Hire in Kenya through our Employer of Record (EOR)

Employer of Record (EOR) is a service that allows companies to hire employees in countries where they don't have a legal entity. This third-party organization takes on the responsibility of being the official employer for tax purposes, while the client company maintains day-to-day control over the employee's activities and responsibilities. EORs are particularly useful for businesses looking to expand globally or hire remote workers in different countries without establishing a local subsidiary.

In the context of Kenya, an EOR can be a valuable solution for foreign companies wanting to tap into the country's growing economy and skilled workforce. Kenya's strategic location in East Africa, its developing infrastructure, and its young, educated population make it an attractive destination for businesses. However, navigating the complexities of Kenyan labor laws, tax regulations, and employment practices can be challenging for foreign entities. This is where an EOR comes in, simplifying the process of hiring and managing employees in Kenya.

How Does EOR Work?

An Employer of Record operates by creating a legal employment relationship with the workers on behalf of the client company. The process typically involves the following steps:

1. The client company identifies a candidate they want to hire in Kenya.

2. The EOR enters into an agreement with the client company to employ the worker on their behalf.

3. The EOR handles all legal and administrative tasks related to employment, including:

   • Drafting and signing employment contracts
   • Managing payroll and tax withholdings
   • Ensuring compliance with local labor laws and regulations
   • Providing mandatory benefits and insurance
   • Handling visa and work permit applications if necessary

4. The client company maintains control over the employee's day-to-day work, assignments, and performance management.

5. The EOR invoices the client company for the employee's salary plus their service fees.

This arrangement allows companies to quickly and compliantly hire employees in Kenya without the need to establish a local entity or navigate complex local regulations on their own.

Benefits of Using an EOR

Utilizing an Employer of Record in Kenya offers several advantages for foreign companies:

1. Rapid Market Entry: EORs enable businesses to quickly hire employees in Kenya without the time-consuming process of setting up a local entity.

2. Compliance Assurance: EORs stay up-to-date with Kenya's labor laws, tax regulations, and employment practices, ensuring full compliance and reducing legal risks for the client company.

3. Cost-Effective: Using an EOR is often more cost-effective than establishing and maintaining a local subsidiary, especially for companies hiring a small number of employees.

4. Flexibility: EORs provide the flexibility to scale operations up or down in Kenya without the long-term commitments associated with setting up a local entity.

5. Local Expertise: EORs offer valuable insights into local business practices, cultural norms, and market conditions in Kenya.

6. Risk Mitigation: By taking on the legal responsibilities of employment, EORs help mitigate risks associated with cross-border hiring and employment.

7. Focus on Core Business: With the EOR handling administrative and compliance tasks, client companies can focus on their core business activities and employee productivity.

8. Access to Benefits: EORs can often provide better access to local benefits and insurance options, enhancing the company's ability to attract and retain top talent in Kenya.

By leveraging an Employer of Record service, companies can effectively navigate the complexities of hiring in Kenya, tapping into the country's potential while minimizing risks and administrative burdens.

Kenya's employment landscape is characterized by a young, diverse workforce spread across urban and rural areas. The country faces challenges such as youth unemployment and skills mismatches, but also presents opportunities in growing sectors like technology and renewable energy. The government is actively working to enhance workforce development through various initiatives.

Overview of Labor Laws

Kenya's labor laws aim to protect workers' rights and establish fair employment practices. Key aspects include:

• The Employment Act of 2007, which governs basic employment conditions
• Regulations on working hours, leave entitlements, and overtime compensation
• Provisions for maternity and paternity leave
• Laws against discrimination and sexual harassment in the workplace
• Regulations on termination of employment and severance pay

Employers must comply with these laws to ensure legal and ethical employment practices in Kenya.

Cultural Considerations

Understanding Kenyan workplace culture is crucial for successful business operations:

• Emphasis on relationship-building before conducting business
• Indirect communication styles to maintain harmony
• Respect for authority and hierarchical structures
• Importance of age and seniority in workplace interactions
• The concept of "Harambee" promoting communal effort and collective responsibility

Managers should adapt their leadership styles to accommodate these cultural norms while maintaining clear expectations and open communication.

Challenges of Direct Hiring

Direct hiring in Kenya can present several challenges for foreign companies:

1. Navigating complex labor laws and regulations
2. Understanding and adapting to local cultural norms and expectations
3. Addressing the skills gap and finding qualified candidates in certain sectors
4. Managing the high youth unemployment rate and potential mismatch between job seekers and available positions
5. Dealing with bureaucratic processes and potential delays in obtaining necessary permits and registrations
6. Establishing appropriate compensation and benefits packages that align with local standards and expectations
7. Implementing effective retention strategies in a competitive job market
8. Ensuring compliance with tax regulations and social security requirements

To overcome these challenges, many companies choose to partner with local experts or consider alternative employment solutions such as using an Employer of Record service.

