How do you terminate an employee in Kenya in 2026?

These are the legal floors set by Section 35 of the Employment Act 2007. Contracts can set longer notice periods. They cannot go below the minimum. Senior roles in Kenyan practice commonly carry one to three months contractual notice, particularly in finance and professional services.

Payment in lieu of notice

Either party may pay out the notice period rather than work it. The payment must cover all earnings the employee would have received during the notice window. It is treated as ordinary income and is taxable under the Pay As You Earn rules administered by the Kenya Revenue Authority.

Section 41 of the Employment Act 2007 requires an employer to hear the employee's explanation before dismissing. This applies to misconduct, poor performance, and other grounds. It does not require elaborate warnings in every case, but it does require a genuine opportunity to respond before the decision is made.

Valid grounds for termination

1. Misconduct or gross misconduct, including theft, dishonesty, insubordination, and violence
2. Poor performance or incapacity, where the employee cannot meet reasonable standards
3. Redundancy, where the role is genuinely eliminated, requiring the severance process under Section 40
4. Legal bar, for example losing a licence that is essential for the role
5. Mutual agreement, where both parties consent to end the relationship

Termination for pregnancy, union membership, whistleblowing, or HIV status is automatically unfair under the Employment Act and the Labour Relations Act. These protections apply from day one, regardless of whether the employee has reached the 13 months threshold for bringing a formal unfair termination complaint.

Unfair termination protection

An employee who has worked continuously for at least 13 months can file a complaint with a labour officer or the Employment and Labour Relations Court. The complaint must be lodged within three months of the termination date. The court may order reinstatement, re-engagement, or compensation up to 12 months gross salary.

1. Establish a valid reason

   Anchor the termination to one of the grounds in the Employment Act: misconduct, poor performance, incapacity, redundancy, legal bar, or mutual agreement. A termination without a valid reason is unfair regardless of notice paid.

2. Give the employee a hearing

   Tell the employee the reason in writing before you decide. Give them a genuine chance to respond. This is a legal requirement under Section 41, not an optional step.

3. Issue written notice or pay it out

   Serve the required notice period in writing or pay it out. Monthly-paid employees get the minimum notice. Shorter notice applies during probation.

4. Calculate all terminal dues

   Add up severance for redundancies, accrued annual leave, and any other contractual sums. Redundancy severance is based on basic wages and is due on the last working day.

5. Notify the labour officer for redundancies

   File a written notification with the relevant labour officer before making the employee redundant. If a trade union is recognised, consult them too. Skipping this step creates procedural exposure.

Section 40 of the Employment Act 2007 sets out the redundancy process. Before making an employee redundant, the employer must give reasonable notice of the intended redundancy to the employee, any recognised trade union, and the relevant labour officer. The employer should also consider alternatives such as redeployment or reduced hours.

Severance calculation

Only completed years count. A nine-month partial year does not add to the total. Severance is calculated on basic wages, excluding allowances such as housing, transport, and overtime. There is no statutory cap on the total sum, so long-serving employees at higher pay bands can generate significant severance liabilities.

Accrued annual leave on termination

All unused annual leave must be paid out on termination. The law grants 21 days per completed year of service, accruing at 1.75 days per completed month. Any accrued leave outstanding on the last working day is a cash liability, whether the termination is for redundancy, misconduct, or any other reason.

Probation and severance

Employees terminated during their probation period do not receive redundancy severance. The probation window runs to a maximum of 6 months, extendable once by written agreement to a total of 12 months.

For larger group redundancies, the duty to consult a recognised trade union under the Labour Relations Act 2007 becomes more significant in practice. That Act requires employers who recognise a union to bargain in good faith before implementing significant changes to terms of employment, including redundancies.

There is no fixed minimum consultation period set in days or weeks for group redundancies. The standard is reasonableness. Labour officers and the Employment and Labour Relations Court assess whether the process was genuine. Employers who skip notification to the labour officer or union risk a finding of procedural unfairness, which can increase exposure across the whole group.

What the notification must cover

• The reasons for the redundancy
• The number and categories of employees affected
• The method used to select employees for redundancy
• The proposed severance terms and timeline
• Any alternatives to redundancy that were considered

Mutual termination is recognised under the Employment Act as a valid way to end employment. The agreement should be in writing and should record the agreed termination date, the final payment breakdown, and any mutual waivers the parties have agreed.

Typical components of a Kenya mutual exit:

• Notice pay or payment in lieu, covering the full 28 days notice period or the contractual notice, whichever is longer
• Accrued annual leave, all unused days at the daily rate
• Agreed ex gratia amount, if the parties want to include one above the legal minimum
• Non-disclosure terms, where commercially appropriate
• Reference wording, agreed in advance and attached to the agreement
• Waiver of unfair termination claims, which prevents the employee bringing a complaint to a labour officer or the court

Note on final pay timing: the Employment Act does not set a fixed number of days after termination by which all terminal dues must be paid. Redundancy severance is due on or before the last working day. Other sums such as accrued leave are due promptly at termination. In practice, Teamed processes final payroll by the end of the payroll month following the last working day. Get the settlement signed before the last day to avoid disputes over the timing of payment.

Real HR and legal experts handle your Kenya hires, from the first offer letter through every monthly payroll run and statutory deduction. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee, and employer cost passes through at cost, itemised on every invoice.

The split of responsibilities under EOR for Kenya terminations:

Kenya has no separate collective consultation window. But the duty to notify the labour officer and any recognised union is real and carries procedural risk if ignored. Teamed tracks that obligation on every redundancy.

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Key sources: Employment Act No. 11 of 2007, KRA PAYE guidance, and Kenya Ministry of Labour and Social Protection.