Kenya has a population of 50.92 million (as of 2022) with a median age of 20.1 years. It is a growing country with a pool of talents that employers can hire. However, there are many factors a candidate considers while choosing one company over another as an employer
Employee benefits is one such factor that can be a total game changer. Employers can make their job offers more attractive for candidates by adding compensation and benefits that are hard to ignore.
Understanding Kenya’s compensation and benefits policy helps employers design a comprehensive employee benefits plan and comply with the law.
Further, in this guide, we will share more details about the essentials of the compensation package in Kenya.
What Are Employee Benefits?
The direct or indirect compensation that employees get apart from the regular remuneration is defined as employee benefits.
Employee benefits in Kenya include healthcare insurance, dental insurance, paid leaves, sick leaves, vacation leaves, childcare benefits, maternity leaves, and retirement plans, etc. It makes employees feel secure and confident about the organization they are working for.
By offering good employee benefits, employers can also minimize employee turnover.
Compensation Laws in Kenya
Kenyan Employment Act offers fundamental rights for every labor and employee. A glimpse of what it includes:
- Right to fair labor practices (Article 41)
- Protection from slavery, servitude, and forced labor (Article 30)
- Protection of wages
- Rights and duties in employment
- Termination and dismissal rules
- Prohibition of Child labor
The minimum wages vary with employment type, industry, working time, location, etc., when it comes to compensation. The minimum workers compensation in Kenya starts at Ksh 13,572.90 per month (2022).
Revised Employment Act, 2012 (2007), Part V-Rights and Duties in Employment, ensures fair work hours, annual leave, maternity leave, sick leave, housing, water, food, and medical attention for employees during employment.
Apart from Employment Act,
- Under the Labor Institutions Act, 2007, Wages Council and National Labor Board take care of remuneration and other employment-related issues.
- The Occupational Safety and Health Act, 2007 provides safety and welfare for employees and all persons at the workplace.
- The Employment and Labour Relations Court Act, 2011 takes care that no employee feels unheard and solves employment-related disputes according to Article 162(2).
In addition to this, another Government Act, National Social Security Fund Act No. 45 of 2013, came into force in 2014 to provide social security to workers and self-employed individuals and their dependents. As per this act, employers have to register themselves as contributing employers and get their employees to register as members. NSSF covers retirement, withdrawal, survivors, and disability and emigration benefits.
The government is also planning to amend the Revised Employment Act, 2012 again and The Employment (Amendment) Bill 2021 was gazetted by Gazette notice dated 8th October 2021. It aims to introduce employees’ ‘right to disconnect’ to promote their work-life balance and reduce employee burnout.
How to Design an Employee Benefits Program for Employees In Kenya?
Designing an employee benefits program is a painstaking process that needs thorough research. Starting from understanding the Kenyan labor laws to including all the mandatory benefits are basic steps that employers need to follow to stay compliant while designing benefit programs.
As per Employment Act and other labor laws, employers have to give basic remuneration and benefits to the employees. Mandatory employee benefits in Kenya such as minimum wages, a minimum number of statutory leaves, social security contributions, etc., are the rights of every employee.
Other than mandatory benefits, there are some voluntary benefits, such as dental insurance, life insurance, etc., that employers can include in total compensation. A standard compensation package in Kenya consists of a fixed basic salary and variable benefits, whereas the basic salary can vary based on the job profile.
The Employees Benefits Program should be designed to give employees a sense of fulfillment and meet the company’s objective.
Steps to follow to create the employee benefits program:
Identify objective
The first step in formulating a benefits program includes identifying its objective. It gives overall guidance in selecting and designing the benefits program.
To understand and develop employee benefits objectives, company’s size, location, industry type, and collective bargaining agreements should be taken into account.
Benefits objectives are ever-evolving and should be evaluated periodically to design a perfect benefit program to meet employer’s strategies and employees’ needs.
Allocate a budget for employee benefits
Determining the budget for employee benefits keeps you in control when selecting voluntary benefits and helps you create a cost-effective benefits plan. Get quotes for key benefits to estimate the budget and analyze it with the current benefits plan and its annual cost to have a clear picture.
Assess the needs
Needs assessment helps determine the employee benefits that best suit employees’ requirements. It includes a review of employer’s perception of employee needs, tax laws & regulations, and competitors’ benefits plans. You can also use market research techniques and interview employees to understand their needs better.
Consider workforce demographics when assessing the need as younger employees may need more paid time off, whereas older employees may expect retirement plans.
Compile the needs assessment results along with the company’s objective and budget. Further, analyze and compare it with the current benefits plan to determine which benefits help achieve the company objective.
Formulate the plan
Once you have collected the required data and analyzed it, develop a list of benefits in order of priority. Then, determine the total cost of benefits selected and evaluate it.
In this step, you can consider the following factors
- Shall we make changes to the current plan to make it more cost-effective?