Kenya's payroll and tax system is a complex framework designed to support the country's social welfare programs and economic development. Both employers and employees play crucial roles in this system, contributing to various funds and schemes that benefit the workforce and society at large. Understanding these obligations is essential for businesses operating in Kenya and for individuals working in the country.

In Kenya, the payroll process involves careful calculations of salaries, deductions, and contributions. Employers must navigate a range of responsibilities, from withholding income tax to contributing to social security and health insurance funds. Employees, on the other hand, see various deductions from their gross pay, which go towards taxes and mandatory contributions to national schemes.

The tax system in Kenya is progressive, meaning that higher earners pay a larger percentage of their income in taxes. This system aims to create a fair distribution of the tax burden across different income levels. Additionally, there are several mandatory contributions that both employers and employees must make to support various national initiatives and social programs.

Let's delve deeper into the specific contributions required from both employers and employees in Kenya.

Employer Contributions

Employers in Kenya have several financial obligations when it comes to their employees' payroll. These contributions are crucial for maintaining the country's social security system and supporting various national initiatives.

Pay As You Earn (PAYE)

While not a direct contribution, employers are responsible for calculating and deducting PAYE from their employees' salaries. This income tax must be remitted to the Kenya Revenue Authority (KRA) by the 9th day of the following month.

National Social Security Fund (NSSF)

Employers must match their employees' NSSF contributions. The maximum contribution is KES 1,080 per month for both the employer and employee, totaling KES 2,160. This fund helps provide a basic level of social protection to Kenyan workers.

National Hospital Insurance Fund (NHIF)

Employers are required to deduct and remit their employees' NHIF contributions. While this is primarily an employee contribution, employers play a crucial role in ensuring these payments are made correctly and on time.

Affordable Housing Levy (AHL)

Employers must contribute 1.5% of each employee's gross monthly salary towards the AHL. This matches the employee's contribution, for a total of 3%. This levy aims to support the government's affordable housing initiative.

Work Injury Benefits Act (WIBA) Premiums

Depending on the industry risk classification, employers may need to contribute to WIBA premiums. This ensures that employees are covered in case of work-related injuries or illnesses.

Additional Retirement Plans

Some employers offer additional retirement savings plans for their employees. The contribution structure for these plans can vary depending on the specific scheme.

Employee Contributions

Employees in Kenya also have several financial obligations that are typically deducted from their gross pay. These contributions support various national programs and personal benefits.

Pay As You Earn (PAYE)

Employees are subject to PAYE deductions based on their taxable income. The tax rates are progressive, ranging from 10% to 30% depending on the income bracket.

National Social Security Fund (NSSF)

Employees contribute to the NSSF based on their pensionable earnings, up to a maximum of KES 1,080 per month.

National Hospital Insurance Fund (NHIF)

NHIF contributions are deducted from employees' salaries based on a graduated scale that depends on their gross monthly salary.

Affordable Housing Levy (AHL)

Employees contribute 1.5% of their gross monthly salary towards the AHL.

Other Potential Deductions

Employees may have additional deductions such as contributions to private pension plans, trade union fees, or repayments of Higher Education Loans Board (HELB) loans.

Understanding these contributions is crucial for both employers and employees in Kenya. It ensures compliance with local laws and regulations while supporting important national initiatives. As tax laws and contribution rates can change, it's always advisable to stay informed about the latest updates and consult with tax professionals when needed.

Navigating employee benefits in Kenya can be a complex task for international companies. This is where an Employer of Record (EOR) service like Rivermate can be invaluable. An EOR manages all aspects of employment, including the administration of both mandatory and optional benefits, ensuring compliance with local labor laws while allowing companies to offer competitive packages to attract top talent. Let's explore the landscape of employee benefits in Kenya, both mandatory and optional.

Mandatory Benefits

In Kenya, employers are legally required to provide certain benefits to their employees. These include:

• Annual Leave: Employees are entitled to a minimum of 21 days of paid annual leave after one year of service.
• Public Holidays: Kenya observes ten national holidays annually, which are paid days off for employees.
• Sick Leave: After two months of service, employees are eligible for 30 days of full-pay sick leave, followed by 15 days at half pay within a 12-month period.
• Maternity Leave: Female employees receive three months of paid maternity leave at full salary.
• Paternity Leave: Fathers are entitled to two weeks of paid paternity leave.
• National Hospital Insurance Fund (NHIF): Both employers and employees must contribute to this fund, providing access to essential healthcare services.
• National Social Security Fund (NSSF): Employers and employees each contribute 12% of the monthly salary (up to a specified cap) to this retirement and social security scheme.

