- January 28, 2022
- Posted by: admin
When a business hires an employee, it assumes responsibility for all employment tasks, costs, and liabilities associated with having that employee on staff. But not all businesses want to deal with that responsibility. There is another option: using an employer of record.
Employer of record Services
An employer of record is an organization that serves as the employer for tax purposes while the employee performs work at a different company. The employer of record takes on the responsibility of traditional employment tasks and liabilities.
The employer of record handles all personnel functions, including:
- Processing and funding payroll
- Depositing and filing taxes
- Handling unemployment
- Handling workers’ compensation
- Collecting and processing time sheets
- Creating and maintaining employment contracts
- Employee onboarding (new hire)
- Complying with Government Requlations
- Doing background checks
- Offering and administering benefits
- Terminating employees
Employer of record benefits
By using an employer of record services in Kenya, recruiters and other businesses can free up time. Not having to deal with payroll and HR issues can potentially save hours.
An employer of record is a cost-effective way to outsource payroll and HR functions. The business pays the employer of record a set rate for every hour the employee works, and the employer of record handles all tasks.
Employer of record services can be especially helpful when dealing with payroll processing and employment laws for employees in multiple states. The employer of record stays updated on the state and local laws so you don’t have to worry about learning and complying with laws in multiple places.
The business and the employer of record have different responsibilities.
The business where the employee works retains control over business operations. The business also is responsible for workplace safety and compliance.
The employer of record is liable for employment issues along with payroll compliance and tax laws.
Employer of record in contract staffing
When applied to recruiting agencies offering contract staffing, the employer of record serves as the legal employer for contract employees. The employer of record responsibility often falls onto a third party known as a contract staffing back office. Recruiters can take on the back office responsibilities themselves, but recruiters can also outsource the responsibility to a contract staffing back office.
If you choose to add contract staffing to your recruiting business, you need to decide who will be the employer of record for your contractors.
If you decide to run the back office yourself, you need to make sure you have the time and resources to do so.
If you don’t want to run the back office yourself, a contract staffing back office provider can take the responsibility from you. The employer of record will handle staffing agency (recruiter) payroll funding, pay the workers, and handle all payroll and employment responsibilities.
Employer of record services in Kenya for non-recruiting small businesses
Other non-recruiting small businesses can also hire employers of record. When a small business hires an employer of record, the employee still works at the business. But, the employer of record handles payroll and HR issues. This frees up time for the business, saves money, and the business doesn’t have to worry about employment law compliance.
Getting an employer of record
Whether you’re a recruiter who offers contract staffing or a small business owner, you need to make sure employees are classified correctly, paid accurately, and employment issues are handled. Otherwise, there can be consequences at the state and federal levels.
2Max Group provides an employer of record back office solution for recruiting agencies and other small businesses. Learn more about 2Max Group’s contract staffing services.
Hiring in Kenya
Kenya’s population is ethnically diverse, with as many as 70 distinct ethnic groups as well as a large number of foreign nationals. Historically, politics and ethnic groups have been intertwined and there is a perception that those in power favor their own ethnic group over others. There have also been tensions between some ethnic groups. Becoming aware of the historical relationships and cultural differences among Kenya’s diverse population is of value to anyone doing business and hiring workers in the country.
Employment law in Kenya is regulated primarily by the Employment Act, the Labor Relations Act, the Labor Institutions Act and the Occupational Safety and Health Act.
Since employment in Kenya is highly regulated, compliant employment contracts are an essential business need. As your employer of record and PEO in Kenya, we can ensure that every contract, for every worker, meets all requirements. We can also provide you with guidance about cultural norms and hiring best practices and keep you up-to-date with employment regulations as they change.
Employment contracts in Kenya
As you look to hire employees in Kenya, here are some common regulations you’ll need to know to create a compliant contract, as well as how an employer of record and PEO can provide support for your unique HR needs.
Regular work hours are eight hours per day Monday through Friday and five hours on Saturday, making a 45-hour workweek. It is legal to work up to 52 hours a week, or 60 hours for night work. Employees are entitled to one day of rest out of every seven.
As you consider the appropriate salary to offer new employees, keep in mind:
- Minimum wage varies based on profession, professional grade and location.
- Professions are divided into 12 occupational groups, with group one receiving the lowest minimum wage and groups 11 and 12 tied for the highest wage. There can be multiple grades within an occupational group, and the minimum wage varies by grade.
- Kenya is divided into three Minimum Wage Areas, each with its own minimum wage:
- Minimum Wage Area 1: Nairobi, Mombasa and Kisumu
- Minimum Wage Area 2: Mavoko (aka Athi River), Ruiru and Limuru
- Minimum Wage Area 3: all remaining territory in Kenya
- Overtime work is compensated at 150% of normal wages for weekday work and 200% of normal wages for Sundays and public holidays. Additional overtime regulations apply to different sectors of the economy.
- Collective agreements typically regulate the legal salary range for unionized employees.
As your employer of record in Kenya, we can provide you with resources and insights about employee compensation, so you are better equipped to make a competitive employment offer.
Bonuses aren’t required by law; however, many employers offer one or more of the following:
- Christmas bonus
- 13th month bonus
- Annual performance bonus
- Production bonus
Probationary periods in Kenya generally do not last longer than six months unless the employee consents to a second six-month probationary period. Terminating probationary employment requires seven days’ notice or payment in lieu of notice.
