Operating a business in Kenya requires compliance with numerous legal obligations designed to protect workers and ensure fair business practices. This comprehensive guide outlines the key employer obligations under Kenyan law, from initial registration to ongoing safety and health standards.
Business Registration Requirements
Company Registration
All employers operating in Kenya must register their businesses with the appropriate authorities:
- Companies Act, 2015 (Act No. 17 of 2015): Private companies must register with the Registrar of Companies through the Business Registration Service (BRS)
- Registration fee: KES 10,000 for companies with share capital up to KES 1 million
- Annual returns: Companies must file annual returns by 30th April each year with a fee of KES 5,000
- Business permits: Obtain relevant business permits from county governments (fees vary by county and business type)
Tax Registration
Employers must register for various tax obligations with the Kenya Revenue Authority (KRA):
- PIN registration: All businesses must obtain a Personal Identification Number (PIN) - free of charge
- VAT registration: Mandatory for businesses with annual turnover exceeding KES 5 million
- PAYE registration: Required for all employers with employees
- Corporation tax: Standard rate of 30% for resident companies, 37.5% for non-resident companies
Employment Law Compliance
Employment Act Obligations
The Employment Act, 2007 (Act No. 11 of 2007) establishes fundamental employer obligations:
- Written employment contracts: Must be provided within 60 days of employment commencement
- Minimum wage compliance: As of 2024, general minimum wage is KES 15,201 per month for urban areas and KES 13,572 for rural areas
- Working hours: Maximum 52 hours per week, with overtime compensation at 1.5 times normal rate
- Annual leave: Minimum 21 working days per year after 12 months of service
- Sick leave: 7 days on full pay, 7 days on half pay per year
- Maternity leave: 3 months on full pay for female employees
Statutory Deductions and Contributions
Employers must make mandatory deductions and contributions on behalf of employees:
- National Social Security Fund (NSSF): 6% of gross salary (capped at KES 2,160 per month) - employer and employee each contribute 6%
- National Hospital Insurance Fund (NHIF): Contributions range from KES 150 to KES 1,700 based on salary bands
- Pay As You Earn (PAYE) Tax: Progressive rates from 10% to 35% based on income brackets
- Housing Fund: 1.5% of gross salary for both employer and employee (to be verified - implementation details)
Occupational Safety and Health Standards
Occupational Safety and Health Act Requirements
The Occupational Safety and Health Act, 2007 (Act No. 15 of 2007) mandates comprehensive workplace safety measures:
- Safety policy: Written occupational safety and health policy required for workplaces with 20+ employees
- Safety committees: Mandatory for workplaces with 20+ employees, meeting at least quarterly
- Safety representatives: Must be appointed in workplaces with 10+ employees
- Accident reporting: All workplace accidents must be reported to the Directorate of Occupational Safety and Health Services (DOSHS) within 7 days
Workplace Health Standards
Employers must maintain specific health standards in the workplace:
- First aid facilities: Adequate first aid equipment and trained first aiders based on workforce size
- Sanitation facilities: Sufficient toilets, washing facilities, and clean drinking water
- Ventilation and lighting: Adequate natural or artificial lighting and ventilation systems
- Medical examinations: Pre-employment and periodic medical examinations for employees in hazardous occupations
Industry-Specific Safety Requirements
Certain industries have additional safety obligations:
- Manufacturing: Machine guarding, noise control measures, and protective equipment
- Construction: Safety harnesses, scaffolding standards, and site safety plans
- Mining: Specialized safety equipment and emergency response procedures
- Chemical handling: Material Safety Data Sheets (MSDS) and specialized training programs
Labor Relations and Dispute Resolution
Industrial Relations Obligations
The Labour Relations Act, 2007 (Act No. 14 of 2007) governs employer-employee relations:
- Recognition of trade unions: Employers must recognize registered trade unions representing their employees
- Collective bargaining: Good faith participation in collective bargaining processes
- Grievance procedures: Established internal grievance and disciplinary procedures
- Strike procedures: Adherence to legal strike notice requirements and procedures
Termination Procedures
Employers must follow proper termination procedures under the Employment Act:
- Notice periods: 28 days for monthly-paid employees, daily wage earners - one day's notice
- Severance pay: 15 days' pay for each completed year of service (for certain terminations)
- Certificate of service: Must be provided upon termination
- Final settlement: All dues must be settled within 7 days of termination
Penalties and Enforcement
Non-Compliance Consequences
Failure to meet employer obligations can result in significant penalties:
- Employment Act violations: Fines up to KES 50,000 or imprisonment up to 12 months
- Safety violations: Fines up to KES 500,000 or imprisonment up to 6 months under OSH Act
- Tax penalties: Late payment penalties of 20% per annum on outstanding amounts
- NSSF/NHIF defaults: Penalties of 25% of contributions due plus interest
Regular Compliance Monitoring
Employers should establish systems for ongoing compliance monitoring:
- Monthly reviews: Statutory deductions and contributions verification
- Quarterly assessments: Safety committee meetings and workplace inspections
- Annual compliance audits: Comprehensive review of all employer obligations
- Record keeping: Maintain employment records for minimum 3 years as required by law
Employers in Kenya must navigate a complex regulatory environment while ensuring full compliance with labor laws, safety standards, and business registration requirements. Regular consultation with legal professionals and staying updated with regulatory changes is essential for maintaining compliance and avoiding penalties.