Optional Benefits

To remain competitive and enhance employee satisfaction, many employers in Kenya offer additional benefits:

• Pension Schemes: Voluntary pension plans to supplement the mandatory NSSF contributions.
• Group Life Insurance: Providing financial security for employees' beneficiaries.
• Private Medical Insurance: Offering wider coverage and access to a broader network of healthcare providers.
• Flexible Work Arrangements: Including remote work options or flexible hours to improve work-life balance.
• Extended Paid Time Off: Additional vacation days or personal leave beyond the mandatory minimum.
• Wellness Programs: Gym memberships, health screenings, or on-site fitness facilities to promote employee well-being.
• Subsidies: Allowances for transportation, meals, or mobile phone and internet usage.
• Employee Discounts: Negotiated rates on various products or services for employees.
• On-Site Amenities: Such as childcare facilities, meal facilities, or relaxation areas to enhance the work environment.

By leveraging an EOR service like Rivermate, companies can ensure they're meeting all mandatory benefit requirements while also having the flexibility to offer attractive optional benefits, creating a comprehensive and competitive benefits package for their Kenyan workforce.

The process of termination and offboarding in Kenya is a structured procedure governed by the Employment Act of 2007. This framework ensures fair treatment of employees while protecting the interests of employers.

When it comes to terminating employment in Kenya, there are three main reasons recognized by law: operational requirements (redundancy), misconduct, and incapacity. Each of these reasons requires specific procedures to be followed to ensure compliance with legal standards.

Termination Process

Valid Reasons for Termination

1. Operational Requirements (Redundancy): This occurs when a company needs to restructure or faces economic challenges, leading to the elimination of certain positions.

2. Misconduct: This involves serious breaches of company rules or repeated violations. Examples include persistent absenteeism, gross negligence, or insubordination.

3. Incapacity: This relates to an employee's inability to perform their job duties, either due to poor performance or health issues.

Fair Procedures

Regardless of the reason for termination, employers must follow fair procedures. This typically involves:

• Issuing warnings
• Providing opportunities for improvement
• Conducting disciplinary hearings (in cases of misconduct or incapacity)

Notice Requirements

Both employers and employees are required to provide notice when terminating employment. The notice period depends on the employee's payment terms:

• For monthly-paid employees: At least one month's notice
• For weekly-paid employees: At least two weeks' notice
• For daily-paid employees: At least one day's notice

Employers have the option to pay the employee's salary for the notice period instead of having them work during that time.

Severance Pay

In cases of redundancy, Kenyan law mandates severance pay. The calculation is based on the employee's length of service:

• At least 15 days of basic pay for each completed year of service

It's important to note that severance pay is not required for dismissals due to misconduct or summary dismissals.

Offboarding Process

The offboarding process in Kenya typically involves:

1. Communicating the termination decision to the employee
2. Conducting an exit interview
3. Retrieving company property (e.g., laptops, access cards)
4. Settling any outstanding payments or benefits
5. Providing necessary documentation (e.g., certificate of service)

By following these procedures, employers in Kenya can ensure a smooth and legally compliant termination and offboarding process. This approach helps maintain positive relationships with departing employees and protects the company from potential legal disputes.

Kenya's vibrant economy and growing job market have made it an attractive destination for foreign workers. However, before embarking on your Kenyan work adventure, it's crucial to understand the visa and work permit requirements. Let's explore the essential information you need to know.

Types of Work Visas

Kenya offers two main types of work visas for foreign nationals:

1. Class D Permit: This is the most common work permit for expatriates. It's issued to individuals who have specific skills or qualifications that are in short supply in Kenya.

2. Special Pass: This is a short-term work permit, typically valid for up to six months. It's often used for temporary assignments or while waiting for a Class D Permit to be processed.

Work Permit Application Process

To obtain a work permit in Kenya, follow these general steps:

1. Secure a job offer from a Kenyan employer
2. Gather required documents, including a valid passport, passport-sized photos, and educational certificates
3. Submit the application to the Department of Immigration Services
4. Pay the required fees
5. Wait for processing, which can take several weeks to months

Key Requirements

When applying for a work permit in Kenya, keep these important points in mind:

• Your employer must demonstrate that no qualified Kenyan citizen is available for the position
• You must have relevant qualifications and experience for the job
• Your passport should be valid for at least six months beyond your intended stay
• You may need to provide a police clearance certificate from your home country

Validity and Renewal

Class D Permits are typically valid for two years and can be renewed. Special Passes are usually valid for up to six months and may be extended once.

Additional Considerations

• Dependents of work permit holders may apply for a Dependant's Pass
• It's illegal to work in Kenya without a valid work permit
• Always carry your work permit with you while in Kenya

Understanding and complying with Kenya's visa and work permit requirements is essential for a smooth transition into the Kenyan workforce. By following these guidelines, you'll be well-prepared to start your professional journey in this dynamic East African nation.