Kenya Employment Act 2007: What Every SMB Owner Should Know

Most Kenyan SMB owners have heard of the Employment Act 2007. Fewer have read it. It's 82 pages of legal text, and for a busy founder or operations lead, that's 82 pages they'd rather not spend an afternoon on.

The problem is that almost every employee dispute in Kenya, from a disagreement about leave to a full wrongful-termination case at the Employment and Labour Relations Court, comes back to this Act. If you run payroll, sign contracts, or manage people in Kenya, the Act defines what you must do, what you may not do, and what your employees can claim if you get it wrong.

This guide translates the SMB-relevant parts of the Act into practical terms. What the law requires from you as an employer, what it protects your employees from, and the handful of places where small businesses most often trip up. For the wider context (payroll, data protection, statutory bodies), see our Kenya HR guide.

What the Act covers

The Employment Act 2007 (Cap 226, No. 11 of 2007) is the primary law governing employment relationships in Kenya. It applies to all employees, with a few narrow exceptions (the armed forces, prison services, and the National Youth Service have their own regimes).

It sits alongside the Labour Relations Act, the Occupational Safety and Health Act, and the Work Injury Benefits Act. Together, those four are the core of Kenyan labour law, but the Employment Act is the one that governs day-to-day employment: hiring, pay, leave, and termination.

The Act is enforced by the Ministry of Labour and, in disputes, by the Employment and Labour Relations Court. If an employee takes you to court over a contract or dismissal, this is the text the judge will be reading.

Contracts must be in writing

Section 9 of the Act requires every contract for employment exceeding three months to be in writing. Verbal agreements are legally valid for shorter engagements, but once you cross the three-month mark, you must have a written contract.

Section 10 spells out what the written contract has to contain:

• Full names of both parties and the employee's address
• Job description and title
• Start date and form of contract (permanent, fixed-term, probationary)
• Place of work
• Hours of work
• Wage or salary and pay cycle
• Leave entitlements, including annual and sick leave
• Details of any pension or provident scheme
• Notice period for termination

Missing any of these isn't a minor technicality. In a dispute, the absence of a written contract or a missing mandatory clause shifts the burden of proof onto the employer. Judges at the ELRC routinely rule in favour of employees when an employer can't produce the relevant paperwork. A compliant contract template takes a few minutes and covers every Section 10 field.

Working hours and overtime

The Act does not cap working hours directly for every category of worker, but subsidiary legislation (the Regulation of Wages Orders) does. For most categories covered by the Wages Orders, the standard working week is 52 hours, or 60 hours for night workers. Work beyond that must be paid at overtime rates, typically 1.5 times the normal rate on weekdays and 2 times on rest days and public holidays.

If an employee is a manager in a genuinely supervisory role, overtime rules don't necessarily apply in the same way. But you can't label a non-supervisory employee a "manager" to avoid overtime. Courts look at the actual work, not the title.

Leave entitlements

The Act provides the floor for every leave type. You can offer more; you cannot offer less. Our guide to setting up Kenyan leave policies covers the practical details. The statutory minimums are:

Leave type	Minimum entitlement	Notes
Annual leave	21 working days after 12 months	Accrues from day one of employment
Sick leave	14 days per year (7 full + 7 half pay)	Kicks in after 2 consecutive months
Maternity	3 months (90 days) fully paid	Separate from annual leave
Paternity	2 weeks (14 days) fully paid	Around the time of birth
Public holidays	12 gazetted days per year	Premium or day in lieu if worked

Skipping leave entitlements is one of the fastest ways to lose an ELRC case. Leave records should be kept for every employee, every year, and included in final dues calculations when someone leaves.

Probation

Section 42 sets a maximum probationary period of six months, extendable by another six with the employee's written agreement. During probation either party can terminate with seven days' notice or seven days' pay in lieu. But recent case law has established that fair-hearing principles apply even during probation, so dismissing a probationer without giving them an opportunity to respond is now legally risky.

