Severance pay can be a confusing and overwhelming topic for both employees and employers in Kenya. Understanding the laws and regulations surrounding severance pay, as well as how it is calculated, can be difficult. In this article, we aim to break down these complexities and provide a clear understanding of severance pay in Kenya. We will cover what severance pay is, how it is calculated, who is eligible to receive it, and an overview of the laws and regulations that govern it. This will not only help employees understand their rights and entitlements, but also employers comply with the legal requirements. With this knowledge, readers will be able to navigate the topic with confidence and make informed decisions.
Overview of Kenyan Labor Laws
Kenya has a complex legal framework that governs the rights and obligations of employers and employees. The main laws governing labor in Kenya include the Constitution of Kenya, the t Employement Act, and the Labor Institutions Act. These laws, among others, provide the legal framework for issues such as hiring, termination, working hours, leave, and benefits.
The Constitution of Kenya guarantees the right to fair labor practices and freedom of association. This means that employers are prohibited from discrimination, and employees have the right to form and join trade unions. The Employment Act is the primary law that governs the terms and conditions of employment in Kenya. It provides for the minimum rights and benefits that employees are entitled to, including working hours, leave, and termination.
The Labor Institutions Act establishes various labor institutions, such as the Ministry of Labor and Social Protection, the Labour Court, and the Industrial Court. These institutions are responsible for enforcing labor laws and resolving disputes between employers and employees.
The Employment Act sets the minimum age for employment at 18 years old and regulates the working hours for employees. The standard working hours for adults is 45 hours per week, which is usually spread over five days. Employers are also required to provide employees with at least one day off per week and are required to pay overtime for any hours worked in excess of the standard working hours.
Employees in Kenya are also entitled to a certain number of leave days per year. The Employment Act provides for a minimum of 21 days of annual leave, 14 days of sick leave, and 7 days of maternity leave. Employers are also required to provide employees with leave for religious holidays, such as Eid-ul-Fitr and Christmas.
The Employment Act also regulates the termination of employment in Kenya. Employers are required to provide employees with notice of termination or pay in lieu of notice. The notice period depends on the length of service of the employee, with a minimum of one week for employees who have been in service for less than two years and a maximum of four weeks for employees who have been in service for more than five years.
Employers are also required to pay severance pay to employees who are terminated due to redundancy or the closure of the business. The amount of severance pay is calculated based on the length of service of the employee and their last drawn salary.
In addition to these laws, Kenya has also ratified several international conventions on labor rights, such as the International Labor Organization (ILO) Convention on Forced Labor and the ILO Convention on Equal Remuneration for Men and Women.
What is Severance Pay?
Severance pay, also known as termination pay, is a form of compensation that employees may be entitled to receive upon the termination of their employment. It is intended to help the employee transition to a new job or situation and can be a significant financial cushion during that time. In Kenya, the laws governing severance pay are provided by the Employment Act, which outlines the conditions under which an employee is entitled to severance pay and how it is calculated.
The importance of severance pay in protecting the interests of workers in Kenya cannot be overstated. For one, it provides a safety net for employees who may have lost their jobs due to factors beyond their control, such as redundancy or the closure of a business. Severance pay can help ease the financial burden of unemployment and provide a cushion for workers as they search for new employment opportunities.
Additionally, severance pay helps to ensure that employers do not take advantage of employees by terminating their employment without just cause. By providing for severance pay, the law ensures that employers are held accountable for their actions and are required to compensate employees for the loss of their job. This helps to promote fair labor practices and protect the rights of workers.
The laws governing severance pay in Kenya also provide for specific calculations on the amount of severance pay an employee is entitled to. The amount of severance pay is based on the length of service of the employee and their last drawn salary. This helps to ensure that employees who have been with the company for a longer period of time and have higher salaries are not disadvantaged.
Furthermore, severance pay is an important aspect of the rights and benefits of employees in Kenya. The Employment Act provides for various rights and benefits such as working hours, leave, and termination, among others, and severance pay is an essential component of these rights and benefits. It ensures that employees are not left without any compensation or support when they lose their job.
Who is Eligible for Severance Pay in Kenya?
Severance pay, also known as termination pay, is a form of compensation that an employer is required to provide to an employee upon termination of their employment. In Kenya, the Employment Act of 2007 outlines the eligibility criteria for severance pay.
According to the Act, any employee who has been continuously employed for a period of at least 12 months is eligible to receive severance pay upon termination of their employment. This includes employees who have been terminated due to redundancy, reorganization, or the liquidation of the employer's business.
Employees who have been terminated due to misconduct, such as theft, fraud, or gross insubordination, are not eligible to receive severance pay. Additionally, employees who have resigned from their position are not eligible to receive severance pay, unless the resignation is due to a constructive dismissal, which occurs when the employer has made the work environment intolerable for the employee.
The amount of severance pay that an eligible employee is entitled to receive is calculated based on the employee's length of service with the employer. The Employment Act of 2007 states that an employee is entitled to receive one month's pay for every year of service, up to a maximum of 12 months' pay. This means that an employee who has been continuously employed for 12 or more years is entitled to receive 12 months' pay as severance pay.
