You searched for one HR term, and here you are. Maybe it’s a payslip with a new acronym on it, a clause in an employment contract, or a question from someone on your team you want to answer correctly the first time. That’s exactly what this glossary is for.
It covers 45 terms HR teams in Kenya use most often, statutory deductions like NSSF, SHIF, and the Housing Levy, alongside Employment Act provisions like redundancy, unfair termination, and notice periods. Each one has a clear definition plus a practical example based on current Kenyan law and rates.
Read through the full A-Z list below.
A
- Affordable Housing Levy (AHL): A statutory deduction introduced in 2024 to fund the government’s affordable housing programme. Both employer and employee contribute 1.5% of gross salary each, with no upper salary cap. Example: An employee earning KSh 80,000 gross pays KSh 1,200 towards AHL, and the employer matches it with another KSh 1,200. Since late 2024, the employee’s AHL contribution is also tax-deductible, slightly reducing their PAYE bill.
- Annual Leave: The minimum paid time off an employee is entitled to each year for rest, recreation, or personal matters. Example: Under Section 28 of the Employment Act, 2007, every employee is entitled to at least 21 working days of paid annual leave after every 12 months of continuous service. Many Kenyan employers offer more as a retention benefit, but 21 days is the legal floor.
B
- Basic Salary: The fixed core pay an employee receives before allowances, bonuses, or statutory deductions are applied. Example: A payslip might show a basic salary of KSh 60,000 plus a house allowance of KSh 15,000 and a transport allowance of KSh 5,000. Gross pay is the sum, but PAYE bands and some statutory calculations specifically reference the basic figure.
- Bipartite Negotiation: Direct negotiation between an employer and employees (or their union) without third-party mediation, often over pay or working conditions. Example: Before escalating to the Ministry of Labour, a unionised manufacturing firm in Athi River would typically attempt bipartite negotiations with its branch union on annual CBA reviews.
C
- Collective Bargaining Agreement (CBA): A legally binding agreement between an employer (or employers’ association) and a registered trade union, setting out pay scales, benefits, and working conditions for unionisable employees. Example: A CBA registered with the Employment and Labour Relations Court is enforceable; an employer who unilaterally pays below the agreed CBA scale can be taken to court by the union.
- Casual Employee: A worker engaged on a day-to-day basis, with wages paid at the end of each day, who has not been engaged for a continuous period. Example: Under Section 37 of the Employment Act, a casual employee who works for the same employer for more than one month, or whose work isn’t really intermittent, is deemed to have converted to a term contract. This means the employer must regularise them or risk a wrongful classification claim.
D
- Disciplinary Hearing: A formal process put in place by HR teams, where an employer investigates allegations of misconduct and gives the employee a chance to respond before any disciplinary action is taken. Example: Section 41 of the Employment Act requires an employer to explain the reasons for contemplated termination to the employee, in a language they understand, and to hear their response before dismissal. Skipping this step is one of the most common grounds for unfair termination claims at the Employment and Labour Relations Court (ELRC).
- Dismissal: The termination of an employee’s contract by the employer, which may be summary (immediate, for gross misconduct) or with notice. Example: A summary dismissal for theft must still follow due process. Failure to do so, even where the misconduct is proven, can still expose an employer to a finding of “unfair termination” for procedural unfairness.
E
- Employment and Labour Relations Court (ELRC): The specialised court in Kenya with exclusive jurisdiction over employment and labour disputes, including unfair termination, discrimination, and CBA enforcement. Example: An employee who feels they were dismissed without valid reason files a claim at the ELRC, not the regular Magistrate’s or High Court.
- Employment Act: 2007 Kenya’s principal labour law, setting out minimum terms of employment: leave, notice periods, termination procedures, and protections against discrimination. Example: Every employment contract in Kenya is read against this Act; a clause in a contract that offers less than the Act’s minimums (e.g. fewer than 21 days annual leave) is void to that extent.
F
- Fixed-Term Contract: An employment contract with a specific end date, as opposed to one of indefinite duration. Example: A two-year fixed-term contract for a project manager on a donor-funded programme automatically ends on the stated date without needing a termination notice, unless renewed.
- Force Majeure: An unforeseeable event (e.g. natural disaster, pandemic, civil unrest) that prevents an employer or employee from fulfilling contractual obligations. Example: During the 2020 COVID-19 lockdown, several Kenyan employers invoked force majeure clauses to justify temporary pay cuts or unpaid leave, though courts later scrutinised whether due process was still followed.
G
- Gross Pay: Total earnings before any statutory or voluntary deductions are subtracted. Example: An employee with a basic salary of KSh 70,000 and a house allowance of KSh 10,000 has a gross pay of KSh 80,000. This is the figure used to calculate NSSF, SHIF, and AHL contributions.
- Grievance Procedure: A formal, documented process by which employees can raise complaints about workplace issues for resolution. Example: A well-run grievance procedure typically routes a complaint from the employee to their supervisor, then HR, and finally to a designated grievance committee if unresolved. Having this in the HR policy manual helps employers demonstrate good faith if a dispute later reaches the ELRC.
