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Hiring in Kenya

Kenya, officially known as the Republic of Kenya, is a country in Eastern Africa. Nairobi is the capital and the largest city. Telecommunications and Financial services are the major sectors of Kenya in terms of contribution to GDP. Agriculture is the largest sector in terms of employment. Kenya’s main trading partners are Uganda, United States, Netherlands, Pakistan, United Kingdom, China and India. Global PEO or Employer of Record (EOR) play a pivotal role in providing companies with services related to hiring employees, and ensuring compliance with Kenya’s legal and tax regulations. Employment regulations including probation, holidays and termination are covered by the Labor Code. Labor Code stipulates that employees are entitled to 21 days of annual leave. Residents are taxed on their worldwide income. Nonresidents are taxed on Kenyan-source income only. Global PEO’s or Employer of Record (EOR) facilitate companies by ensuring compliance with Kenya’s Labor Code and tax laws.

statutory labor requirements

Probation Period

  • According to Employment Act, Probationary contract is an employment contract of up to twelve months’ duration or part thereof. 
  • It must be written and expressly states that it is for a probationary period.

Annual Leave

  • Every employee is entitled to 21 annual leave days after one year of service to the company, with full pay.

Public Holidays

  1. New Year's Day (1st January)
  2. Funeral of Former President Daniel arap Moi (11th February)
  3. Good Friday (10th April)
  4. Easter Monday (13th April)
  5. Labor Day (1st May)
  6. Eid al-Fitr
  7. Madaraka Day (1st June)
  8. Eid al-Adha
  9. Huduma Day (10th October)
  10. Mashujaa Day (20th October)
  11. Jamhuri Day (12th December)
  12. Christmas Day (25th December)
  13. Utamaduni Day (26th December)

Maternity Leave

  • A female employee is entitled to three months’ maternity leave in addition to any period of annual leave she is entitled to, and sick leave if she happens to fall sick during her time of confinement and with the consent of the employer.

Paternity Leave

  • Employment Act provides for two weeks/14 working days of paid paternity leave.

Sick Leave

  • Employees are generally entitled to 14 days of paid sick leave per year. 
  • Employees must provide a medical certificate. 
  • The first 7 days are paid at 100%, the remaining days are paid at 50%.

Work Hours

  • The work week in Kenya is generally 45 hours.

Overtime

  • An employer is required to pay at least 150% of the wage if overtime work is performed during normal working hours. 
  • Overtime payment for the workers that are not employed on hourly basis, is calculated on the basis of the basic hourly rate of at least one two-hundred-and twenty-fifth of the employee’s basic minimum monthly wage. 
  • The Wages Order also specifies that overtime plus time worked in normal hours per week may not exceed 116 hours in total in any period of 2 consecutive weeks. 
  • Thus a worker can work only 6 hours of overtime in a week. 
  • For night workers this limit is 144 hours per week. 
  • For night workers, 12 hours of overtime is allowed.

Notice Period

  • The minimum notice period is determined by the duration after which the salary is paid; so that if one is paid weekly, the minimum notice period is one week and if one is paid monthly, as most people are, the minimum notice period is one month.

Severance

  • There is no provision for severance pay in legislation for reasons other than redundancy.
  • Severance pay, paid by the employer, in Kenya is equivalent to 15 days’ basic wages for each completed year of employment.

13th / 14th Month Pay

  • No
  • There is no statutory requirement to pay the 13th or the 14th month salary.
  • Employees are entitled to 21 days full pay.

income tax

  • Resident employees are taxed on worldwide earned income, in respect of any employment or services rendered in Kenya or outside Kenya. 
  • Residents are also taxed on any other income that has accrued in or is derived from Kenya.
  • Non-resident employees are taxable only on their income earned from within Kenya or derived from Kenya.
  • The tax rates applied to taxable income are tabulated below.

