An illustration of severance package in Kenya

Severance Package in Kenya: A Complete Guide

In Kenya, as in many countries, the concept of severance pay plays a pivotal role in ensuring the financial security and dignity of workers facing job transitions.

Whether it’s due to layoffs, downsizing, or other unforeseen circumstances, understanding severance pay is paramount for both employers and employees.

In this article, we’ll explore the key aspects of severance pay in Kenya, including its definition, legal requirements, importance for both employers and employees and crucially, how employees can negotiate for a fair severance package in the event of job loss.

What Is Severance Pay?

Let’s begin with the basics. Severance pay, also known as termination pay, is a compensation package provided to employees when their employment is terminated involuntarily. 

This payment serves as a financial safety net, helping employees transition to new job opportunities or cover immediate financial needs during challenging times.

The Legal Framework

The Employment Act of 2007 primarily establishes the legal framework governing severance pay in Kenya. This act outlines specific conditions requiring employers to provide severance pay to their employees.

Severance pay becomes applicable when an employee’s role is deemed redundant due to reasons such as company restructuring, downsizing, or other legitimate business needs. In such cases, employers must offer severance pay.

Additionally, if an employer terminates an employee’s contract without proper cause and fails to follow due process, the affected employee is entitled to severance pay.

Here Is How To Calculate Severance Pay

Severance pay isn’t a fixed amount in Kenya; instead, it should be “reasonable” and consider factors such as an employee’s length of service, current salary, and circumstances surrounding the termination.

In Kenya, the severance pay amounts to 15 days of an employee’s basic wages for every year of service completed.

Typically, it’s calculated based on the number of years an employee has served with the company.

As an illustration, if an employee has a work history of 9 years, they would qualify for severance pay equivalent to 9 months’ worth of their last earned salary. If the employee’s final salary amounted to KES 70,000 per month, their severance pay entitlement would total KES 630,000.

Why Severance Pay Matters

Now that we’ve covered the basics, let’s explore why severance pay is crucial for both employers and employees.

For Employers

Legal Compliance

Adhering to severance pay requirements under Kenyan labour laws is not only a good practice but also a legal obligation. It helps employers avoid potential legal disputes and associated penalties.

Reputation

Treating employees fairly, including providing reasonable severance pay, enhances an employer’s reputation. A positive image makes the company more attractive to potential hires.

Smooth Transitions

Offering severance pay assists employees in transitioning to new job opportunities, reducing their financial burden during challenging times and fostering goodwill.

For Employees

Financial Support

Severance pay serves as a financial safety net during job loss, helping employees cover essential expenses while actively searching for new employment.

Security

Knowing that they have severance pay as a safety net provides employees with a sense of financial security during uncertain times.

Bridge to New Opportunities

Severance pay can bridge the gap between jobs, offering employees the time and resources they need to find a new position that aligns with their skills and aspirations.

Negotiating Severance Package

In addition to understanding the legal framework and importance of severance pay, employees should also know how to negotiate for a fair and equitable severance package in case of job loss. 

Here’s a step-by-step guide to help you navigate the negotiation process effectively:

Know Your Rights

Familiarise yourself with labour laws in Kenya, especially the provisions related to severance pay as outlined in the Employment Act, 2007.

Review Your Employment Contract

Examine your contract and company policies, as they may contain specific provisions regarding severance pay.

Seek Legal Advice

If unsure about your rights or severance terms, consult legal counsel or a labour expert for guidance.

Gather Relevant Information

Collect all documents that can support your case, such as employment records and termination-related correspondence.

Plan Your Approach

Determine your negotiation goals, considering factors like your length of service, termination reason, and industry standards.

Open Communication

Approach your employer or HR department professionally and express your willingness to engage in constructive discussions regarding your severance package.

Highlight Your Value

Emphasize your contributions, skills, and experience during negotiations to strengthen your position.

Be Flexible

While advocating for your rights, be open to compromise and consider alternative arrangements or benefits.

Document Everything

Keep detailed records of all negotiation-related communication.

Seek Mediation if Necessary

Consider mediation if negotiations stall or become contentious. Mediators can facilitate discussions for a mutually acceptable resolution.

Review the Final Agreement

Before finalizing any agreement, carefully review all terms and conditions to ensure they align with what was discussed and negotiated.

Seek Legal Review

If in doubt, have the final agreement reviewed by legal counsel to protect your rights and interests.

Conclusion

In conclusion, severance pay is a critical component of employment law in Kenya, offering vital financial protection to employees facing involuntary job loss. 

Understanding the legal requirements, significance, and negotiation strategies is essential for both employers and employees. 

By adhering to these regulations and principles and being prepared for negotiation, employees can secure a severance package that supports their transition to new opportunities.

We hope this answers all your questions on severance pay in Kenya. If you’d like to learn more about working in Kenya check out our employer of record in Kenya page.

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