Use probation deliberately. It's not a licence to fire without process; it's an adjusted notice period and a formal review window. A written mid-probation review document, signed by both parties, is your best defence if a dismissal during probation is later challenged.

Notice periods for termination

Section 35 sets the notice periods based on how the employee is paid:

• Paid daily: Contract terminable by either party at the close of any day without notice
• Paid at intervals of less than one month (e.g. weekly): Notice ends at the close of the next pay period
• Paid monthly or at longer intervals: 28 days' written notice required from either party

If the employment contract specifies a longer notice period, that takes precedence. An employer who wants to terminate without requiring the employee to serve out the notice must pay the equivalent in lieu.

Our deep-dive on terminating employment in Kenya covers the full procedure, including redundancy and summary dismissal, because termination is where employers most often get sued.

Unfair termination

Section 41 requires an employer to give the employee a fair opportunity to be heard before termination. Before deciding to terminate, the employer must:

• Explain the reasons for the proposed termination
• Do so in a language the employee understands
• Allow the employee to be accompanied by a colleague or union representative
• Give the employee a genuine chance to respond

Termination without this process is "unfair termination" and entitles the employee to compensation, reinstatement, or both. The ELRC has wide discretion on remedies, and the standard award is up to twelve months' wages.

The list of valid reasons for termination (Section 43) is broad: misconduct, poor performance, incapacity, and operational reasons (redundancy). But even a valid reason doesn't protect you if the process was unfair.

Redundancy

Section 40 requires a specific procedure when terminating on redundancy grounds:

• One month's written notice to the employee or to any trade union they belong to
• Equivalent notice to the County Labour Officer
• Selection of employees to be declared redundant on fair criteria (typically skill, ability, reliability, and length of service)
• Payment of at least one month's notice pay (or notice served in lieu)
• Severance pay of at least 15 days' pay for each completed year of service
• All leave owed, accrued but untaken, paid out in cash

"Redundancy" is a legal term, not a convenience label. If you dismiss an employee for performance reasons and call it redundancy to avoid a hearing, a court will see through it. The consequence is reclassification as unfair termination, with full compensation.

Discrimination

Section 5 prohibits discrimination on grounds of race, colour, sex, language, religion, political or other opinion, nationality, ethnic or social origin, disability, pregnancy, marital status, or HIV status. This applies at hiring, during employment, and at termination.

The practical implication for SMBs: no pregnancy-based dismissals, no paying male and female employees differently for the same role, no age requirements in job adverts unless genuinely occupational.

Where SMBs most often trip up

The recurring issues in Kenyan ELRC cases involving small employers:

• No written contract, or a contract missing Section 10 fields
• No documentation of performance issues before a dismissal
• Leave records reconstructed after the fact when the employee leaves
• Fixed-term contracts renewed repeatedly, then the employer refusing to recognise permanent status when the worker claims it
• Dismissals during probation without any hearing or process
• Labelling a performance-based termination "redundancy" to avoid due process
• Not knowing that severance pay is statutory for redundancy regardless of what the contract says

Each of these turns a one-line decision into a twelve-month compensation order at the ELRC.

Key points

• Written contract required for any employment over three months, with every Section 10 field present
• Leave entitlements are a floor, not a ceiling, and must be documented per employee per year
• Probation maxes at six months (plus six with agreement), and fair-hearing rules still apply
• Notice period depends on how the employee is paid; monthly salaries mean 28 days' written notice
• Termination requires a valid reason and a fair process; missing either gets you compensation orders
• Redundancy is a specific legal path with its own notice, selection, and severance requirements
• The Employment and Labour Relations Court is where disputes land; documentation is your strongest defence

The Employment Act is not a document you need to memorise. But every decision you make as a Kenyan employer sits on top of it. When in doubt, the default answer is "write it down, follow a process, and document it." That single habit prevents most of the disputes that small employers actually end up in.