When do you graduate from an EOR to your own Kenya entity?

The table below uses KES 80,000 as an illustrative KES equivalent of the Teamed fee. This is illustrative. The actual KES amount depends on the exchange rate at the time of invoice. Teamed charges from $599 USD with zero FX mark-up.

All entity cost figures in this table are typical ranges. They cover outsourced payroll, bookkeeping, statutory filings, and HR admin for a small Kenyan limited company. They are illustrative, not law figures. Actual costs vary with your outsourcing model and benefits programme.

Kenya has four statutory deduction streams every employer must remit each month. NSSF employer contribution is 6% on pensionable wages up to the Upper Earnings Limit. The Affordable Housing Levy adds 1.5% of gross payroll on top. SHIF (Social Health Insurance) is deducted from the employee side. These rates apply whether you use EOR or your own entity. They do not shift the crossover much, but they do add compliance complexity to the entity side.

Run the Crossover Calculator with your own headcount and salary band.

1. Calculate the EOR cost

   Multiply the Teamed fee (from $599 USD) by your planned Kenya headcount. This is the fixed variable cost. It grows linearly as you hire.

2. Estimate the entity fixed overhead

   Typically KES 250,000 to 450,000 per month for a small Kenyan company. This covers payroll bureau, bookkeeping, statutory filings, PAYE, NSSF, SHIF, AHL administration, and first-point HR. This cost does not grow much until headcount exceeds twelve.

3. Find the crossover headcount

   The crossover is where EOR monthly cost equals entity monthly overhead. For most Nairobi tech salary bands, this is around six to nine employees. Use the Crossover Calculator for your own numbers.

4. Factor in non-financial triggers

   The maths gives you a headcount threshold. Local substance requirements, public procurement eligibility, and market-validation reversibility are separate questions that may override the cost crossover in either direction.

5. Plan the graduation date

   Allow four to six weeks for entity formation before the first payroll on your own entity. Factor in two to four weeks extra for bank account opening. Start the GEMO process while EOR continues running.

These are typical ranges, not law figures. There is no law that sets what a Kenyan private limited company costs to form. The range reflects real professional services market rates in Nairobi. It varies with share structure complexity and how much you outsource.

Why the bank account matters for payroll

Most Kenyan commercial banks require a fully registered company with KRA and NSSF numbers before opening a business account. That means the registration sequence matters. Expect 2 to 4 weeks from incorporation to an opened account, assuming all directors are present or available for KYC. International or foreign-parented companies should budget up to 6 weeks. This turns a 4-week incorporation into a 6 to 10 week wait before first payroll if the sequence is not managed tightly.

These figures are typical market ranges for a small Kenyan company with 1 to 12 employees. They are illustrative, not law figures. Actual costs depend on whether you outsource or hire in-house, and the complexity of your payroll and benefits programme.

Above 12 employees, dedicated in-house HR and finance capacity typically becomes necessary. The cost band widens at that point. Group medical insurance, which is near-universal in competitive Nairobi hiring, can add KES 3,000 to 8,000 per employee per month and is not included in the overhead estimates above.

Most cost comparisons skip the director-liability dimension because it is hard to put a number on. It is worth naming before you decide.

Personal director duties under Kenyan law

Under the Companies Act 2015, every director of a Kenyan company must act in good faith in the best interests of the company, exercise reasonable care and diligence, avoid conflicts of interest, and disclose personal interests in transactions. Breach of these duties can result in personal civil liability. These are personal duties. They cannot be outsourced to a company secretary or professional adviser.

The compliance treadmill

• Annual returns: filed with the Business Registration Service each year. Late filing attracts penalties that accumulate per day of delay.
• PAYE remittance: due by the 9th of each month. Late payment penalty is 5% of the outstanding amount plus 1% per month interest.
• NSSF contributions: due by the 9th of each month. Late contributions attract a 5% penalty.
• Affordable Housing Levy: due by the 9th working day after payroll. Late payment penalty is 3% per month.
• SHIF deductions: due by the 9th of each month. Failure to remit is a civil offence.
• Audited accounts: required annually for companies above specified thresholds.

Each filing is individually manageable. Stacked across a year, they consume real management attention and carry personal director risk on every missed deadline. An EOR carries all of these on its own entity.

• Under 5 Kenya employees at typical Nairobi salaries: EOR is cheaper every month. The entity overhead has nothing to amortise against at that headcount.
• Market validation phase: you are hiring 1 or 2 people to test commercial fit. Entity setup commits capital and management attention before you know whether Kenya will deliver.
• Project-based hires: 6 to 12 month engagements where the formation cost will not amortise before the project ends.
• Uncertain headcount trajectory: Kenya is a priority market but you have not yet committed to long-term headcount growth. EOR preserves optionality.
• High wind-down risk: post-acquisition holding patterns or pilot programmes where adding a local entity creates exit complexity later.

• Sustained headcount above 8 Kenya employees at typical salaries: the entity overhead amortises across enough people that per-head cost falls below the EOR fee.
• Local substance requirements: regulated sectors (financial services, telecoms, certain government contracting) require a registered Kenyan entity with a physical presence and local directors. EOR employment does not provide the required substance.
• Public procurement eligibility: Kenya's Public Procurement and Asset Disposal Act gives preference to locally registered companies in certain tender categories. An EOR employer does not qualify as a locally registered business for these purposes.
• Employee share schemes: senior hires expecting equity participation at a Kenyan-registered company, particularly in financial services or tech sectors, need a local entity to structure those arrangements.
• Multi-year growth plan: you have line of sight to 10 or more Kenya employees over 24 months. Starting formation early means your entity is ready before the crossover, not after it.

The technical mechanic is contract novation: the employment contract transfers from Teamed's partner entity to your new Kenyan company on a specified date. All terms carry across. Salary, NSSF contributions, annual leave entitlement, and continuous service date all remain unchanged. The employee sees a different employer name on their payslip. Nothing else changes.

What we do operationally:

• Stand up your Kenya entity through GEMO, typically around 4 to 6 weeks, while EOR continues running in parallel.
• Register the new entity for PAYE, NSSF, SHIF, and AHL with the relevant Kenya Revenue Authority and fund portals.
• Open the entity bank account and payroll mandate.
• Novate every active employment contract on a single effective date.
• Migrate ongoing benefits, including any group medical cover, without any lapse.
• File final EOR-period PAYE returns and open new filings on the entity from the novation date.
• Provide the same People Ops specialist as the post-graduation primary contact.

The Graduation Model exists because every other EOR makes this hard. We treat the move as something we help you plan for from the day you hire your first employee through us.

Real HR and legal experts handle your Kenya hires from the first offer letter through every PAYE submission and annual audit period. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee. Every employer cost passes through at cost, itemised on every invoice. You see the NSSF employer line at 6%, the Affordable Housing Levy at 1.5%, and the annual leave accrual for 21 days. Nothing is hidden inside the management fee.

EOR payroll, contractor onboarding, and entity setup all live on one platform. Run the Crossover Calculator to see the month the model flips. Start from the Kenya hiring overview. Key sources: KRA PAYE and NSSF contribution rates.