. RemotePass removes delays from the payment process, and offers a broad variety of payout options — including bank transfer, PayPal, Wise, Payoneer, Crypto, and payout to card — the latter of which means you can be paid in seconds.
Cheques: Although less common, some contractors still receive payment through cheques. However, this method is gradually being phased out due to the rise of electronic payment alternatives.
Tax Obligations for Independent Contractors in Kenya
Independent contractors in Kenya have specific tax obligations that they must fulfill. Understanding and managing these tax obligations is crucial to ensure compliance with the Kenya Revenue Authority (KRA). Here are the key tax considerations for independent contractors in Kenya:
Independent contractors are responsible for paying income tax on their earnings. Income tax rates are progressive, meaning that higher income levels are subject to higher tax rates. Contractors must register for income tax and file their tax returns annually.
Value Added Tax (VAT)
If your annual taxable turnover exceeds the VAT threshold (currently Kshs 5 million as of 2021), you must register for VAT. VAT is a consumption tax levied on the supply of goods and services. VAT-registered contractors charge VAT on their services and remit the collected VAT to the KRA.
Independent contractors may have withholding tax deducted by clients when making payments. Withholding tax is a mechanism for collecting income tax at the source. The rates vary depending on the type of income.
National Social Security Fund (NSSF) and National Hospital Insurance Fund (NHIF)
Independent contractors are required to make contributions to the NSSF and NHIF. These contributions provide social security benefits and healthcare coverage. The amounts are based on your income and are deducted from your earnings.
Tax Compliance and Filing
Contractors must ensure they meet tax compliance requirements, including maintaining accurate records, filing tax returns on time, and paying taxes by the specified deadlines.
Benefits for Independent Contractors in Kenya
As a contractor in Kenya, you’ll enjoy the following benefits on RemotePass:
Access health insurance plans for you and your dependents — regardless of your location — paid in monthly installments.
With the RemotePass Card, you can receive payments in USD, hold funds indefinitely, and enjoy global, offline and online spending.
Choose from 90+ currencies and seven payment options, including bank account, bank card, Wise, PayPal, Payoneer, or Crypto.
Manage contracts, cards, invoices, expenses, and time-off conveniently through a single app.
Good Luck On Your Kenyan Contracting Journey!
Working as an independent contractor in Kenya offers great opportunities, and for those considering this brave next step in their career, it is an exciting time. However, ensuring full compliance with local legislation and taxes is vital — and getting this wrong can be costly.
By staying informed, maintaining accurate records, and seeking professional assistance when needed, you can navigate the contractor landscape effectively and focus on growing your independent contracting career.
To help remove the complexity, refer your clients to use RemotePass today — we’ll take care of the details, so you can focus on your work in the UK.
Good luck on your contracting journey!