It's important to note that severance pay is in addition to any other entitlements the employee may have, such as outstanding wages, vacation pay, or benefits. The employer is also required to provide the employee with a certificate of service, which certifies the employee's length of service and the amount of severance pay to which the employee is entitled.
The employer is also required to give notice to the employee before the termination of their employment. The notice period is dependent on the length of service of the employee and ranges from one week to four weeks.
In Kenya, severance pay is a legal requirement and it's the employer's responsibility to ensure that they comply with the Employment Act of 2007. Failure to provide severance pay to an eligible employee can result in fines and penalties, so it is important for employers to understand the requirements and take the necessary steps to comply.
How Severance Pay is Calculated in Kenya
In Kenya, the calculation of severance pay is outlined in the Employment Act of 2007.
An employee is entitled to receive one month's pay for every year of service, up to a maximum of 12 months' pay. This means that an employee who has been continuously employed for 12 or more years is entitled to receive 12 months' pay as severance pay. The employee's basic salary, which includes their base pay, house allowance, and transport allowance, is used to calculate their severance pay. The calculation of severance pay is based on the employee's last drawn salary.
It's important to note that severance pay is in addition to any other entitlements the employee may have, such as outstanding wages, vacation pay, or benefits. The employer is also required to provide the employee with a certificate of service, which certifies the employee's length of service and the amount of severance pay to which the employee is entitled.
For example, if an employee has been employed for 8 years, the employee would be entitled to 8 months' pay as severance pay. If an employee's last drawn salary is KES 100,000 per month, the employee would be entitled to KES 800,000 in severance pay.
It's important to note that the calculation of severance pay must be in accordance with the provisions of the Employment Act of 2007 and any collective bargaining agreement that may be in place. Employers should consult with legal counsel or the Ministry of Labour to ensure that they are in compliance with the law when calculating severance pay.
When is Severance Pay Paid in Kenya?
According to the Employment Act of 2007, an employee who has been in continuous employment for at least one year is entitled to severance pay. The amount of severance pay is calculated based on the employee's length of service and last remuneration. Employees who have been in continuous employment for less than one year are not entitled to severance pay.
The Employment Act stipulates that an employee who has been in continuous employment for one year but less than five years is entitled to one month's remuneration for every year of service. An employee who has been in continuous employment for five years or more is entitled to two months' remuneration for every year of service. The remuneration used to calculate severance pay should include basic salary, housing allowance, and transport allowance.
Additionally, the Labour Relations Act of 2007, provides for the payment of severance pay to employees who have been retrenched. The amount of severance pay for retrenched employees is calculated based on the employee's length of service and last remuneration. The Act requires an employer to give notice of retrenchment to the employee and the relevant trade union and to hold consultations with the trade union before retrenchment.
It is important to note that severance pay is not the same as redundancy pay, which is paid to employees who are made redundant as a result of the employer's decision to close down or scale down the business. Redundancy pay is calculated based on the employee's length of service and last remuneration and is capped at a maximum of 12 months of remuneration.
How to Submit a Claim for Severance Pay
Submitting a claim for severance pay in Kenya can be a straightforward process, as long as you have all the necessary information and documentation. Here is a step-by-step guide to help you submit a successful claim:
Step 1: Get your documents ready
To submit a claim for severance pay, you will need to provide proof of your employment, including:
- A copy of your employment contract
- Payslip or other proof of remuneration
- A letter of termination of employment, if applicable
- Valid ID or passport
Step 2: Review your eligibility
Check if you qualify for severance pay by checking your length of service and if you meet the criteria as stipulated by the Employment Act of 2007.
Step 3: Calculate the amount of severance pay you’re entitled to
The amount of severance pay you are entitled to is based on your length of service and last remuneration. Employees who have been in continuous employment for one year but less than five years are entitled to one month's remuneration for every year of service. An employee who has been in continuous employment for five years or more is entitled to two months' remuneration for every year of service.
Step 4: Submit your claim
You can submit your claim for severance pay to your employer or to the Ministry of Labour and Social Protection. You can also submit your claim through the Ministry of Labour's online portal.
Step 5: Follow up on your claim
After submitting your claim, it is important to follow up on the status of your claim. You can do this by calling the Ministry of Labour or your employer to check on the status of your claim.
Collecting Your Severance Pay with IntaSend
You can’t go through all the hurdles of filing a successful claim for your severance pay only to be halted when it’s time for your funds to be disbursed. This is where IntaSend can help. You can receive your funds directly in your IntaSend wallet, where they will instantly reflect and be made available for withdrawal. Settlement takes a few minutes, which means you can withdraw your funds directly to your bank account, or mobile money wallet in a matter of minutes.
However, to use receive funds directly in your IntaSend wallet, you’ll need an account if you don’t already have one. Creating an IntaSend account is easy; all you need is an active email address and a working phone number. You’ll also need some documents for quick verification if you’re a business owner. However, if you run an unregistered business, IntaSend has some services for you as well.
Cover Photo by Ümit Yıldırım on Unsplash