Annual taxable income (KES)

Tax rate (%)

On the first 147,580

10

On the next 139,043

15

On the next 139,043

20

On the next 139,043

25

On all income over 564,709

30

 

  • As shown above, the maximum rate of 30% will be charged on income in excess of KES 564,709.
  • Bonuses, overtime allowances, and retirement benefits paid to employees earning less than KES 147,580 per annum are now exempt from tax. 
  • The tax-free amount is based on the employment income before the bonus, overtime allowances, and retirement benefits.

deductible expenses

Employment Expenses

  • Bona fide reimbursement of business expenses relating to entertainment, travel, and car expenses are not part of taxable income.
  • Actual airfare and moving expenses paid to expatriate employees recruited outside Kenya and there solely to perform their duties are not taxable. Leave passages for such employees are also not taxable.
  • Reimbursed medical insurance or medical expenses are not normally taxable.
  • Any expense incurred wholly and exclusively in the production of employment income is not taxable.

Personal Deductions

  • Effective 1 January 2017, interest payments on loans borrowed for the purposes of improvement or construction of residential premises are deductible, subject to a limit of KES 300,000 per annum (or KES 25,000 per month).
  • An employee can claim a deduction against taxable income in respect of their annual contributions to a Kenya-registered retirement benefit scheme. 
  • This relief is limited to the lowest of the following:
  • Actual contributions during the year.
  • 30% of the employee’s pensionable (taxable) income during the year.
  • KES 240,000 per annum (equivalent to a maximum monthly contribution of KES 20,000).

Personal Allowances

  • Personal relief is minimal, and the current relief is KES 16,896 per annum for all individual taxpayers, and is applied as a credit against the tax liability. 
  • Where an employee has more than one employer, they are entitled to claim personal relief credit through only one employer.

Deductible Expenses

Employment Expenses

  • Bona fide reimbursement of business expenses relating to entertainment, travel, and car expenses are not part of taxable income.
  • Actual airfare and moving expenses paid to expatriate employees recruited outside Kenya and there solely to perform their duties are not taxable. Leave passages for such employees are also not taxable.
  • Reimbursed medical insurance or medical expenses are not normally taxable.
  • Any expense incurred wholly and exclusively in the production of employment income is not taxable.

Personal Deductions

  • Effective 1 January 2017, interest payments on loans borrowed for the purposes of improvement or construction of residential premises are deductible, subject to a limit of KES 300,000 per annum (or KES 25,000 per month).
  • An employee can claim a deduction against taxable income in respect of their annual contributions to a Kenya-registered retirement benefit scheme. 
  • This relief is limited to the lowest of the following:
  • Actual contributions during the year.
  • 30% of the employee’s pensionable (taxable) income during the year.
  • KES 240,000 per annum (equivalent to a maximum monthly contribution of KES 20,000).

Personal Allowances

  • Personal relief is minimal, and the current relief is KES 16,896 per annum for all individual taxpayers, and is applied as a credit against the tax liability. 
  • Where an employee has more than one employer, they are entitled to claim personal relief credit through only one employer.

immigration

  • Certain classes of entry permits allow foreign nationals to work in Kenya and are generally referred to as work permits. 
  • An entry permit that allows a foreign national to work in Kenya is obtained by an employer on behalf of a foreign national. 
  • Employers are required to justify employment of a foreign national instead of a Kenyan. If the foreign national changes employment, his or her new employer is responsible for obtaining a new work permit. 
  • Individuals requiring entry permits may enter Kenya on visas or visitors’ passes while their applications for the permits are being processed, but they cannot engage in any work-related or income generating activities. 
  • Foreign nationals who are over 18 years of age and stay in the country for more than 90 days are required to register as foreigners. 
  • Different classes of entry permits are issued in Kenya including permits for the following categories of expatriates: 
    • Class A, which is issued to a person engaged in prospecting for minerals and mining in Kenya. 
    • Class C, which is issued to a member of a prescribed profession who intends to practice that profession in Kenya, alone or in partnership. 
    • Class D, which is issued to a person who is offered specific employment by a specific employer. 
    • Class G, which is issued to a person who intends to engage, alone or in partnership, in a specific trade, business or profession (other than a prescribed profession) in Kenya.
  • The permits are issued only to persons whose employment, business or presence will benefit the country. 
  • A foreign national wishing to carry out business in Kenya must obtain the necessary licenses and registrations required and must have sufficient capital or resources for investment.

