Terminating an employment contract is one of the most sensitive tasks for any HR department in Kenya. Under the Employment Act 2007 and subsequent judicial precedents leading into 2026, the law is strictly protective of employee rights. A termination must satisfy two main criteria to be considered lawful: substantive fairness and procedural fairness. Failure to meet both can lead to the Industrial Court awarding the employee up to twelve months of gross salary as compensation for unfair dismissal.
Here is the professional guide to the legal requirements for employee termination in Kenya.
Valid Grounds for Termination
An employer cannot terminate a contract of service without a valid and fair reason. The law recognizes four primary grounds:
-
Misconduct: When an employee breaches the terms of their contract or workplace policies.
-
Poor Performance: When an employee consistently fails to meet set targets despite being given the opportunity to improve.
-
Physical Incapacity: When an employee is medically unfit to perform their duties.
-
Redundancy: When the operational requirements of the business mean a position is no longer needed.
The Disciplinary Process and Procedural Fairness
Even if you have a valid reason, the termination is unlawful if you do not follow the correct procedure. Section 41 of the Employment Act requires the following steps:
-
Notice to Show Cause: The employer must issue a written notice explaining the allegations or reasons for the intended termination. The employee should be given a reasonable time, usually at least 48 to 72 hours, to provide a written response.
-
The Disciplinary Hearing: If the response is unsatisfactory, a hearing must be convened. The employee has a legal right to be accompanied by a fellow employee or a union representative.
-
The Decision: After the hearing, the employer must objectively consider the defense. The final decision must be communicated in writing, clearly stating the reasons for the choice made.
Types of Termination
1. Termination with Notice
Either party can end the contract by giving notice. If the contract does not specify a period, the law sets minimums based on pay frequency:
-
Daily wages: Termination can happen at the end of any day without notice.
-
Weekly or bi-weekly wages: At least one week or two weeks' notice respectively.
-
Monthly wages: At least 28 days or one month of written notice. An employer may also choose to pay the employee a sum equivalent to the salary they would have earned during the notice period, known as payment in lieu of notice.
2. Summary Dismissal
Summary dismissal occurs when an employer terminates a contract without notice due to gross misconduct. Under Section 44, grounds include willful neglect of duty, absenteeism without leave, using abusive language, or criminal acts against the employer. Importantly, even in cases of summary dismissal, a fair hearing must still be conducted before the final decision is made.
3. Redundancy
Termination due to redundancy requires a specific 30-day notice to both the employee and the Labour Officer. Employers must use fair selection criteria and pay severance at a rate of at least 15 days for every completed year of service.
Final Dues and Terminal Benefits
Upon termination, the employee is entitled to several payments regardless of the reason for leaving:
-
Unpaid Salary: Wages for all days worked up to the termination date.
-
Accrued Leave: Payment for any annual leave days earned but not taken.
-
Certificate of Service: A mandatory document stating the dates of employment and nature of work performed.
Get Expert Help Today
Handling terminations incorrectly can lead to expensive lawsuits and damage to your company reputation. FaidiHR provides a compliant platform to manage disciplinary records and calculate final dues accurately according to the latest 2026 Kenyan labor regulations.
Contact FaidiHR for Professional Tax and HR Support
-
Call: 254 702 339 699
-
Email: sales@faidihr.com