Legal requirements for redundancy in Kenya explained

1. Introduction

It is 9.17 AM, and the office is quiet. The day has barely begun when you open your office email expecting routine correspondence. Instead, you see it:

“Subject: Notice of Intended Redundancy.”

The words feel clinal, almost detached. But their impact is immediate and deeply personal. Your mind begins to race. Is this final? Have I done something wrong? What does the law say? What happens next?

Next door, in the HR office, the same email was drafted after weeks of financial modelling, restructuring proposals, and difficult internal conversations. To the employer, it is a strategic business decision but to the employee it presents a moment of uncertainty.

In Kenya, the law recognizes both realities. Redundancy may be commercially necessary, but it is also legally regulated. The process is not merely administrative, it is legal. When mishandled, it becomes a costly burden for the employer, exposing the organization to litigation, compensation claims and reputational risk.

2. Legal Foundation

Article 41 of the Constitution of Kenya guarantees every person the right to fair labour practices. When employers are terminating contracts of service on the basis of redundancy, they need to remain aware of their mandate to uphold fair labour practices as contemplated in the Constitution.

Section 2 of the Employment Act, 2007 defines Redundancy as :

“loss of employment, occupation, job or career by involuntary means through no fault of an employee, involving termination of employment at the initiative of the employer”

Redundancy therefore arises where, despite the employee being blameless, their role/position becomes superfluous to the employer’s operational requirements. Typical triggers include- business closure, restructuring, automation, downsizing, funding constraints and diminished workload.

At this juncture it is important for us to emphasis that it is a job role/position that becomes redundant and not an employee.

Further, because the employee is blameless, the law imposes strict procedural and substantive safeguards. Even where the business justification is valid, non-compliance with the statutory process renders the termination unlawful.

3. What Must an Employer Do?

The governing provision is Section 40 of the Employment Act, which sets out Mandatory preconditions for a valid redundancy. Non-compliance with these conditions renders the process procedurally unfair, even where the redundancy is substantially justified.

a) Apply Objective Selection Criteria

An important aspect of procedural fairness in redundancies is the criteria employed to determine which employees are to be laid off. An employer must apply objective and transparent selection criteria when identifying employees to be declared redundant.

 Section 40 (1) (c) of the Employment Act lists the considerations which include the employee’s seniority in time and to the skill, and the ability and reliability of each employee or of the particular class of employees affected by the redundancy. This is to mean that before selecting the employee(s) to be declared redundant, an employer has to consider these set of factors.

Courts often interpret “seniority in time” through the  principle of “last- in-first-out”. This denotes that in deciding the employees to lay off, the employer should consider the number of years an employee has worked and the more the number of years worked, the lesser the probability of being declared redundant. The same criterion is also applied to the skills of an employee. The employee with the most or finest skills should have lesser chances of being laid off as compared to the less skilled ones.

An employer is also required to be objective in the selection criteria by considering attendance records, an employee’s efficiency at the job, their experience, or the length of their service as set out in the case of Standard Group Limited v Rugami & another [2025] eKLR.

This process must not be discriminatory, arbitrary, or targeted at specific individuals under the guise of redundancy. If the process appears pre-determined or discriminatory, courts are likely to invalidate it.

b) Issue a Notice of Intention to Declare Redundancy

Section 40 requires an employer to issue a written notice of intention to declare redundancy at least one month prior to the intended termination.

 The notice must explain:

1. The reasons for the redundancy; and

2. The extent of the intended redundancy

This notice serves as a trigger for consultation. Courts have made it clear that redundancy should not be abrupt  and consultation is  required to be genuine, meaningful engagement with affected employees and must not be treated as mere procedural “box ticking” exercise.

In interpreting the depth of this requirement, Kenya Courts frequently rely on International Labour Organization (ILO) Convention No. 158 (Termination of Employment Convention). While Section 40 of the Employment Act outlines the notice period, Article 13 of the ILO convention provides the substantive “soul“ to the process. It mandates that an employer must provide relevant information to workers’ their representatives in good time and consult on measures to be taken to avert or minimize terminations, as well as measures to mitigate the adverse effects.

