For a market where talent has options, your reputation as an employer hinges a lot on how you handle employee salaries and wages.
Below, you’ll find what the law says about salary and wages in Kenya, where most employers make mistakes, and what compliance entails.
If you’d prefer personalized guidance tailored to your business, schedule a free consultation with our HR experts.
Which Laws Govern Salary and Wages in Kenya?
Salary and wage regulations in Kenya don’t come from a single document. There are several pieces of legislation that regulate how you pay employees, when you pay them, and what happens if you fail to do so.
These are the four main legislations that provide information on wages in Kenya:
- The Employment Act, 2007, which outlines everything from payment timelines to lawful deductions.
- The Labour Institutions Act, specifically the Wages Council, which sets minimum wages for different sectors and regions.
- Regulation of Wages Orders, which specify minimum wage rates by job category, location, and industry.
- The Ministry of Labour and Social Protection which provides guidance on interpreting these laws and publishes updates when minimum wages change. The ministry also handles complaints and enforces wage laws.
Salary Payment Rules Under the Kenya Labour Law
Kenyan law provides plenty of guidelines on how, when, and where to pay employees.
How to pay employees in Kenya
According to Kenyan labour laws, employers are required to pay salaries and wages in Kenyan currency.
Moreover, employers are expected to pay employees directly or to someone they’ve authorized in writing to receive payment on their behalf.
In some cases, you can pay wages in the form of goods or services.
The exception here is drugs and alcohol, which aren’t recognized as valid in-kind payments.
Most employers today use bank transfers because they’re traceable and reduce the risk of disputes. If you pay in cash, document every payment with a signed receipt to protect both parties.
When and where to pay salaries
Payment of salaries should happen on a working day, during working hours, at or near the workplace.
If you and the employee agree on a different location, make sure it’s not somewhere that puts them at risk of intoxication unless that’s their actual place of work.
What about when to pay?
The law sets different payment timelines depending on how you’ve hired someone.
For employees hired to complete a specific task:
If the task takes more than one day, you can either pay them at the end of each day for work completed or let them finish the task and pay them once it’s done.
For piece work:
You are required to pay employees at the end of each month for work done during that month, or immediately after completing the job, whichever comes first.
For all other employees:
- Casual employees: Pay at the end of each working day
- Employees hired for more than one day but less than one month: Pay at the end of the agreed work period
- Employees hired for more than one month: Pay at the end of each month, or for any part of the month worked
- Employees on open-ended contracts: Pay at the end of each month, or when the journey ends, whichever happens first
If a court order, labour court decision, or your employment agreement gives the employee better payment terms than these minimums, those better terms apply.
Can you recover a salary advance if an employee quits or is terminated?
Offering salary advances can help your employees manage unexpected expenses and emergencies.
However, the law sets limits on how much you can recover in the event of the termination or resignation of an employee.
If you advance more than one month’s salary to an employee without a written contract, you can only legally recover up to one month’s salary.
For employees with written contracts, the limit is two months’ salary.
Anything beyond that can’t be enforced in court.
For instance, if an employee earning KSh. 50,000 per month receives an advance of KSh 80,000. You can only recover KSh 50,000.
If the same employee has a written contract and receives an advance of Ksh 120,000, you can recover up to Ksh 100,000 (their two months’ salary).
The remaining KSh 20,000 isn’t recoverable through legal channels.
What does this mean for you?
To ensure you’re able to recover salary advances in case of an issue, you should document all advances and keep them within the allowed thresholds.
Lawful and Unlawful Salary Deductions
Employees must always be paid their full salary.
The only exceptions are lawful deductions specifically permitted by law or agreed to by the employee.
Any deduction outside these rules can expose your business to penalties.
When are deductions allowed?
Labour regulations recognize several situations where you can legally deduct from an employee’s salary.
1. Statutory and approved contributions
You can deduct employee contributions to PAYE, NSSF, pensions, provident funds, or similar schemes. However, the scheme must be legally approved, and the employee must have agreed to contribute to it.
2. Damage or loss caused by the employee
If an employee deliberately damages or loses company property through their own fault, you can deduct a reasonable amount to cover the damage or loss.
3. Absence without permission
Deduct up to one day’s pay for each full day an employee doesn’t show up without permission or a valid reason.
4. Cash shortages
If your cashier’s till is short and an employee’s contract explicitly includes cash handling responsibilities, you can deduct for shortages caused by negligence or dishonesty.
5. Overpayment errors
You can recover any salary amount mistakenly paid in excess of what was due.
6. Deductions required by law or formal authority
Court orders, collective bargaining agreements, wage orders, or arbitration awards may require specific deductions.
7. Employee-requested deductions
You can make deductions requested in writing by the employee, as long as you don’t benefit directly or indirectly from these deductions. Examples include SACCO savings, loan repayments to third parties, or insurance premiums.
8. Loan repayments to the employer
If you have given an employee a loan, you can recover it through salary deductions. The repayment must be agreed to in writing and cannot exceed 50% of the employee’s net wages after other lawful deductions.
