Terminating Employment in Kenya: Legal Process and Best Practices

Termination is where Kenyan SMBs most often end up in front of a judge. A leave dispute is annoying; a payroll error is expensive; a badly handled termination is what puts a small employer on the receiving end of a twelve-month compensation order from the Employment and Labour Relations Court.

The awkward truth is that most termination cases aren't won or lost on whether the employer was right to end the employment. They're won or lost on whether the employer followed the process. You can have a genuinely underperforming employee, a real redundancy, or serious misconduct, and still lose at the ELRC because the steps between the decision and the dismissal weren't documented.

This guide walks through the legal process. What the grounds for termination are, what notice each requires, how to run a fair hearing, what to pay out when someone leaves, and where small employers most often get it wrong. For the full Kenyan employment landscape (labour law, statutory bodies, leave), see our Kenya HR guide.

The four grounds for termination

Kenyan law recognises four broad reasons to end an employment contract:

• Termination with notice. The employment ends for any lawful reason, with the required notice served or paid in lieu.
• Summary dismissal. The employer ends the employment immediately, without notice, on the grounds of gross misconduct (Section 44 of the Employment Act 2007).
• Redundancy. The role, not the person, becomes surplus to requirements. Specific process and payments apply (Section 40).
• Constructive dismissal / resignation. The employee leaves, with or without notice, sometimes because the employer has made continued employment untenable.

Each path has different notice rules, different procedural requirements, and different final-dues calculations. Getting the category right is the first decision.

Notice periods

Section 35 of the Act ties the notice period to how the employee is paid:

Pay cycle	Minimum notice from either party
Daily	None; contract may end at close of any day
Less than monthly (e.g. weekly)	End of the pay period following notice
Monthly or longer	28 days' written notice

If the contract specifies a longer notice period than the Act requires, the contract wins. If an employer wants the employee gone immediately, they can pay the equivalent wages in lieu of notice.

Notice must be written. A verbal "we're letting you go" creates evidentiary problems immediately, and in a dispute the courts will generally treat the absence of written notice as the absence of lawful notice.

Fair procedure is non-negotiable

Section 41 requires an employer to follow a fair process before terminating. Whatever the reason, before the final decision you must:

• Explain the reasons for the proposed termination to the employee
• Explain 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
• Consider the response before making a final decision

This is the "right to be heard." Skipping it turns even a well-founded termination into an "unfair termination" under Section 45, and the remedies for the employee include compensation of up to twelve months' wages, reinstatement, or both.

The procedural steps in practice:

1. Written notice to show cause. A letter specifying the conduct or performance issue and calling the employee to a hearing.
2. Hearing. In person, with a note-taker, allowing the employee to speak and bring a representative.
3. Decision letter. Written outcome, with reasons, delivered to the employee.
4. Right of appeal. Internal or, failing that, external to the ELRC.

This applies whether you're terminating for performance, misconduct, or redundancy. It also applies during probation, following recent case law. There is no category of employee in Kenya whose dismissal is exempt from fair-hearing rules.

Summary dismissal for gross misconduct

Section 44 allows summary dismissal (no notice, no notice pay) for specific categories of gross misconduct, including:

• Absence from work without lawful cause or permission
• Arriving at work intoxicated
• Wilful neglect to perform work or careless performance
• Use of abusive language
• Assault or threat of assault against a fellow employee or the employer
• Committing a criminal offence in the course of duty
• Other serious offences as defined in the Act

Summary dismissal does not skip the fair-hearing requirement. It skips the notice period. You still need to call the employee, explain the allegation, allow them to respond, and make a reasoned decision. Courts are unambiguous on this: "gross misconduct" is not a permission to dismiss without process, only without notice.

Document everything. The evidence for gross misconduct often sits in CCTV, email logs, or witness statements. If it's not written down and preserved, it doesn't exist in a hearing.