Termination and severance
Employees with indefinite contracts who have worked for at least five years are entitled to at least one month’s notice of termination. Employees who have worked more than five years are entitled to at least two months’ notice.
To terminate an employee for gross misconduct, the employer must inform the employee about the misconduct and allow the employee to defend their actions. Employees may sue for damages if they feel the dismissal is unfair.
A contract with an end date may be terminated with the following notice:
- A contract that requires wages to be paid daily: no notice
- A contract that requires wages to be paid at intervals of less than one month: one pay period’s notice
- A contract that requires wages to be paid at intervals of one month or more: 28 days’ notice from either party
The employer or employee may provide payment in lieu of notice.
An employer may waive an employee’s notice, but they are still required to pay the employee for the time they would have worked.
The Employment Act requires that employers provide employees who have worked for four weeks or longer with a certificate of service upon termination. Failure to do so subjects the employer to a fine of up to 100,000 Kenyan shillings and/or six months in jail.
Severance pay in Kenya is only mandatory in cases of redundancy, where 15 days of wages are required for each year of employment.
As your employer of record in Kenya, we can work with you to quickly handle the unforeseen event of an employee termination, providing legal guidance and a personalized process that ensures you stay out of labor court.
Employee benefits and paid leave in Kenya
When negotiating terms of an employment contract with a candidate in Kenya, here are some of the statutory benefits and paid leave requirements to keep in mind, as well as how an employer of record can support your company’s benefits strategy.
Pregnant employees are entitled to three months of paid maternity leave and must give written notice at least seven days in advance. If an employer requests a medical certificate, the employee must provide one.
An employee may choose to take other kinds of leave (sick, compassionate, annual or any other leave) immediately following maternity leave.
Annual leave continues to accrue during maternity leave.
An employee on maternity leave cannot be terminated unless it is for cause.
Employees are entitled to at least 21 days of paid annual leave after 12 months of employment. The employee must be allowed to take at least one two-week period of leave each year.
Collective agreements often require additional leave of between 30 and 45 days.
Kenya observes 10 public holidays:
- New Year’s Day
- Good Friday
- Easter Monday
- Labor Day
- Madaraka Day
- Mashujaa (Kenyatta)
- Independence Day
- Christmas Day
- Boxing Day
Employees who work on a holiday are entitled to double pay.
Employees are entitled to a minimum of seven days of sick leave with full pay followed by seven days with half-pay for every 12 months of employment. An employee may take this leave after a period of two consecutive months of service and must supply the employer with a certificate signed by a qualified medical practitioner confirming the inability to work.
Employees pay into the National Hospital Insurance Fund (NHIF) each month, which in turn reimburses employers for sick leave expenses. The NHIF also reimburses insured employees and their dependents for up to 432,000 Kenyan shillings a year for costs incurred at private and faith-based hospitals.
Healthcare in Kenya is offered by a variety of providers both public and private, and funded by various means.
Public healthcare is funded by a mixture of government revenues, donor funds and employee contributions to the NHIF. Membership in the NHIF is mandatory for Kenyans 18 and over. Formal employees contribute monthly based on their income while informal employees pay a voluntary monthly flat rate premium.
Private healthcare is funded via out-of-pocket payments made directly to providers as well as private health insurance, although very few Kenyans have private health insurance.
Employers are required to provide healthcare for their employees. Most employees are covered by the NHIF, which reduces the burden, but some employers also offer private health insurance.
As your employer of record in Kenya, we may be able to provide optional supplementary medical insurance coverage for professionals and their dependents at a more cost-effective rate.
Under the National Social Security Fund Act, all employers with at least one employee are required to register with the pension fund, and membership is mandatory for all employed persons between the ages of 18 and 60. Employees are eligible to receive retirement benefits at age 60.
Employees contribute 6% of their monthly salary and employers contribute 6% of total monthly payroll.
Foreign nationals working in Kenya are exempt from participation if they are covered by a social security treaty (totalization agreement) or if they have worked in Kenya for less than three years and are covered by an equivalent program in their home country.
Employees who earn more than 4,000 shillings a month are covered by the employer-liability system, which is funded entirely by employers. There is no qualifying period for eligibility.
Compensation is calculated as follows:
- For a temporary disability: 50% of daily wages, up to 540 Kenyan shillings a day after a three-day waiting period. (If the disability lasts longer than three days, the award is paid retroactively.)
- For a partial permanent disability: a lump sum equal to 60 months of the employee’s earnings up to 240,000 Kenyan shillings.
Employer social costs will cover a large portion of employee benefits in Kenya, but we can consult with you about supplemental coverage options, such as additional pension contributions or life insurance, if needed.
Employee onboarding with an employer of record in Kenya
We write and validate all local employment contracts, streamlining the onboarding process for you and your Kenya employees—all you have to do is provide relevant information and review and approve the employment agreement.
As your employer of record in Kenya, we will:
- Schedule a welcome call to discuss HR and employment information for Kenya, as well as answer any questions
- Prepare a customized employment contract in English and in Swahili (or other local language)
- Share the employment contract and benefits information with the new employee for signature and review
- Gather tax and banking information from the employee to set up payroll
- Provide a local point of contact to the employee to answer any questions regarding their employment, local HR or payroll
The entire onboarding process for the employee is often completed in as little as two weeks.