Deductions that are strictly prohibited
Some deductions are illegal regardless of whether the employee agrees to them.
For starters, you cannot deduct wages as a condition for giving someone a job, as a reward for employing or retaining an employee, or as any form of recruitment or job security fee.
The two-thirds rule
At any one time, total deductions cannot exceed two-thirds of an employee’s wages unless a higher limit is specifically approved by the Cabinet Secretary.
Learn more about NSSF, SHIF, and PAYE Compliance in Kenya.
What Should Employers Include in an Employee Pay Slip?
If you employ someone on a contract exceeding six months and pay them on a monthly basis, you must provide a written pay statement at or before the time wages are paid.
3 main payslip components
The pay statement needs to include three pieces of information:
1. Gross pay
This is the total amount the employee earned before any deductions. It should reflect their full salary or wages for the pay period, including any applicable allowances, bonuses, or overtime.
2. Deductions and their purpose
Every deduction must be itemized with an explanation.
If you deducted PAYE, NSSF, a loan repayment, or any other amount, the payslip should show exactly how much was taken and why.
3. Net pay
If the net pay is split across different payment methods, for example, part paid in cash and part transferred to a bank account, the payslip should show how the payment was divided.
Employees exempt from mandatory itemised payslips
You don’t need to provide itemized payslips for casual employees, piece-rate workers, or employees on contracts of six months or less.
However, even if the law doesn’t require it, providing payslips to all employees can help you maintain good records and protect you during disputes by providing documented proof of what you paid and deducted.
Many payroll systems today automatically generate payslips.
In fact, we provide this option to our payroll processing clients here at Bridge Talent Management.
Contact us to learn more about payroll outsourcing in Kenya and how it can benefit your business.
Minimum Wage Laws in Kenya
Kenya doesn’t have a single minimum wage that applies to everyone.
The law sets different wage floors based on where your business operates and the type of work your employees do.
How has minimum wage evolved in Kenya over the years?
Minimum wage in Kenya has increased significantly over the past three decades.
In 1994, the minimum wage for unskilled workers was KSh 1,700 per month. By the 2000s, this had risen to between KSh 3,500 and KSh 5,000, depending on the region.
The increases became more substantial in recent years.
In 2017, urban areas saw a minimum wage of KSh 12,926. By 2022, this had jumped to KSh 15,201.
In 2024, a further 6% increase brought the total to KSh 16,113.75.
As of 2025, the minimum wage structure looks like this:
- Major urban centers (Nairobi, Mombasa, and Kisumu): KSh 18,530.10
- Other regions: KSh 9,885.97 to KSh 15,201, depending on the occupation
These figures aren’t arbitrary.
The government reviews minimum wages periodically through the Wages Councils. The council typically considers economic conditions, inflation, and the cost of living in various parts of the country before making a decision.
The best practice for this particular situation is to have an HR team that can regularly monitor all the above.
However, if you don’t have an in-house team or the capacity to do that, it’s better to work with a payroll service provider that can make sure you’re fully compliant.
Overtime Pay Regulations in Kenya
A typical workweek for most employees should not exceed 52 hours, spread across six days.
For night workers, the maximum workweek is 60 hours.
Any hours worked beyond these limits are considered overtime and must be compensated.
This means that if your employee works 55 hours in a week, the extra 3 hours are considered overtime. If a night worker puts in 65 hours, the additional 5 hours must be paid as overtime.
How to calculate overtime pay
The law sets different rates depending on when the overtime work happens.
- Weekday overtime: Pay at one and a half times (1.5X) the normal hourly rate.
- Rest day or public holiday work: Pay twice (2X) the normal hourly rate.
Check out our guide on Working Hours in Kenya to learn more about calculating overtime and leave.
Payment in Lieu of Leave
Sometimes employees leave your organization before taking all their accrued annual leave. When this happens, employees can choose to claim those days as cash.
Kenyan law doesn’t allow employees to routinely trade their leave for cash while still employed.
Annual leave exists to give employees time to rest and recharge.
However, when the employment relationship ends, those unused days can be paid out.
See also: Annual Leave, Sick Leave, and Family Responsibility Leave in Kenyan Labour Law.
Can Kenyan Employers Make Salary Reductions and Pay Adjustments?
Reducing an employee’s salary is acceptable under Kenyan labour laws, but there are certain exemptions. Below are a few cases where reducing an employee’s salary in Kenya is perfectly legal.
1. Legal demotion to a lower position
If you demote an employee to a role with different responsibilities and a lower pay grade, you can adjust their salary to match the new position.
However, the demotion itself must follow proper procedures.
Kenyan laws do not permit employers to arbitrarily demote or discipline an employee as punishment without following fair disciplinary procedures.
2. Financial difficulties
If your company is facing tough financial times, you can reduce salaries, but only if both you and the employee discuss and agree to it.
This isn’t a unilateral decision.
You need to sit down with your team, explain the situation, and get their written consent before implementing any pay cuts.