Type of Visa/Permit

Documentation

Validity

Eligibility

Class C

  • Duly filled and signed Form 25 online form.
  • Two copies of detailed and signed cover letter from the employer /self /organization, addressed to the Director of Immigration Services
  • Copies of valid national passport
  • Two (2) recent passport size colored photos (for both new and renewal)
  • Current Immigration status if in the country
  • Documents in foreign languages should be translated into English by either the Embassy, Public Notary, or authorized /recognized institution
  • Copy of any previous permit(s) and or pass (es) held
  • Tax compliance certificate from KRA (for renewals)
  • Proof of membership to a prescribed profession
  • Copies of certified academic and professional certificates (qualifications)
  • Curriculum vitae (CV)
  • Copy of PIN certificate
  • Processing fees non-refundable (Kshs. 10,000/=)
  • Valid Organization Tax Compliance Certificate for new cases, and both valid organization and individual Tax Compliance Certificates for renewal cases.

2 years (renewable)

  • This permit is issued to a person who is a member of a prescribed profession who intends to practice that profession, whether alone or in partnership, in Kenya, and who –
  • Possesses the prescribed qualification (Eighth schedule of The Kenya Citizenship and Immigration Regulations, 2012)
  • Has in his/her own right and at his/her full and free disposition sufficient capital and other resources
  • Is registered with the professional body, association or institute to which he/she belongs in his/her own country; and
  • Whose practice of that profession will be of benefit to Kenya

Class D

  • Duly filled and signed Form 25
  • Two copies of detailed and signed cover letter from the employer/organization/ self, addressed to the Director of Immigration Services
  • Copies of valid national passport
  • Two(2) recent passport size colored photos (for both new and renewal)
  • Current Immigration status if in the country
  • Documents in foreign languages should be translated into English by either the Embassy, Public Notary, or authorized /recognized institution
  • Copy of any previous permit(s) and or pass (es) held
  • Duly certified copies of academic and professional certificates.
  • Curriculum vitae.
  • Duly filled and signed Form 27(Report on Employment)
  • Name of the Kenyan understudy
  • Certified copies of academic/professional certificates and full contracts of the Kenyan understudy
  • Curriculum vitae (CV) for the Kenyan understudy.
  • Full contact-address, email, cell phone, of the Kenyan understudy
  • Clearance letter from relevant institutions.
  • Certificate of company / organization registration.
  • Valid organization Tax Compliance Certificate for new cases, and both organization and individual Tax Compliance Certificates for renewals cases from KRA
  • Processing fees nonrefundable (Kshs. 10,000)

2 years (renewable)

  • This permit is issued to a person who is offered specific employment by a specific employer, the government of Kenya or any other person or authority under the control of the Government or an approved technical aid scheme under the United Nations Organization or some other approved Agency (not being an exempted person under section 34 (3), who is in possession of skills or qualifications that are not available in Kenya and whose engagement in that employment will be of benefit to Kenya.

Class G

  • Duly filled and signed Form 25
  • Two copies of detailed and signed cover letter from the employer/ self /organization, addressed to the Director of Immigration Services
  • Copies of valid national passport
  • Two (2) recent passport size colored photos (for both new and renewal)
  • Current Immigration status if in the country
  • Documents in foreign languages should be translated into English by either the Embassy, Public Notary, or authorized /recognized institution
  • Copy of any previous permit(s) and or pass (es) held
  • Duly filled form 27
  • Documentary proof of capital to be invested at least USD 100,000
  • Certificate of incorporation of the company
  • Memorandum of understanding
  • Articles of association
  • Shareholding certificate (CR 12)
  • Copies of PIN certificate
  • Signed current audited accounts (for renewals)
  • List of Kenyans already employed (for renewals)
  • Clearance letter from relevant institutions.
  • Two copies of bank statement verification form (For new cases). Click here to download the verification form.
  • Provide a proof of offshore transaction receipt / slip.
  • Processing fees non-refundable (Kshs. 10,000/=)
  • Valid Organization Tax Compliance Certificate for new cases, and both valid organization and individual Tax Compliance Certificates for renewal cases.