By adopting these international standards, Kenyan jurisprudence most notably in the Kenya Airways vs. Aviation Allied Workers Union [2014] case has established that “consultation” is not just a courtesy but a mandatory opportunity for employees to propose alternatives to their job loss. If an employer fails to engage in this “back-and-forth” dialogue, the redundancy may be declared procedurally unfair regardless of the company’s financial justification.

The notice requirements differ depending on union membership

• • • • • Where the affected employee is a member of a trade union(unionized), notice must be given to both the relevant trade union and the labour officer in charge of the area; and
        • Where the employee is not a member of a trade union (not unionized), notice must be given to the employee personally and the labour officer.

Failure to notify the Labour Officer is one of the most common and fatal procedural defects in redundancy cases.

c)Issue a Notice of Termination or Pay one month’s wages in lieu of notice. (Distinct from Redundancy Notice)

In addition to the one-month redundancy notice (notice of intended redundancy) discussed above, the employer must also issue:

• • • • • One month’s notice of termination; or
        • Pay one month’s wages in lieu of notice.

These are two distinct notices. The redundancy notice informs of the intention and enables consultation and must be issued and allowed to run while the termination notice effects the termination.

Therefore, an employer cannot pay in lieu of first notice. It must be issued and allowed to run.

This distinction was affirmed in Nyakwara v Housing Finance Company of Kenya Limited & another, where the court held that compliance with Section 40 is mandatory and procedural lapses invalidate the redundancy.

Therefore, collapsing the two notices into one will lead to the whole redundancy process being declared invalid.

d)Leave and Severance pay(pay separation benefits)

Upon redundancy, an employee is entitled to:

1. Accrued Leave

     Any earned but untaken leave must be paid in cash.

2. Severance Pay

              Section 40 mandates severance pay of not less than fifteen (15) days’ pay for each completed year of service.

For example:

• • • • • If an employee earns KES 100,000 per month and has worked for 30 years:
        • 15 days’ pay = KES 50,000
        • Severance = 50,000 × 30 = KES 1,500,000

Severance is mandatory and separate from notice pay, leave pay, gratuity (if applicable), or pension entitlements.It is therefore a statutory minimum and not a discretionary benefit.

e)Protection Against Trade Union Discrimination

An employer must not disadvantage or treat an employee differently based on:

• • • • • Membership in a trade union; or
        • Non-membership in a trade union.

Where a Collective Bargaining Agreement (CBA) exists, its redundancy provisions must be honored. Section 40 prohibits discriminatory treatment in the computation or payment of redundancy benefits.

4. Practical Summary: Compliance Checklist

In summary, before an employer effects lawful redundancy, they should confirm:

• • • • • An objective and documented selection criteria to select the employee(s) to be declared redundant was applied;
        • Issue a proper notice of intended redundancy to the employee’s trade union and the relevant labour officer or in the event an employee is not a member of a trade union, the notice is issued to them personally and to the relevant labour officer;
        • Genuine consultation occurred
        • A separate termination notice is issued or the affected employee is paid one month’s wages/salary in lieu of notice;
        • Pay off any accrued but unpaid leave and severance pay; and
        • Ensure an employee is not disadvantaged due to their affiliation or lack thereof to a trade union.

N.B.- The redundancy notice issued in no. 2 above must be issued to the affected employee/s to set stage for consultation, an employer is not allowed to pay one month’s wages in lieu of this first notice.

5. Final Observations

For Employees: If you have received that email, pause but do not panic then ask yourself the following questions?

a) Has the Labour Officer been formally notified of the intended redundancy?

b) Will a genuine consultation process take place with the affected employee(s)?

c) What objective criteria will be applied in selecting employees for redundancy?

d) Will the employer issue all statutory notices required under law, or provide wages in lieu of notice where applicable?

e) Have all terminal benefits, including accrued leave and severance, been correctly calculated?

For Employers: Redundancy is both legally sensitive and financially significant. Most failed redundancy processes collapse not because the business lacked justification, but because the procedure was flawed.

For professional guidance on implementing a lawful redundancy process in Kenya or challenging an unlawful redundancy, contact our Employment Law team today:smusembi@ssmlawadvocates.com; pgatua@ssmlawadvocates.com

CONTRIBUTORS:

Gloria Samba – Trainee Advocate

Peter Njoroge Gatua – Associate Advocate

You can also visit our website https://ssmlawadvocates.com/en for more information about us and our services.