Forcing pay cuts without agreement will likely result in resignations, labour disputes, or both.
Salary reductions that are never allowed
Even with employee consent, certain salary reductions are illegal.
- You cannot reduce salary for work already completed. If an employee has worked a full month, you owe them the agreed salary for that period. You can’t go back and reduce what you’ve already promised to pay.
- You cannot reduce salary during maternity or paternity leave. These are protected leaves, and any salary reduction during this time violates the Employment Act.
- You cannot make discriminatory reductions. Reducing someone’s pay based on race, gender, religion, disability, or any other protected characteristic is illegal, even if the employee agrees to it.
- You cannot reduce salary below the minimum wage. Even if an employee consents to a pay cut, you must still meet the legal minimum wage for their location and job category. The law doesn’t allow anyone to waive this right.
Termination, Final Dues, and Salary on Exit
Below is an outline of how employers should handle salary and final dues in exit situations.
Summary dismissal
Even if you dismiss an employee for a valid legal reason like gross misconduct, you still must pay all salary earned up to their last working day and any allowances or benefits that were due up to the date of dismissal.
Contract expiration
When an employment contract ends because the agreed period has come to an end, you must pay all unpaid wages earned and all outstanding allowances due to the employee.
Is there a legal timeline for paying an employee’s final dues?
While the law doesn’t specify an exact deadline for paying terminal dues, best practice is to settle everything by the employee’s last working day or within a few days after.
Some employers hold final pay until the employee returns company property or completes exit formalities.
And while you can tie the final payment to these conditions, you should communicate this and ensure you’re not withholding money unreasonably.
What happens to an employee’s salary in case of death?
When an employee passes away, employers must pay all outstanding wages and benefits to their legal representatives within 30 days.
If no legal representative comes forward to claim the wages or property after three months, employers must transfer these amounts to the local labour officer. The labour officer then holds these funds until a rightful claimant appears.
See also: Resignation and Notice Period Rules Under Kenyan Labour Law
Salary Obligations During Employee Suspension and Disciplinary Proceedings
The Employment Act, 2007, does not expressly provide for suspension, whether with pay or without pay. Due to this silence, employers cannot automatically rely on the Act itself to justify suspensions without pay.
Is suspension without pay illegal?
Not automatically, but it is heavily restricted.
Under Kenyan law and Employment and Labour Relations Court decisions:
- Suspension without pay is generally unlawful if there is no express contractual or policy basis for it.
- Even where a policy exists, courts have consistently held that suspension without pay should be the exception, not the rule, and must be reasonable, justified, and procedurally fair.
Withholding pay during suspension can amount to unfair labour practice, especially where misconduct has not yet been proven.
Penalties for Non-Compliance with the Minimum Wage Laws in Kenya
Violating Kenya’s wage laws isn’t only a bad practice. It’s a criminal offence that carries serious consequences.
If found guilty of wage law violations, employers could face a fine of up to Ksh 100,000, imprisonment for up to two years, or both.
Beyond criminal penalties, employees can file civil claims for unpaid wages.
Labour courts can order you to pay back wages with interest, compensate the employee for damages, and cover their legal costs.
These legal penalties are just one part of the cost.
Non-compliance damages your reputation as an employer, making it more challenging to attract and retain top talent. Word spreads quickly when a company fails to pay employees properly or treats them unfairly.
The best protection is getting it right from the start.
Understand the wage laws that apply to your business, implement proper payroll systems, and document everything. When minimum wages increase or regulations change, update your processes immediately.
Consult with our HR professional today to understand what you need to correct and how to avoid future salary violations.
FAQs
What is the two-thirds salary rule in Kenya?
The two-thirds rule means that total deductions from an employee’s salary cannot exceed two-thirds of their wages at any one time.
What counts as wages under Kenyan law?
Wages include all remuneration paid to an employee for the work they perform. This covers salary, allowances, bonuses, overtime pay, and any other compensation specified in the employment contract or mandated by law.
When must employees receive their pay?
Payment timelines depend on the type of employment. Casual employees must be paid at the end of each working day, while employees on contracts longer than one month must be paid at the end of each month. Payment should happen on a working day during working hours at or near the workplace.
Is it legal to reduce an employee’s salary in Kenya?
You can reduce an employee’s salary if you demote them to a lower position, provided you follow proper procedures, or if the company faces financial difficulties and the employee agrees in writing. You cannot reduce a salary below the minimum wage for work already completed or during protected leave, such as maternity or paternity leave.
What if an employer fails to pay wages?
Employers who violate wage laws face criminal penalties, including fines of up to Ksh 100,000, imprisonment for up to two years, or both. Employees can also file civil claims for unpaid wages, and labour courts can order back pay with interest, damages, and legal costs.
Are employees entitled to a pay slip?
Yes, if they are on a contract exceeding six months and paid monthly. The payslip must show the gross pay, all deductions with explanations, and how the net pay was divided if it is split across different payment methods.
Schedule a free consultation with our payroll experts to assess whether you are compliant with Kenya’s minimum wage laws.
