Population: (2023 est.) 50,830,000
Monetary Unit: Kenyan Shilling (KES, KSh)
Official languages: Swahili, English
Kenya, officially known as the Republic of Kenya, is a country in Eastern Africa. Nairobi is the capital and the largest city. Kenya’s main trading partners are Uganda, United States, Netherlands, Pakistan, United Kingdom, China, and India.
The public holidays in Kenya are as follows;
- 1 Jan New Year’s Day
- 2 Jan New Year Holiday
- 7 Apr Good Friday
- 10 Apr Easter Monday
- 22 Apr Idd ul Fitr
- 1 May Labour Day
- 1 Jun Madaraka Day
- 29 Jun Idd ul Azha
- 10 Oct Moi Day
- 20 Oct Mashujaa Day
- 12 Nov Diwali
- 12 Dec Jamhuri Day
- 25 Dec Christmas Day
- 26 Dec Boxing Day
Probationary contracts, as defined by the Employment Act, are employment contracts with a maximum tenure of twelve months, or a portion thereof. It must be in writing and explicitly specify that the agreement is for a trial period.
After one year of employment, every employee is entitled to 21 paid annual leave days.
A female employee is entitled to three months of paid maternity leave in addition to any paid annual leave she is eligible for. With the employer’s approval, she may also take sick leave if she becomes ill while she is pregnant.
Paternity leave is compensated for two weeks, or 14 working days, under the Employment Act.
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%.
Severance pay is not an option under the law for situations except redundancy. In Kenya, the amount of severance pay is equal to 15 days’ worth of basic salary for every year of service that has been completed.
13th / 14th Month Pay: The 13th or 14th month’s wage is not required by law to be paid. A full 21 days of compensation is due to employees
The term “work permit” primarily refers to a class of entrance permits that allow foreign nationals to work in Kenya. An employer obtains an entry permit on behalf of a foreign citizen in order for them to work in Kenya. Employers must provide justification for hiring a foreigner over a Kenyan. A new work permit must be obtained by the foreign national’s new employer if they change jobs. While their applications for the permits are being processed, people who need entry permits are allowed to enter Kenya on visas or visitors’ passes, but they are not allowed to do any work-related or income-generating activities. Foreign nationals older than 18years of age who remain in the nation for longer than 90 days must register as foreigners. In Kenya, entry permits for a variety of groups of foreigners are issued, they include;
Class A, which is given to someone who is mining and prospecting for minerals in Kenya.
A member of a predetermined profession who wishes to work alone or with others in Kenya is granted a Class C license.
Class D, which is given to someone who is given a specific job offer by a particular firm.
When a person plans to work in Kenya alone or with partners in a particular trade, business, or profession (other than one that is specifically authorized), they are given a Class G license.
Only those who will benefit the nation through their work, businesses, or presence are granted permission. A foreign national who wishes to operate a business in Kenya must have the proper permits and registrations, as well as possess the necessary funds or resources for investment.
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.
According to the legislation, these benefits are required. These consist of the probationary term, yearly leave, federal holidays, sick leave, maternity leave, overtime pay, notice period, and severance compensation. Social Security payouts are statutory benefits as well.
In Kenya, a typical work week lasts 45 hours.
If overtime work is completed during regular business hours, the employer must pay at least 150% of the normal rate of compensation. For workers who are not hourly paid, overtime is determined using a baseline hourly rate of at least one-two-and-a-quarter times the employee’s basic minimum monthly salary. The Wages Order further states that the total number of hours worked per week, including overtime and regular hours, cannot exceed 116 in any span of two consecutive weeks. So, a worker is only permitted to perform 6 hours of extra per week. This restriction is 144 hours per week for night workers. Twelve hours of overtime are permitted for nighttime employees.
The length of time after which the salary is paid determines the minimum notice period; as a result, 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.
Regarding any employment or services provided in Kenya or outside of Kenya, resident employees are taxed on their worldwide earned income. Any other income that a resident receives from Kenya or that was earned there is also taxed. Only income earned within Kenya or derived from Kenya is taxable for non-resident employees. The tab below shows the tax rates that were applied on taxable income.
