All about Severance Pay in Kenya

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 after termination of employment. These severance packages can include health insurance, life insurance, disability insurance and outplacement assistance to help an employee get another job position. This article cannot be taken as legal advice.

Who is Eligible for Severance Pay in Kenya?

In Kenya, the Employment Act of 2007 outlines the eligibility criteria for severance pay.

Any employee who has been continuously employed for a period of time of at least 12 months is eligible to receive severance pay upon employment termination. This includes employees who have been terminated due to redundancy, reorganization, or the liquidation of the employer's business.

Employees who have been terminated due to misconduct, such as theft, fraud, or gross insubordination, are not eligible to receive payment of severance pay.

Are there legal requirements for severance pay in Kenya?

Yes, there are specific legal requirements regarding severance pay in Kenya as outlined in the Employment Act. 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.

Every employer firing an employee is giving them a right for the pay.

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. 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.

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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.

How to Claim Severance Pay in Kenya

Claiming severance pay in Kenya involves a series of steps that an employee must follow to ensure they receive the compensation they are entitled to.

Review the Employment Contract

The first step in claiming severance pay is to review the employment contract carefully. This document will outline the terms of employment, including severance pay provisions, notice periods, and any specific conditions under which severance pay may be withheld.

Verify Employment Period

Next, confirm the length of your employment with the company. This is key in calculating the amount of severance pay owed to you. Keep records of your start date, any gaps in employment, and the final day of work, as this will determine the number of completed years of service and the total payable amount.

Gather Necessary Documentation

Collect all relevant documents that support your claim for severance pay. This includes your employment contract, payslips, termination letter, and any correspondence with your employer regarding your termination. These documents will serve as evidence of your employment history and entitlements.

What are the minimum notice periods required from employers for severance pay?

Kenyan employment laws stipulate that employers must provide a minimum notice period before terminating an employee's contract. The required notice periods vary based on the duration of employment, and these notices are crucial for determining eligibility for severance pay.

Adequate Notice Periods Based on Employment Duration:

1. Less than One Year: If an employee has been with the company for less than a year, the employer is required to give a notice period of at least one week.
2. One to Five Years: For employees who have served between one to five years, the minimum notice period extends to one month. 
3. More than Five Years: Employees who have been with the company for more than five years must receive a notice period of at least two months.

If the employer fails to provide the required notice, they may be obligated to compensate the employee accordingly, which can include payment in lieu of notice.

This is important because it not only affirms the employee's right to severance pay but also ensures fair treatment during termination.

What is the Typical Redundancy Process?

The redundancy process in Kenya is governed by various labor laws, particularly the Employment Act. This process is designed to ensure that an employee is treated fairly and justly throughout their termination. Below is an overview of the typical redundancy steps that employers must adhere to:

Notification of Redundancy

Before any redundancy can occur, employers must notify their employees of the impending loss of employment. This notice should ideally be given in writing and should state the reasons for the loss of employment, such as economic downturns, company restructuring, or technological changes. Notice of termination periods vary but should generally comply with the notice requirements in the employment contract or labor laws.

Consultation with Employees

Following the notification, employers are obligated to conduct consultations with employees who may be affected by the redundancy. This includes discussing the reasons for termination/ redundancy, exploring alternative options to avoid termination, and considering employee input on the redundancy process. This step aims to foster transparency and allows employees to voice their concerns or possible alternatives.

Selection Process

If redundancy is unavoidable, the employer must proceed with a selection process to determine which employees will be laid off. The criteria for selection should be fair, objective, and transparent. Employers are typically advised to consider factors such as:

• Performance Records: Historical performance evaluations can provide insight into an employee’s contributions and competencies. This ensures decisions are based on merit rather than arbitrary factors.
• Seniority: Length of service may be a consideration, rewarding employees who have dedicated more time to the organization. However, this should be balanced with performance to avoid retaining underperforming employees simply based on tenure.
• Skill Sets: An assessment of the skills each employee brings to the organization may guide decisions, particularly in instances where specific expertise is essential for remaining positions.
• Attendance Records: Employers may consider the regularity with which an employee has attended work, as a chronic absenteeism record could indicate less commitment to the organization.

The selection criteria must always be communicated clearly to all employees involved in the redundancy process. This transparency builds trust and helps mitigate feelings of unfair treatment among those not selected.

Notification of Affected Employees

Once the selection process is complete, employers are required to promptly notify affected employees. This notification should be done in writing and must include:

• The reason for the redundancy,
• The selected employee's right to severance pay, and
• Any other relevant entitlements such Yes, there are specific legal requirements regarding severance pay in Kenya as outlined in the Employment Act.

What is Unfair Termination?

Unfair termination, also known as wrongful dismissal, occurs when an employee is dismissed from their job without just cause or proper procedure. In Kenya, the Employment Act safeguards employees against such dismissals, ensuring that individuals are not arbitrarily terminated from their positions.

Indicators of Unfair Termination

Several factors can indicate that a termination may be unfair, including:

• Lack of Just Cause: If an employee is terminated without a valid reason, such as misconduct or poor performance, this could be considered an unfair dismissal. Valid reasons must be documented and communicated to the employee.
• Violation of Due Process: Employers are required to follow specific procedures before terminating an employee. This includes conducting a fair hearing and allowing the employee a chance to respond to any allegations against them. If these procedures are not followed, the termination may be deemed unfair.
• Discrimination: If an employee is dismissed based on discrimination—such as age, gender, race, or any other unlawful criteria—it constitutes unfair termination. Employers cannot use discriminatory practices as grounds for dismissal.
• Retaliation: Terminating an employee in retaliation for exercising their legal rights—such as filing a complaint about workplace harassment
• Failure to Provide Warning: Employees are generally entitled to receive warnings or disciplinary actions before their termination, particularly in cases of poor performance or misconduct. If an employee is terminated without prior warnings, it may be seen as unfair.
• Frivolous or Unsubstantiated Claims: If the employer relies on vague or unfounded allegations to justify the termination, this can indicate unfairness. Employees should be given clear and specific reasons for their dismissal.
• Inadequate Investigation: Employers have a responsibility to investigate claims thoroughly before making a termination decision. If an employer fails to conduct a fair investigation, or if they ignore key evidence that exonerates the employee, termination may be deemed unfair.
• Employment Contract Violations: If the termination violates clauses stipulated in the employment contract, such as the required notice period or specific grounds for termination, this can also be a sign of unfair dismissal.

Should I Involve My Trade Union?

Trade unions in Kenya play a significant role in protecting the rights of employees and negotiating on their behalf. They offer support in navigating the complexities of labor disputes. They can advocate for your rights and represent you in negotiations with your employer.

Unions often provide access to legal expertise and representation during hearings or grievances. This professional guidance can help you effectively communicate your case. If you have a trade union, your case could be stronger when presented collectively. They can also leverage collective bargaining to seek fair treatment, including severance pay entitlements.

Final Thoughts about Severance Pay

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 and How do you manage monthly deductions in Kenya.

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