How to Hire Your First Employee in Kenya: A Step-by-Step Legal Guide for SMBs

Hiring your first employee in Kenya is a bigger administrative step than hiring your fifth. Once that first contract is signed, you cross from "founder paying contractors" into "registered employer with statutory obligations across four different government agencies." You need to register with each, set up payroll correctly, and get the contract right from the first day of work.

This guide walks through the hire end to end. What to settle before the offer goes out, what the contract has to contain, which employer registrations are required, and how to run a compliant first payroll. For the broader overview of Kenyan employment law, statutory bodies, and data protection, see our Kenya HR guide.

Before the offer

Three things to decide before you put anything in writing.

Role and compensation. Job title, core responsibilities, reporting line, and gross monthly salary. Factor in the minimum wage. As of early 2026, the gazetted minimum wage is KES 16,113.75 per month for general labourers in Nairobi, Mombasa, and Kisumu, with lower thresholds for other areas and specific occupations. The Regulation of Wages Order is reviewed annually around Labour Day, so check for an update before you finalise pay.

Contract type. Permanent (indefinite), fixed-term (specific end date), or probationary. Each has different consequences on termination, severance, and renewal. Fixed-term contracts that get repeatedly renewed can be reclassified as indefinite by the Employment and Labour Relations Court, so don't use them as a workaround for avoiding permanent status.

The paperwork path. Offer letter first, then employment contract, then registrations. The offer letter gives the candidate something concrete to accept or negotiate before either side commits. Skip the offer letter and you lose a useful negotiation checkpoint.

The employment contract

The Employment Act 2007 requires a written contract for any employment lasting more than three months. Section 10 spells out what the contract has to include at minimum:

• Names of the parties and the employee's home address
• Job title and description
• Start date and form of contract
• Place of work
• Hours of work
• Wage or salary, and the pay cycle
• Annual leave entitlement
• Sick leave and incapacity provisions
• Any pension or provident fund arrangements
• Notice period for termination

A contract generator can handle all of this in a few minutes, but whether you draft manually or use a tool, make sure every Section 10 field is present. A US or UK template will not cover Kenyan requirements, and repurposing one is the single most common legal failure we see in SMB contracts.

Probation. If you're using a probationary period, put it in writing. The legal maximum is six months, extendable by another six with the employee's written consent. During probation, either party can terminate with seven days' notice or seven days' pay in lieu. Recent case law has also clarified that fair-hearing principles apply even during probation, so a probationary dismissal without any process is now risky.

Confidentiality and IP. Not required under the Act, but strongly recommended for any role touching customer data, finances, or proprietary systems. A one-paragraph clause is usually enough for a first hire.

Get the contract signed before the start date. Not the same day. Not the following week. Before.

Employee registrations they need to bring

The new hire is responsible for these; your job is making sure they exist before payroll day.

National ID, alien ID, or passport. Everything else downstream depends on it.

KRA PIN. Personal tax identification, issued free by the Kenya Revenue Authority on iTax.

NSSF number. Issued by the National Social Security Fund on registration.

SHIF registration. Every employee must be enrolled with the Social Health Authority. SHIF replaced NHIF in October 2024; make sure they're on the new system rather than dormant in old NHIF records.

Bank account. The Act doesn't mandate a specific bank, but you need the account number on file for salary transfer.

Anyone who has worked before will already have all of these. If it's someone's first-ever formal job, budget a week to get them registered end to end.

Your employer registrations

For your first hire, you register with four agencies before the first payroll run.

KRA as an employer. For PAYE remittance via iTax. Requires a business KRA PIN.

NSSF as an employer. For the 6% employer contribution matching the employee's 6%.

Social Health Authority. So SHIF deductions can be remitted monthly.

Housing Levy filing. No separate registration beyond your KRA employer account; the 1.5% employer contribution (plus 1.5% employee) is remitted through iTax alongside PAYE.

Registrations are free and mostly same-day online. The common mistake is doing them after the first payroll has already run, which means you're already late on the 9th-of-the-month filings the moment you hit submit.

First payroll

For a KES 50,000 gross hire in 2026, your first monthly run looks like this:

Item	Employee deduction	Employer cost
PAYE	KES 5,846	0
NSSF (6% of gross)	KES 3,000	KES 3,000
SHIF (2.75% of gross)	KES 1,375	0
Housing Levy (1.5% each)	KES 750	KES 750
Totals	KES 10,971	KES 3,750

The employee takes home KES 39,029. Your total cost for that one hire is KES 53,750, which is the KES 50,000 gross plus KES 3,750 in employer contributions. Remit all four deductions to their respective agencies by the 9th of the following month.

The rates above, the gotchas around NSSF tier migration, and common payroll template mistakes are covered in depth in our PAYE, NSSF, SHIF, and Housing Levy guide. Worth reading end to end before your first run.

Getting the person set up on day one

Everything above is paperwork. The other half of a first hire is the operational onboarding: an employee profile with ID copies and bank details, a laptop or tools assigned, a training plan for the first two weeks, and a 30-day check-in scheduled. A single place for people profiles and documents saves you from the scattered email and WhatsApp pattern most first-time employers default to. Once there are three people on the team, the cost of rebuilding that out of chat history is real.

Common first-hire mistakes

• Letting work start before the contract is signed. The Act implies a contract exists regardless, but not necessarily on the terms you wanted.
• Using a foreign contract template that doesn't cover Section 10.
• Registering with KRA, NSSF, and SHA only after the first payroll has run.
• Budgeting from gross salary rather than true employment cost (gross + NSSF employer + Housing Levy employer).
• Forgetting that SHIF replaced NHIF in October 2024. Old templates deduct the wrong amount and enrol your hire in a dormant system.
• Using fixed-term contracts with repeated renewals as a substitute for permanent status. Courts can and do reclassify.

The short version

• Decide role, pay, and contract type before the offer goes out
• Issue an offer letter, then a Section-10-compliant written contract, signed before day one
• Register with KRA, NSSF, and SHA; confirm Housing Levy filing via iTax
• Collect the employee's IDs, KRA PIN, NSSF number, SHIF registration, and bank account before payroll day
• Run payroll on gross; remit PAYE, NSSF, SHIF, and Housing Levy by the 9th of the following month
• Budget from true cost of employment, not gross salary

Your first hire is where you build the operating model for every hire after that. Get the paperwork right once and the next four hires are copy-paste. Get it wrong and you'll spend legal fees or back-remittances fixing it later.