In Kenya, employment is governed primarily by the Employment Act of 2007, which sets the minimum standards for the relationship between an employer and an employee. For an employer, a “handshake deal” is a legal minefield; the law heavily favors documented evidence and procedural fairness.
Here is a detailed breakdown of what every employer in Kenya must know about employment contracts in 2026.
1. The Legal Requirement for a Written Contract
While Kenyan law recognizes oral contracts, Section 9 of the Employment Act mandates that any employment intended to last for three months or more must be in writing.
As an employer, you are responsible for:
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Drafting the document: It is your legal duty to provide the written contract.
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Language: If the employee does not understand English, you must explain the terms in a language they understand.
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Timeline: The contract (or a written statement of particulars) must be provided to the employee within two months of their start date.
2. Mandatory Clauses: What Must Be Included
Under Section 10, a compliant contract must contain specific “initial particulars.” Omitting these can lead to disputes where the court may rule in favor of the employee’s interpretation.
| Item | Requirement |
| Identity | Full names of both employer and employee. |
| Job Description | Specific duties. Avoid vague phrases like “any other duties” as courts now require more specificity for performance-based terminations. |
| Remuneration | The gross salary, payment intervals (e.g., monthly), and method of calculation. |
| Working Hours | Standard hours (capped at 52 hours per week by law). |
| Leave Entitlement | Annual leave (min. 21 days), sick leave, maternity/paternity leave. |
| Termination | The notice period required by both parties. |
3. Navigating the Probation Period
The probation period is your “test drive” of a new hire. However, it is strictly regulated to prevent abuse.
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Duration: Typically 6 months, but can be extended to a maximum of 12 months total, provided the employee consents in writing.
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Notice Period: During probation, either party can terminate the contract with 7 days’ notice (or 7 days’ pay in lieu of notice) unless the contract specifies a longer period.
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The “Fair Hearing” Shift: Recent court rulings (e.g., Mount Kenya University vs. eKLR) have clarified that even during probation, you cannot simply fire someone without a reason and a fair hearing. The era of “terminating at will” during probation is effectively over in Kenya.
4. Types of Employment Contract
Choosing the right structure is vital for your business’s flexibility and tax obligations.
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Permanent (Indefinite) Contracts: No end date. These are the hardest to terminate and require strict adherence to redundancy or disciplinary procedures.
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Fixed-Term Contracts: Have a specific end date (e.g., 1 or 2 years). These are ideal for project-based work. Warning: Repeatedly renewing a fixed-term contract for years can lead a court to deem the employee “permanent.”
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Casual Employment: Engagement for not more than 24 hours at a time, paid daily. If a casual worker works for more than one month continuously, the law automatically converts them into a regular employee with full benefits.
5. Statutory Deductions (2026 Updated Rates)
As of 2026, Kenyan payroll has become more complex. Failing to remit these by the 9th of every month attracts heavy penalties from the KRA and other bodies.
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PAYE (Income Tax): Progressive rates ranging from 10% to 30%.
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NSSF (Pension): Now in “Year 4” of the phased implementation. For 2026, the combined (Employee + Employer) upper limit for high earners is significantly higher (capped at KES 6,480 per month for those earning above KES 72,000).
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SHIF (Social Health Insurance Fund): Replaces NHIF; it is a mandatory 2.75% deduction from gross salary.
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Affordable Housing Levy: A mandatory 1.5% deduction from the employee’s gross salary, matched by another 1.5% from the employer.
6. Termination and The “Fairness” Test
In Kenya, you cannot fire an employee just because you “want to.” For a termination to be legal, it must meet two criteria:
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Substantive Fairness: You must have a valid reason (e.g., gross misconduct, poor performance, or redundancy).
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Procedural Fairness: You must follow the law’s steps:
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Show-Cause Letter: Explain the allegations in writing.
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The Hearing: Allow the employee to defend themselves, accompanied by a colleague or union representative.
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Termination Notice: Provide written notice or pay in lieu of notice.
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Pro Tip: Always issue a Certificate of Service upon termination. It is a legal requirement under Section 51, regardless of why the employee is leaving.