First 147,580 – 10%
Next 139,043 – 15%
Next 139,043 – 20%
Next 139,043 – 25%
On all income over 564,709 – 30%
Contributions to the National Social Security Fund (NSSF). The NSSF must undergo significant change because of the NSSF Act 2013, which was passed and took effect on January 10, 2014. The new Act will not go into effect, though, until a current legal battle is resolved. Contributions to the NSSF are made in the interim in accordance with the rules of the previous Act (i.e., KES 200 for employer and KES 200 for employee). contributions to the National Hospital Insurance Fund (NHIF). Contributions to the NHIF are compulsory of all Kenyan employees. There is no comparable employer contribution. The contributions are tiered, with the highest contribution currently being KES 1,700 per employee for those making more over KES 100,000 per month.
The National Social Security Fund (NSSF) offers social protection to Kenyan employees. Kenyans with an income contribute a percentage of their gross earnings to be guaranteed basic compensation in case of permanent disability, basic assistance to needy defendants in case of death, and a monthly life pension upon retirement. The implementation of the new Act awaits the conclusion of a pending court case. In the meantime, NSSF contributions are as per the provisions of the old Act. Employers and employees contribute 5% of gross earnings to the social security fund (i.e. KES 200 for the employer and KES 200 for employee).
Genuine reimbursement for travel, entertainment, and auto-related business expenses is not considered taxable income. Actual flight and relocation costs paid to foreign workers who were hired outside of Kenya and were only there to carry out their jobs are not taxable. Such employees’ leave passages are also not taxed. Reimbursed medical bills or insurance are typically not taxable. Any expenditure made entirely and solely for the purpose of generating income from employment is not taxable.
Mortgage Interest Expenses: With effect from 1 January 2017, interest payments on loans taken out for the purpose of improving or building residential properties are deductible up to KES 300,000 annually (or KES 25,000 per month).
Contributions to a retirement benefit plan registered in Kenya
An employee’s annual contributions to a retirement benefit program registered in Kenya may be deducted from taxable income. The lowest of the following is the only relief available:
- Actual donations made throughout the year.
- 30% of the worker’s annual pensionable (taxable) income.
- KES 240,000 annually (equivalent to a maximum monthly contribution of KES 20,000).
Personal Allowances: Personal relief tax credits are the Kenyan equivalent of personal allowances. The present relief amount for all individual taxpayers is KES 16,896 per year, which is used as a credit against the tax debt. Personal relief is small. Employees who work for multiple employers are only allowed to submit one personal relief credit application.
Under specific conditions, expats may be eligible for a one-third deduction from their taxable income if they work for a regional office that has no operations in Kenya and are away from the country for at least 120 days during any given tax year on business.
The standard rate of VAT levied on the supply of taxable goods and services in Kenya, as well as on the importation of taxable goods and services into Kenya is 16%.
WHT is levied at varying rates (3% to 25%) on a range of payments to residents and non-residents. Resident WHT is either a final tax or creditable against CIT. Non-resident WHT is a final tax.
If the dividend receiver is an eligible Kenyan financial institution or if the beneficiary company owns 12.5% or more of the payer’s stock, no withholding tax is applied. Dividends paid to other Kenyan residents and inhabitants of the East African Company partner states are taxed at a rate of 5%; dividends paid to other non-residents are taxed at a rate of 10%. Dividend payments made by a SEZ enterprise to a non-resident are not subject to withholding taxes.
Financial institutions must withhold 15% of the interest they pay. Bearer bond interest is charged at a rate of 10%, while bearer certificate interest is charged at a rate of 25%. Payments made to both residents and non-residents are subject to the charges. However, interest paid by a SEZ firm to a non-resident is subject to a reduced withholding tax rate of 5%.
A 5% withholding tax is applied to royalties (and natural resource income) paid to residents as well as royalties paid by a SEZ enterprise to non-residents. Where royalties are paid to a non-resident, the standard rate is 20%.
When technical service fees are paid to a non-resident by a SEZ firm or by a resident providing the services, a 5% withholding tax is applied. When payments are paid to residents, contractual fees are subject to a 3% withholding tax. Unless otherwise specified in an applicable tax treaty, the general withholding tax rate for technical service fees where the service provider is a nonresident is 20%.