Annual leave is not intended to be paid in cash but has to be if it is not used within a specific time. Learn how to calculate leave pay in Kenya.
Before hiring employees, business owners in Kenya must study the benefits and protections workers are entitled to. Denying workers their rights has legal consequences if aggrieved employees decide to assert them.
Among the rights employees in Kenya are guaranteed under the law is a minimum of 21 days of paid annual leave. To help you understand your leave pay obligations, this article will demonstrate and explain:
- How to calculate leave days,
- How to calculate leave pay, and,
- What to do with unutilised leave days.
Let's dive in.
What is the leave policy in Kenya?
Section 28 of the Employment Act of 2007 entitles Kenyan employees to at least 21 working days of leave with full pay after every 12 months of consecutive service.
According to the act, employees receive their full pay while on annual leave. The leave days may be taken as a whole or, if the employer and employee agree, divided and taken in parts at different intervals.
The law allows employers and employees to negotiate how accumulated leave days are used. However, unused leave days are a liability to the employer, so they must ensure employees use their accrued leave days.
What is the formula for calculating annual leave days?
The purpose of annual leave is to give workers time away from work to rest and rejuvenate. Workers can use the time to engage in activities they enjoy outside work, like taking holidays with their families. They will expect to return to work rested and re-energised.
However, employees with leave entitlement may have their employment contracts terminated before they have utilised their accrued leave days. In other cases, workers may be unable to take their accumulated leave days within the 18 months stipulated by law because of work pressure or other reasons.
In such scenarios, employees can monetise their leave days. They can take payment instead of the accumulated leave days. The employer shall pay for leave days using this formula:
Number of accrued leave days X 1.75 X daily rate.
To explain with an example, if a terminated employee had utilised 14 of their accrued 21 days annual leave days, the number of their unutilised leave days would be seven.
Assuming the daily rate for their salary was 4,000 KES, you would have to pay them 49,000 KES, calculated as follows:
7 X 1.75 X 4,000 KES
12.25 X 4,000 KES
49,000 KES
Annual leave is paid time off that an employee can take each year. Therefore, every unutilised leave day counts as 1,75 days since they would still be paid in full if utilised. They cannot be paid at the same rate as standard work days.
So, what happens if employees don't take their annual leave?
Can Kenyan employers forfeit unutilised leave days?
The Employment Act is silent on what happens when employees do not use their accrued leave days. However, Kenyan courts have pronounced themselves, ruling that employees can monetise their unused leave days.
The court in Rumba Mnyika Nguta v Southern Hills Development Agency [2020] ruled that employers cannot forfeit unutilised leave days. Stating that the Employment Act does not support the forfeiture of unused leave days, the court adjudged that unused leave becomes an accrued benefit that the employee can monetise on demand.
The court pronounced itself further in Antony Kavinguha v Erica Krug & Another [2014], averring that entitlement is enshrined in the Employment Act. The court further explained that the act sets minimum terms and conditions for a contract of employment, meaning employers cannot grant less favourable terms.
So, the cases cited above clear up the ambiguity of the Employment Act regarding forfeiture of unutilised leave. They decreed that employers may not forfeit unused leave days. The employer must ensure that employees use their leave days and pay employees for the days where they are not used.
Employees who have taken other types of leave, like paternity, maternity, or sick leave, will still be due their accrued annual leave days. Employers cannot forfeit unused leave days because the employee has already taken time off work.
How are leave days calculated in Kenya?
Employees in Kenya are entitled to 21 working days of leave with full pay after working for 12 consecutive months. This translates to 1,75 days of time off work for every month worked.
Employees who are terminated before serving a whole year but at least two months are entitled to their accrued leave days. The employer must pay for those leave days, each amounting to 1,75 standard work days.
The minimum leave employees may be awarded is the 21 leave days entitlement enshrined in the Employment. This means employers may agree through collective bargaining exercises or decide through their initiatives to grant more leave days than the law requires.
Some employers award more leave days for employees who have been with the company longer. They use a sliding scale determined by the length of service to calculate how many leave days each employee gets for 12 months worked.
Hence, long-serving employees will accrue more leave days in the same 12-month period than newer employees. This is done to reward and encourage loyalty to the company.
So, where one employee may accrue 21 leave days that all Kenyan workers are entitled to, a long-serving employee may accrue 30 days. In such scenarios, the employer and the employee may agree on how those leave days will be utilised.
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