- Shall we eliminate underutilized benefits?
- How much should an employee contribute in benefits?
- Do we have enough resources to execute a specific benefit plan?
Like this, all the critical questions should be answered before you finalize the benefits program.
What Are the Mandatory Benefits Employers Offered in Kenya?
As per law, Kenyan employees have rights that make it mandatory for employers to dispense certain benefits. Before adding any voluntary benefits, guaranteed employee benefits in Kenya should be included in the employee benefits program.
Mandatory employee benefits in Kenya includes:
- Annual leaves
- Pension or retirement benefits
- National Holidays
- Sick Leaves
- Maternity leave for female employees
- Paternity leave for male employees
- NHIF and NSSF deductions and benefits
Detailed leave benefits in Kenya
- 21 Annual Leaves in a year
- 3 months paid maternity leaves for female employees
- 2 weeks paid paternity leaves for male employees
- 7 days paid leaves in a year
- 10 National Holidays
Medical benefits for employees in Kenya
- Employer shall ensure provision of proper medicine for employees during illness
- This excludes self-inflicted injuries, injuries or illness that happen when an employee was on leave without intimation and illness that are covered under insurance or for the illness free treatment is provided by the government.
Employee benefits in Kenya for expatriates
Expatriates are exempted from NHIF and NSSF deductions.
How Are Employee Benefits Taxed in Kenya?
In Kenya, the Pay As You Earn (PAYE) method is used to collect tax from resident and non-resident individuals from profitable employment.
Profit includes wages, salary, leave pay, sick pay, fees, commission, bonus, gratuity, traveling, and other allowances that employees receive for rendering service.
As an employer, you have to register under PAYE and deduct tax from employee salary and remit the tax deducted to the revenue department of Kenya.
Employers have to deduct it based on prevailing rates and remit it before the 9th of each month. PAYE is applicable for employees having a monthly income over Kshs 24,000.
Non-cash benefits that are chargeable under PAYE include:
- Vehicle or car benefit
- Provision of housing
- Loan at interest rates lower than market rates
- Housing facilities such as water, electricity, telephone, security, and other expenses over Kshs 3000/month
- Pension contribution paid by a tax-exempt employer to an unregistered plan over Ksh 20,000 per month
- Pension contribution paid by the employer to registered plan over Ksh 20,000 per month
Employee Incomes are not chargeable under PAYE:
- Medical cover by the employer
- Pension contribution paid by a tax-exempt employer to an unregistered plan below Ksh 20,000 per month
- Pension contribution paid by the employer to a registered plan below Ksh 20,000 per month
- Amount paid by the employer to reimbursement of expenses done by the employee for the company
- Amount paid by the employer as a gratuity or for a registered pension scheme
- Education fees paid through employee income that the employer has already taxed
- The meal offered by employers below Ksh 4000 per month
- Night-out of Ksh 2000 per day
PAYE Tax for expatriates
Non-Kenyan citizens are exempted from PAYE taxes in conditions where they are in Kenya to serve an employer solely and on passage between Kenya and places outside Kenya.
Supplemental Benefits for Employees in Kenya
Supplemental or voluntary benefits include cash and non-cash benefits that an employee receives from the employer beyond their regular wage and statutory benefits.
Supplemental benefits make employee benefits programs more attractive for employees and help them improve their lifestyles.
Some of the voluntary benefits include:
- Educational assistance
- Mobile and internet allowance
- Life insurance
- Accidental insurance
- Identity theft protection
- Financial counseling
- Discounts on goods and services
- Workplace wellness program
- Pickup and drop facility for employees
- Dependent care assistance
- Employee meals
- Dental Insurance
- Bonus Compensation
These benefits can vary from company to company as per their budget, as well as from one employee to another depending upon the position in the company.
Restrictions for Benefits and Compensation in Kenya
Employers expanding to Kenya need to set up their own branch or subsidiary, and Employers have to register the subsidiary or branch legally in that case. This whole registration process can take a few weeks to months. Until then, you cannot start a business operation in Kenya and cannot offer any benefits to employees.
How Can Multiplier Help Manage Benefits & Compensation in Kenya?
Kenyan employment and labor laws offer excellent protection and rights to employees. And employees being aware of these laws expect fair compensation and benefits from their employers.
A nicely designed benefits and compensation package for employees in Kenya can make you stand out in the crowd of other competitors and make you the first choice among prospective employees.
If you plan to extend your business to Kenya, you can try a global employment solution by Multiplier to offer competitive benefits to your Kenyan talents.
To offer various benefits, you have to deal with different vendors. Multiplier facilitates this process and helps you outsource this conveniently as well. Our SaaS-based EOR solution helps you stay compliant with the country’s labor law without having a physical office or registering the branch or subsidiary.
Now, On-board employees compliantly and pay salaries and benefits in one click with Multiplier.
Learn more about Multiplier from our experts!