H
- Housing Levy: This is also called Affordable Housing Levy, a matched contribution of 1.5% from the employee and 1.5% from the employer, both of which must be remitted monthly. “Housing Levy” is simply the common short name people use for the Affordable Housing Levy (AHL) in payslips and everyday conversation.
- HELB Deduction: A statutory deduction for employees repaying loans from the Higher Education Loans Board, deducted by the employer and remitted directly to HELB. Example: An employer who hires a graduate with an outstanding HELB loan is required, once notified, to deduct an agreed installment monthly and remit it. Failure to do so can make the employer liable for the unpaid amount.
I
- Industrial Court: The court that existed in Kenya from 1964 (originally under the Trade Disputes Act) and was the country’s specialist labour court before 2011. It began as the Industrial Court of Kenya, set up under Tom Mboya’s leadership as Minister of Labour, presided over by a single judge with assessors from trade unions and employers. Parliament later renamed it from “Industrial Court” to “Employment and Labour Relations Court” to align with the wording of the Constitution. So “Industrial Court” is the defunct, former name of today’s ELRC. Judges who currently sit on the ELRC, like Justice James Rika, previously served as judges of the “defunct Industrial Court of Kenya.
- Independent Contractor: A self-employed individual or entity providing services to a business without being an “employee,” and therefore not entitled to Employment Act protections. Example: A graphic designer invoiced on a per-project basis with no fixed hours or supervision is typically a contractor; misclassifying someone who is actually under the employer’s control as a “contractor” to avoid NSSF/SHIF obligations is a recognised compliance risk that KRA and labour officers actively flag.
J
- Job Evaluation: A systematic process HR teams adopt to assess the relative worth of different roles within an organisation to establish fair and consistent pay structures. Example: A SACCO restructuring its pay bands might use a points-based job evaluation method to determine that a branch manager role should sit two grades above a teller role, justifying the pay differential.
K
- KRA PIN: The unique Personal Identification Number issued by the Kenya Revenue Authority, required for payroll, tax filing, and most formal employment processes. Example: An employer cannot process PAYE for a new hire without their KRA PIN, and HR teams typically collect it during onboarding alongside the NSSF and SHA numbers.
L
- Lower Earnings Limit (LEL): Under the NSSF Act, the minimum income threshold (Tier I) used to calculate the first portion of pensionable pay. Example: As of February 2026, the Tier I (lower) limit is KSh 9,000. This means the first KSh 9,000 of every employee’s pensionable pay attracts a 6% NSSF contribution from both employer and employee, working out to KSh 540 each.
M
- Maternity Leave: Paid leave granted to a female employee around childbirth. Example: Section 29 of the Employment Act entitles a female employee to three months (90 calendar days) of fully paid maternity leave, separate from her annual leave entitlement, provided she gives at least seven days’ written notice where practicable.
- Minimum Wage: The lowest wage an employer is legally permitted to pay, set by government order and varying by sector, region (e.g. city vs. municipality), and occupation. Example: Kenya’s minimum wage is reviewed periodically through a Wages Order published by the Ministry of Labour, and rates differ for, say, a general labourer in Nairobi versus one in a rural municipality. HR teams should check the current Wages Order rather than assume a flat national figure.
N
- NSSF (National Social Security Fund): Kenya’s mandatory retirement savings scheme, into which both employer and employee contribute monthly. Example: As of February 2026, the contribution rate is 6% from each party, calculated against a Tier I band (first KSh 9,000) and a Tier II band (KSh 9,000 to KSh 108,000). For an employee earning KSh 150,000, the maximum combined NSSF contribution from employer and employee together is KSh 12,960 per month.
- NITA Levy: A monthly training levy paid by employers to the National Industrial Training Authority to fund workforce skills development. Example: Employers remit KSh 50 per employee per month to NITA via KRA’s iTax system. It’s a small amount, but it’s still a statutory obligation, and missing it shows up in compliance audits.
- Notice Period: The advance warning either party must give before ending an employment contract, as required by law or contract. Example: Under Section 35 of the Employment Act, an employee on a month-to-month contract is entitled to at least 28 days’ notice (or pay in lieu) before termination. Many employment contracts extend this for senior roles.
O
- Occupational Safety and Health Act (OSHA): 2007 Kenya’s law governing workplace safety standards, requiring employers to maintain safe working environments and report incidents. Example: A manufacturing employer is legally required to register its workplace with the Directorate of Occupational Safety and Health Services (DOSHS) and report any workplace accident causing more than three days’ incapacity.
- Overtime: Work performed beyond an employee’s normal contracted hours, which must be compensated at a premium rate. Example: Under the Regulation of Wages (General) Order, overtime on a normal working day is typically paid at 1.5 times the hourly rate, and at double the rate for work on a rest day or public holiday.
P
- PAYE (Pay As You Earn): The income tax employers deduct from employee salaries and remit to KRA, calculated on a graduated scale. Example: For 2025/2026, PAYE bands run from 10% on the first KSh 24,000 of taxable income up to 35% on income above KSh 800,000 monthly, after applying any allowable reliefs.