Redundancy

Redundancy is a legal path, not a label of convenience. Section 40 requires:

• At least one month's written notice to the employee and to any trade union the employee belongs to
• The same notice to the County Labour Officer
• Fair selection criteria (commonly: skill, ability, reliability, and length of service)
• Payment of at least one month's pay in lieu of notice, if notice is not served
• Severance pay of at least 15 days' pay for each completed year of service
• All accrued but untaken leave, paid out in cash
• Any other terminal benefits due under the contract

Redundancy requires the role to genuinely be redundant: a restructuring, a closure, an operational change that eliminates the position. You cannot dismiss an employee for performance reasons, call it redundancy, and then hire a replacement into the same role. Courts will reclassify this as unfair termination and impose full compensation.

The severance calculation: daily wage = monthly basic salary divided by 30, then 15 × daily wage per completed year of service. An employee earning KES 60,000/month who has worked three full years would be entitled to (60,000 / 30) × 15 × 3 = KES 90,000 in severance, on top of leave payout, notice pay, and any other contractual benefits.

Employees dismissed for gross misconduct are not entitled to severance pay. Everyone else terminated on redundancy or operational grounds is.

Probationary termination

Section 42 is the special case. During a probationary period (maximum six months, extendable by another six with the employee's written consent), termination requires only seven days' notice or seven days' pay in lieu. There's no right to severance pay.

But the fair-hearing principle still applies. Recent ELRC case law has made clear that even during probation, an employee is entitled to know the reasons and respond before being dismissed. A silent probationary dismissal is legally risky in 2026.

Treat probation as what the law intends: a shorter-notice review period, with process. Not a window for no-process firings.

Final dues on termination

Whatever the path, final dues typically include:

• Salary accrued to the last day of work
• Pay in lieu of any notice not served
• Accrued but untaken annual leave, paid out in cash
• Severance pay (redundancy only, 15 days per completed year of service)
• Any contractual gratuities, bonuses earned, or benefits owed
• Return of deposits, if any

Statutory deductions (PAYE, NSSF, SHIF, Housing Levy) still apply to the final payment. Our PAYE, NSSF, SHIF, and Housing Levy guide covers the calculation. Severance pay in particular is subject to PAYE, which is often a surprise to employees expecting the full gross amount.

Provide a certificate of service on request (Section 51). This isn't a reference, it's a simple statement of dates worked, job title, and any other information the employee requests. Refusing to issue one is itself a legal breach.

The unfair termination tail

If an employee believes the termination was unfair (no valid reason, no fair hearing, or both), they can bring a claim to the ELRC within three years of the dismissal. The remedies available to the court are substantial:

• Reinstatement or re-engagement
• Compensation of up to twelve months' wages
• An order to pay any dues that were not paid

A successful unfair termination claim against a small employer can easily run into seven figures in KES. The cost of fair process up front is almost always less than the cost of cutting corners. This is the area where small employers most consistently learn the lesson the hard way. See our guide on the HR mistakes growing African businesses make for the broader pattern.

Where employers most often trip up

• Dismissing without any written notice
• Skipping the hearing because "the facts were obvious"
• Labelling performance terminations as redundancy to avoid a hearing
• Calculating severance from net pay instead of basic salary
• Missing final leave payout in the terminal dues
• Failing to issue a certificate of service on request
• Dismissing during probation without any process
• Rehiring into a recently "redundant" role
• Not keeping contemporaneous written records during the employment, which makes the dismissal impossible to defend later

Key points

• Four grounds for termination: with notice, summary dismissal, redundancy, or mutual
• Notice period is tied to pay cycle; monthly salaries require 28 days' written notice
• Fair hearing is required for every termination, even for gross misconduct and even during probation
• Redundancy requires specific notice, fair selection, and 15 days' pay per year severance
• Final dues include salary to last day, notice pay, leave payout, and any severance or contractual benefits
• A certificate of service must be issued on request
• Documentation throughout the employment is your strongest defence at the ELRC

Termination is rarely complicated on the merits. It's almost always complicated on the process. The single most important habit is documenting everything: performance reviews, warnings, hearing notes, and decision letters, all on file, dated, and signed. That discipline is what separates a defensible dismissal from a twelve-month compensation order.