Compliance and Statutory

All About Severance Pay in Kenya

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Severance pay in Kenya is the compensation or benefits issued to an employee by an employer after employment is over. There are several severance packages available. These are for example, health insurance, life insurance, disability insurance and outplacement assistance to help an employee get another job position.

Is Severance pay in Kenya a must?

Under Section 40 of the Employment Act , an employer can only terminate a contract of service when an employee is no longer useful or making an impact. Therefore every employer firing an employee is giving them a right for the pay. In addition, the employer has an obligation to pay the employee at the rate set under the Employment Act. However, firing an employee based on  indiscipline does not allow them severance pay. Moreover, an employee has a right to severance pay if he or she is a member of gratuity. A Registered Pension fund , or any other scheme provided by an employer whose terms are more favorable.

 

Calculating severance pay in Kenya?

Severance pay in Kenya, is equivalent to 15 days basic wages for each completed year of employment. Calculating the severance pay, is dividing the employee’s monthly pay by 30 days to get the pay per day. Similarly, multiplying the pay per day by 15 days and finally by the total number of years in service.

If, on the other hand, the contract of employment provided a higher severance pay than the one under the Act. The employer must pay the higher amount. If the contract provided a lower pay, then the employer pays the one stipulated under the Act.

Final Thoughts 

To sum up, severance pay in Kenya is an obligation that every employee must honor if they declare a redundancy. The pay is equivalent to your salary for 15 days for every year you worked in the company. 

Read more on Everything you need to know about pension in Kenya , even more, How do you manage monthly deductions in Kenya .

 

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