- Probation Period: An initial period during which an employer assesses a new employee’s suitability for the role, often with a shorter notice period for termination. Example: Probationary contracts in Kenya are commonly capped at six months (extendable to a maximum of twelve with the employee’s written consent), and Section 42 of the Employment Act sets out a shorter notice period (commonly seven days) for terminating during probation. The employer must still act fairly and follow proper process.
Q
- Quorum (for disciplinary/grievance committees): The minimum number of panel members required to be present for a disciplinary or grievance hearing to be validly conducted. Example: An HR policy might specify that a disciplinary panel needs at least three members, including one from outside the employee’s direct department, to ensure impartiality and quorum.
R
- Redundancy: Termination of employment because the role itself is no longer needed, due to restructuring, technology, or business downturn. This is distinct from dismissal for individual conduct or performance. Example: Section 40 of the Employment Act requires an employer declaring redundancy to notify the labour officer, the union (if applicable), and affected employees at least a month in advance, and to pay severance of at least 15 days’ pay for each completed year of service.
- Redundancy Pay (Severance Pay): The statutory minimum compensation owed to an employee whose role is made redundant. Example: An employee with 6 completed years of service who is declared redundant is entitled to at least 90 days’ (15 days × 6 years) pay as severance, in addition to notice pay and accrued leave.
- Right to Fair Labour Practices: A constitutionally protected right under Article 41 of the Constitution of Kenya, guaranteeing every worker fair treatment, reasonable working conditions, and the right to form or join a trade union.
S
- SHIF (Social Health Insurance Fund): Kenya’s mandatory health insurance scheme, administered by the Social Health Authority (SHA), which replaced NHIF in October 2024. Example: Both employer and employee contribute 2.75% of gross salary each (with a minimum employee contribution of KSh 300). Unlike the old NHIF tiered-bracket system, SHIF has no upper salary cap on contributions.
- Summary Dismissal: Immediate termination of an employee’s contract without notice, reserved for serious misconduct such as theft, gross insubordination, or fraud, implemented by HR teams. Example: Section 44 of the Employment Act lists circumstances justifying summary dismissal, but employers must still conduct a fair hearing first. Kenyan courts have repeatedly held that even “obvious” misconduct doesn’t excuse skipping due process.
T
- Termination Notice: A formal communication ending an employment relationship, specifying the effective date and reason where required. Example: A termination letter from HR team, for a confirmed employee on a month-to-month contract should reference the required notice period (or payment in lieu) and, per Section 41, document that the employee was heard before the decision was finalised.
- Trade Union: An organisation of employees formed to represent their collective interests in negotiations with employers over pay, conditions, and grievances.
U
- Unfair Termination: Dismissal that is either substantively unjustified (no valid reason) or procedurally flawed (no fair hearing), as defined under Section 45 of the Employment Act. Example: Even where an employee genuinely underperformed, dismissing them without a documented performance improvement process and a chance to respond can still be ruled “unfair” by the ELRC, exposing the employer to compensation of up to 12 months’ salary.
- Upper Earnings Limit (UEL): The ceiling income threshold (Tier II) used in NSSF contribution calculations. Example: As of February 2026, the Tier II upper limit is KSh 108,000. NSSF contributions are calculated only on pensionable pay up to this amount, even if the employee earns significantly more.
V
- Vicarious Liability: The legal principle holding an employer responsible for the wrongful acts of an employee committed in the course of their employment. Example: If a company driver causes an accident while making deliveries during work hours, the employer can be held vicariously liable for damages, even though the driver was the one at fault.
W
- WIBA (Work Injury Benefits Act): Cover Mandatory insurance employers must maintain to compensate employees for injuries, disability, or death arising from work. Example: An employer must take out a WIBA-compliant insurance policy (rates vary by industry risk class) and is legally required to report any qualifying workplace injury to the Director of Occupational Safety and Health within stipulated timelines. Failure to do so risks the employer being personally liable for the compensation.
- Wages Order: A legal notice issued by the Ministry of Labour setting minimum wage rates for different sectors, regions, and job categories. Example: HR teams in retail or hospitality should check the current Wages Order each year, since minimum pay rates for cleaners, watchmen, and general labourers are revised periodically and can vary by city classification.
Y
- Years of Service: The total continuous period an employee has worked for an employer, used to calculate entitlements like severance pay and long-service awards. Example: An employee’s “years of service” resets if there’s a genuine break in employment, but continues accruing through approved leave (including maternity leave). This distinction matters when calculating redundancy payouts.
Z
- Zero-Hour / On-Call Arrangements: Informal work arrangements made with HR teams, where an employee is called in as needed, without a guaranteed minimum number of hours. Example: While not formally legislated as a distinct contract category in Kenya, employers using on-call arrangements (common in security and hospitality) still need to be careful. If the arrangement becomes regular and continuous, it can be reclassified as a term contract under Section 37, triggering full Employment Act protections.
This glossary reflects Kenyan statutory rates and provisions as of mid-2026, including the NSSF Tier I/II limits effective February 2026 and SHIF rates in force since October 2024. Statutory rates and thresholds change periodically. Always confirm current figures with KRA, NSSF, SHA, and the Ministry of Labour, or consult a qualified HR or legal professional before applying these to payroll or disciplinary decisions.
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