The Kenya Employment Act (2007) requires employers to use the right type of contract for each person they hire. Using the wrong contract or failing to issue one can result in fines, legal disputes, imprisonment, and other penalties.
To stay compliant, you must understand the different types of employment contracts recognised under the Act and when to use them. This article highlights them and explains when you should use them to help you meet all legal obligations and protect your business and your employees.
What Is an Employment Contract?
An employment contract is a legal agreement between an employer and an employee that sets out the terms and conditions of the employment. It defines compensation, benefits, working hours, job duties, termination terms, and other key aspects of the relationship.
The contract may be oral or written, but it has to be in writing if it lasts more than three months.
Employment contracts in Kenya are governed by several labour laws, including:
- The Employment Act, 2007: Regulates the terms and conditions of employment.
- The Labour Relations Act, 2007: Governs trade unions, strikes, and collective agreements.
- The Occupational Safety and Health Act: Covers workplace health and safety requirements.
- The Constitution of Kenya (Article 41): Guarantees fair labour practices.
- The Factories Act (Cap. 514): Ensures employee health, safety, and welfare in factory settings.
- The Work Injury Benefits Act (Cap. 253): Provides compensation for work-related injuries.
All employment contracts must comply with these statutes to be valid and enforceable. Any changes to the contract must be documented in writing and signed by both the employer and the employee.
Do You Need One?
Yes, every employer does.
Types of Employment Contracts under Kenyan Law
The Employment Act 2007 recognises the four main types of employment contracts discussed below.
Permanent Contracts
Permanent contracts are employment agreements without a fixed end date. Under this arrangement, an employee is expected to work until the statutory retirement age, unless the contract ends earlier due to circumstances such as:
- Death
- Resignation
- Termination
- Incapacity
- Mutual agreement between the employer and employee
Permanent contracts are best suited for core positions that are critical to an organization’s operations, such as management or technical roles.
Permanent employees generally enjoy comprehensive employment benefits, including paid leave, pension or retirement benefits, and healthcare coverage. They may be engaged on a full-time (40 hours per week) or part-time (<35 hours per week) basis.
Fixed-Term Contracts
Fixed-term contracts are employment agreements that apply for a specified period, ranging from a few weeks to years. These contracts automatically expire at the end of the agreed term, but they may be terminated earlier if both parties follow the agreed termination clauses and notice periods.
Fixed-term contracts are best suited for project-based, seasonal, or time-limited work, where the need for an employee is clearly defined and temporary.
A fixed-term contract may be renewed, and Kenyan law does not set a strict limit on the number of renewals. However, repeated or continuous renewals imply permanency and may suggest that the employer is using fixed-term contracts to avoid granting permanent employment rights. In such cases, the courts may interpret the relationship as permanent employment.
Temporary or Casual Contracts
Temporary or casual contracts apply to workers who are engaged on a short-term, day-to-day basis. Under this arrangement, workers are not engaged for more than 24 hours at a time and are paid at the end of the day.
Casual employees are generally not entitled to benefits such as annual leave, notice of termination, and medical cover. They may also decline work when it is offered and are free to work for multiple employers.
Temporary contracts are best suited for seasonal, intermittent, or irregular work. A common example in Kenya is workers in the construction industry, popularly referred to as “watu wa mjengo”. They are hired as work becomes available and paid at the end of the day or after an agreed-upon short period.
It is important to note that a casual contract can convert into a fixed-term or permanent contract if the nature of the work becomes continuous. Under Section 37 of the Employment Act, a casual worker who works for more than a month, or who performs work that is not of a temporary nature, is no longer considered a casual employee. They must be treated as a regular employee, including being paid on a monthly basis rather than daily.
Probationary Contracts
Probationary contracts are issued to new employees to allow employers to assess their performance, conduct, and suitability for the role.
If the employee meets expectations, the employer can confirm them into permanent or fixed-term employment. If not, they can terminate the contract more easily than a confirmed appointment.
The Employment Act limits the probation period to six months, but it can be extended for a further six months with the mutual consent of both parties. Both the employer and the employee can terminate a probationary contract early, but they have to give at least seven days’ written notice.
Choosing the Right Employment Contract
Choosing the right employment contract is essential for staying compliant with Kenyan labour law and avoiding costly legal risks. Using the wrong contract or misclassifying employees can expose employers to disputes, penalties, and operational challenges.
Bridge Talent Group can help ensure your employment practices remain lawful, fair, and aligned with statutory requirements. We can help you choose and manage the right employment contracts through expert HR advisory, recruitment, and HR outsourcing services. Partner with us to stay compliant and manage your workforce with confidence.
Contact Bridge Talent Group today to get started.
FAQs
1. Is a written employment contract mandatory in Kenya?
Yes, it is. While a contract can be oral or written, the law requires a written contract for any employment that lasts more than three months.
2. Can a fixed-term contract be renewed indefinitely?
There is no statutory limit on renewals, but repeated renewals may imply permanent employment. The court may interpret such an arrangement as an attempt to avoid granting permanent employee rights.
3. Can an employer change the terms of an employment contract?
Yes, they can. However, every change must be documented in writing and signed by both the employer and the employee.
4. What is the maximum probation period allowed in Kenya?
The maximum probation period is 6 months, but it can be extended once for another six months.
5. When does a casual worker become a permanent employee?
Under Section 37 of the Employment act, a casual employee is treated as a regular employee if they work continuously for more than one month, or performs work that is not temporary in nature.