2 years (renewable)

  • This permit is issued to a person who intends to engage, whether alone or in partnership, in a specific trade, business, consultancy or profession (other than a prescribed profession) in Kenya, and who;
  • Has obtained any license, registration or other authority or permission that may be necessary for the purpose;
  • Has in his/her own right and at his/her full and free disposition sufficient capital and other resources for the purpose;
  • Whose engagement in trade, business, consultancy or profession will be of benefit to Kenya.

 value added tax

  • VAT is levied at a standard rate of 16% on the supply of taxable goods and services in Kenya, as well as on the importation of taxable goods and services into Kenya.

VAT

Standard Rate

16%

Zero Rate

0%

 

withholding tax

Dividends

  • No withholding tax is imposed if the dividend recipient is a qualifying Kenyan financial institution or if the recipient company controls 12.5% or more of the capital of the payer.
  • The rate is 5% for dividends paid to other residents of Kenya and citizens of the East African Company partner states; the rate is 10% for other nonresidents
  • No withholding tax is imposed on dividends paid by an SEZ enterprise to a nonresident

Interest

  • Interest paid by financial institutions is subject to a 15% withholding tax
  • The rate is 25% for interest paid on bearer certificates and 10% for interest paid on bearer bonds
  • The rates apply to payments made to both residents and nonresidents
  • However, a reduced withholding tax rate of 5% applies to interest paid by an SEZ enterprise to a nonresident

Royalties

  • Royalties (and natural resource income) paid to a resident, as well as royalties paid by an SEZ enterprise to a nonresident are subject to a 5% withholding tax
  • The general rate is 20% where royalties are paid to a nonresident

Fees for Technical Services

  • A 5% withholding tax is levied on the payment of technical service fees where the services are provided by a resident and where the fees are paid by an SEZ enterprise to a nonresident
  • Contractual fees are liable to a withholding tax of 3% if payment is made to a resident person
  • The general withholding tax rate in respect of technical service fees is 20% where the service provider is a nonresident, unless otherwise provided in an applicable tax treaty

Type of Payment

Residents

Nonresidents

 

Company

Individual

Company 

Individual

Dividends

0%/5%

5%

0%/10%

0%/5%/10%

Interest

10%/15%/25%

10%/15%/25%

5%/10%/15%/25%

0%/10%/15%/25%

Royalties

5%

5%

5%/20%

5%/20%

Technical Service Fee

3%/5%

3%/5%

5%/20%

5%/20%

termination

  • Termination of employment is regulated under the Employment Act. 
  • A worker may be terminated after serving due notice or paying in lieu of notice. 
  • Length of notice period depends on the type of employment contract.
  • Notice period is not provided for a worker hired on daily basis; contract may be terminated at the end of working day without any prior notice
  • At least seven days’ notice for workers during the probationary period (or payment in lieu of notice)
  • Length of notice period may be set in employment contract by mutual consent of employer and worker, provided that the period is more than that is provided by the Act. 
  • Notice should be written in language easily comprehended by the worker, otherwise someone has to explain it to the worker, orally, in language that he/she could comprehend.
  • There is no provision for severance pay in legislation for reasons other than redundancy.
  • Redundancy means the loss of employment by involuntary means through no fault of a worker, involving termination of employment at the initiative of the employer, where the services of a worker are superfluous and the practices commonly known as abolition of office, job or occupation and loss of employment.
  • Severance pay, paid by the employer, in Kenya is equivalent to 15 days’ basic wages for each completed year of employment.

