Employment Contracts in Kenya: Key Clauses and Legal Requirements

A well-drafted employment contract protects both employer and employee. It sets clear expectations, reduces disputes and ensures compliance with Kenya's labour laws. A poorly drafted contract, or none at all, leaves employers exposed to claims in the Employment and Labour Relations Court, and employees uncertain about their rights. This guide sets out the legal requirements for employment contracts in Kenya and the key clauses every contract should contain.

Key takeaways

• A contract of service for three months or more, or for a number of working days amounting to three months, must be in writing (Employment Act, section 9).
• Certain particulars of employment must be set out in writing, and the contract cannot give the employee less than the statutory minimums.
• Probation is limited to a maximum of six months, extendable by agreement for up to another six months.
• Employers must make statutory deductions for PAYE, the NSSF, the Social Health Insurance Fund and the Affordable Housing Levy.
• Termination requires a valid reason and a fair procedure; non-compete clauses must be reasonable to be enforceable.

The legal framework

• Constitution of Kenya, Article 41: the right to fair labour practices, fair remuneration and reasonable working conditions.
• Employment Act, 2007: minimum terms and conditions of employment.
• Labour Relations Act, 2007: trade unions, collective bargaining and disputes.
• Labour Institutions Act, 2007: wage councils and Regulation of Wages Orders, which set minimum wages by sector and location.
• Occupational Safety and Health Act, 2007 and Work Injury Benefits Act, 2007: safety and compensation for injuries.
• Data Protection Act, 2019: the handling of employee personal data.

Particulars that must be included

Under section 10 of the Employment Act, a written contract must state:

1. the name, age, permanent address and sex of the employee;
2. the name of the employer;
3. the job description;
4. the date of commencement;
5. the form and duration of the contract;
6. the place of work;
7. the hours of work;
8. the remuneration, scale or rate of pay and the method of calculating it, and the intervals of payment;
9. entitlement to annual leave and holiday pay;
10. terms relating to incapacity due to sickness or injury, including sick pay;
11. pension arrangements, where applicable;
12. the length of notice required to terminate the contract; and
13. any disciplinary rules and the person to whom grievances may be referred.

If there is a dispute about a term and the employer has not provided a written contract, the burden of proving the term lies on the employer.

Key statutory entitlements

Statutory deductions

Employers must deduct and remit the following on time, failing which they face penalties and interest:

• PAYE: income tax deducted and remitted to the Kenya Revenue Authority by the 9th of the following month.
• NSSF: pension contributions under the National Social Security Fund Act, 2013, shared equally between employer and employee, at rates being phased in over several years.
• Social Health Insurance Fund (SHIF): 2.75% of gross salary under the Social Health Insurance Act, 2023, which replaced NHIF contributions from October 2024.
• Affordable Housing Levy: 1.5% of gross salary from the employee, matched by 1.5% from the employer, under the Affordable Housing Act, 2024.
• NITA levy: paid by the employer for each employee.

Key clauses to include

Probation

Under section 42, a probationary period must not exceed six months but may be extended by agreement for a further period of not more than six months. During probation, either party may terminate on seven days' notice. Courts have held that even probationary employees are entitled to be told the reason for termination and to be heard.

Duties, hours and place of work

Describe the role clearly but with enough flexibility to allow reasonable changes. Address working hours, overtime and remote or hybrid working arrangements.

Remuneration and benefits

State the salary, allowances, bonus arrangements (and whether they are discretionary), medical cover, pension and other benefits. Be clear whether salary is consolidated.

Confidentiality

Protect trade secrets, client information and business strategies, both during and after employment.

Intellectual property

Provide that IP created in the course of employment belongs to the employer. See our guide on intellectual property law in Kenya.

Restraint of trade (non-compete and non-solicitation)

Under the Contracts in Restraint of Trade Act, restraint clauses are void unless the court considers them reasonable. A clause is more likely to be enforced if it protects a legitimate interest such as trade secrets or client relationships, and is limited in duration, geographical area and the activities restricted. Non-solicitation clauses are generally easier to enforce than broad non-compete clauses.

Data protection

Inform employees how their personal data will be used, including any monitoring of systems, and comply with the Data Protection Act.

Discipline, grievances and termination

Refer to the employer's disciplinary and grievance procedures. Set out notice periods and the circumstances that may amount to gross misconduct.

Fixed-term, casual and part-time employees

• Fixed-term contracts end on expiry, but repeated renewals may create a legitimate expectation of renewal, and courts may scrutinise non-renewal that appears to be a disguised dismissal.
• Casual employees who work continuously for one month or more, or perform work that cannot reasonably be completed within three months, are converted by law to employees on monthly terms (section 37), with full statutory protection.
• Independent contractors are not employees, but courts look at the real relationship rather than the label used in the contract.

Termination: getting it right

Termination must be both substantively and procedurally fair. Under sections 41, 43 and 45 of the Employment Act, the employer must have a valid reason related to the employee's conduct, capacity or compatibility, or to operational requirements, and must follow a fair procedure: explain the reasons, allow the employee to respond in the presence of a colleague or union representative, and consider their response. Redundancies require notice to the employee and the labour officer at least one month before the date of termination, fair selection criteria and payment of severance pay of at least 15 days' pay for each completed year of service. A court may award compensation of up to 12 months' gross salary for unfair termination, in addition to other remedies.

Frequently asked questions

Is a verbal employment contract valid in Kenya?

Yes, but a contract for three months or more must be put in writing. If it is not, the employer bears the burden of proving any disputed term.

Can an employer change the terms of a contract?

Not unilaterally. Material changes to terms, such as pay or working hours, require consultation and the employee's agreement.

Are non-compete clauses enforceable in Kenya?

Only if they are reasonable in scope, duration and geography and protect a legitimate business interest.

How W.O.A. Advocates can help

We draft and review employment contracts, staff handbooks and HR policies, advise on restructuring and terminations, and represent employers and employees in the Employment and Labour Relations Court. Contact our employment law team, and read our article on mental health in the Kenyan workplace.