The Legal Requirement for Written Contracts in Kenya
The Employment Act 2007 (Section 9) requires every employer in Kenya to provide a written contract of employment. This applies to all employees, whether full-time, part-time, or on fixed-term arrangements. The written contract must be provided within two months of the commencement of employment, although best practice is to execute the contract on or before the first day of work.
A written contract is more than a legal formality. It serves as the foundation of the employment relationship, clearly defining the rights and obligations of both parties. In the event of a dispute, the Labour Court will look to the written contract as the primary document governing the employment terms. Operating without one exposes your business to significant legal risk.
Mandatory Clauses Under the Employment Act
Section 10 of the Employment Act specifies the particulars that must be included in every contract of employment. Omitting these details does not void the contract, but it can create ambiguity that works against the employer in a dispute. Every contract should clearly spell out the fundamental terms of the employment relationship.
| Clause | Description | Legal Reference |
|---|---|---|
| Names of parties | Full legal names of the employer (company) and the employee | Section 10(1)(a) |
| Date of commencement | The date when employment begins | Section 10(1)(b) |
| Job title and description | The position and a summary of the duties to be performed | Section 10(1)(c) |
| Place of work | The primary location where the employee will be based | Section 10(1)(d) |
| Hours of work | Normal working hours per day and per week | Section 10(1)(e) |
| Remuneration | Gross salary, allowances, payment frequency, and method | Section 10(1)(f) |
| Leave entitlements | Annual leave, sick leave, and other applicable leave types | Section 10(1)(g) |
| Notice period | Required notice for termination by either party (minimum 1 month for monthly-paid employees) | Section 10(1)(h) |
| Duration of contract | Whether the contract is permanent, fixed-term, or casual | Section 10(1)(i) |
Remuneration and Statutory Deductions
The remuneration clause should clearly state the gross salary, any allowances (such as transport, housing, or airtime), and the payment schedule. It is essential to specify that the salary is subject to statutory deductions as required by Kenyan law. This manages the employee's expectations and prevents disputes about net pay.
The statutory deductions that must be referenced in the contract include PAYE (Pay As You Earn) tax remitted to KRA, SHA contributions, NSSF contributions, and the Housing Levy. While you do not need to list the exact amounts (since these change with salary adjustments and legislative updates), the contract should state that deductions will be made in accordance with applicable law.
- PAYE: Income tax deducted based on KRA tax bands, remitted monthly to KRA
- SHA: Health insurance contribution based on graduated scale, remitted to SHA
- NSSF: Retirement contribution shared between employer and employee, remitted to NSSF
- Housing Levy: 1.5% of gross salary (employer matches 1.5%), remitted to the Housing Fund
Probation Period Terms
The Employment Act allows employers to include a probationary period in the contract of employment. Section 42 stipulates that the probation period should not exceed six months unless justified by the nature of the work and agreed upon by both parties. During probation, the employee is still entitled to all statutory benefits including leave accrual and statutory deductions.
The contract should clearly state the duration of the probation period, the criteria for successful completion, and the notice period during probation (which can be shorter than the standard notice period, typically 7 days). At the end of probation, the employer should either confirm the appointment in writing or extend the probation period with documented reasons.
A probationary employee has the same statutory rights as a confirmed employee. You must still deduct and remit PAYE, SHA, NSSF, and Housing Levy contributions from the first day of employment, and the employee accrues leave from the start date.
Termination and Notice Provisions
Every contract must include clear provisions for how the employment relationship can be ended by either party. The Employment Act requires a minimum notice period of 28 days (or one month) for employees paid on a monthly basis, unless a longer period is agreed upon in the contract. For daily-rated employees, the minimum notice is one day; for weekly-rated employees, it is seven days.
The contract should also address summary dismissal, which allows the employer to terminate without notice for gross misconduct as defined in Section 44 of the Employment Act. Include a clause on payment in lieu of notice, which allows either party to end the relationship immediately by paying the equivalent of the notice period salary. Clearly outline the return of company property and the process for final settlement of dues.
Confidentiality and Restrictive Covenants
While not mandated by statute, confidentiality and non-compete clauses are increasingly common in Kenyan employment contracts, especially for roles involving access to sensitive business information. A confidentiality clause should define what constitutes confidential information, the obligations of the employee during and after employment, and the consequences of a breach.
Non-compete clauses must be reasonable in scope, duration, and geographic reach to be enforceable by Kenyan courts. A clause that prevents an employee from working in any similar business anywhere in Kenya for five years would likely be struck down. A more defensible approach is to limit the restriction to direct competitors within a specific region for a period of six to twelve months.
Additional Clauses to Consider
Beyond the mandatory requirements, there are several additional clauses that strengthen your employment contracts and reduce the likelihood of disputes. These clauses address common scenarios that arise during the course of employment and provide clarity on how they will be handled.
- Intellectual property: Specify ownership of work products created during employment
- Disciplinary procedures: Reference the company's disciplinary policy and process
- Grievance procedure: Outline how employees can raise complaints formally
- Data protection: Include consent for processing personal data in compliance with the Data Protection Act 2019
- Remote work: Define terms for hybrid or remote working arrangements if applicable
- Benefits and perks: Detail any additional benefits such as medical cover, pension schemes, or bonuses
Managing Contracts with Vendly
Creating, distributing, and tracking employment contracts across a growing team is a task that demands precision. Vendly provides contract management tools that help you generate compliant contracts from pre-built templates tailored to Kenyan employment law. Each contract is linked to the employee's profile, so statutory deductions, leave entitlements, and probation timelines are automatically configured in your payroll and HR systems.
With Vendly, you can track contract statuses, set reminders for probation reviews, and maintain a complete audit trail of all employment documents. This ensures that your business stays compliant while reducing the manual work involved in HR administration.