statutory benefits

  • These are mandatory benefits as postulated by law
  • These include probationary period, annual leave, public holidays, sick leave, maternity leave, paternity overtime pay, notice period, and severance pay
  • Statutory benefits also include social security benefits

Statutory Benefits

Probationary Period

Annual Leave

Public Holidays

Maternity Leave

Paternity Leave

Sick Leave

Overtime Pay

Notice Period

Severance Pay

Social Security Benefits

 payments and invoicing 

  • The year of income is a calendar year.
  • Individual self-assessment tax returns must be filed by 30 June in the year following the year of income. 
  • Spouses can file separate self-assessment returns.
  • The majority of tax on employees is paid by withholding from salaries and benefits under the PAYE system. 
  • Any further tax liability is based on self-assessment, and it must be paid by 30 April following the year of income to which the liability relates.
  • An individual (other than one whose total taxable income has been subjected to tax at source) whose tax liability exceeds KES 40,000 per annum is required to pay four instalment taxes by 20 April, 20 June, 20 September, and 20 December. 
  • The instalment tax payable on each due date is 25% of the lower of 110% of tax assessed in the prior year or the taxpayer's estimate of the current year's tax liability.

 ease of doing business

  • The ease of doing business index is an index created by Simeon Djankov, an economist at the Central and Eastern Europe sector of the World Bank Group.
  • Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
  • According to the World Bank Kenya ranked 56th in the World in 2019 in terms of ease of doing business

 employee accruals

   
Christmas Bonus%

0%

Christmas Bonus Over Vacations %

0%

Severance per Year %

Employees are entitled to severance pay that equals 15 days of pay for each completed year of service (4.28% of annual salary)

Vacations % Every employee is entitled to 21 days of annual leave days after one year of service (5.76% of annual salary)
Notice %

Employees are entitled to 28 days of notice period for one year of service or more (7.26%)

Christmas Bonus Over Notifications% 0%
Vacations Plus% Note the employer need to make provisions to cover the employee's rent and/or provide accommodation (Art 31)
Total percentage of Salary (yearly) The total employment accruals as a percentage of salary per anum are equal to 17.3%

employer accruals

Additional information (Country Accruals)

   
National social security fund 12.00%
Maternity 2months
Vacations 7.67%
Description The NSSF was set to undergo drastic transformation following the enactment of the NSSF Act 2013, which became effective from 10 January 2014. However, the implementation of the new Act awaits conclusion of a pending court case. In the meantime, NSSF contributions are as per the provisions of the old Act (i.e. KES 200 for employer and KES 200 for employee).

Employer Accruals Additional information

    Employment Accruals
Annual Leave Every employee is entitled to 21 annual leave days after one year of service to the company, with full pay. This equals 5.75% (21/365 days) of annual income
Maternity Leave A female employee is entitled to three months’ maternity leave in addition to any period of annual leave she is entitled to, and sick leave if she happens to fall sick during her time of confinement and with the consent of the employer. This equals 25% (3/12 months) of annual income
Paternity Leave Employment Act provides for two weeks/14 working days of paid paternity leave. This equals 3.84% (2/52 weeks) of annual income
Sick Leave Employees are generally entitled to 14 days of paid sick leave per year.
Employees must provide a medical certificate.
The first 7 days are paid at 100%, the remaining days are paid at 50%.
This equals 1.91% (7/365 days) of annual income. Plus 50% of 1.91% of annual income
Overtime An employer is required to pay at least 150% of the wage if overtime work is performed during normal working hours. Depends on the number of overtime hours worked
Severance Severance pay, paid by the employer, in Kenya is equivalent to 15 days’ basic wages for each completed year of employment. This equals 4.1% (15/365 days) of annual income
Social Security Employers must contribute KES 200 to the National Social Security Fund (NSSF) This equals KES 200

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