How is Severance Pay Calculated in Kenya?

Severance pay in Kenya is a statutory entitlement granted to employees who are terminated due to redundancy, as defined under Section 40 of the Employment Act.


 To qualify, an employee must have completed at least 12 consecutive months of service. The amount payable is calculated as 15 days’ worth of salary for each completed year of service. This is determined by dividing the employee’s gross monthly wage by 30 to get a daily rate and then multiplying that by 15. 


The resulting figure is then multiplied by the total number of full years the employee has served. Partial years may be pro-rated depending on the employer’s discretion or contractual terms.


 It is also essential that the redundancy process complies with legal requirements, including issuing proper notices to the employee and notifying the labour office. Employers must ensure that all procedural steps are followed carefully to avoid legal disputes. Severance is not applicable in cases of resignation, termination for misconduct, or end of a fixed-term contract unless otherwise stated in the contract.


Understanding this process ensures fair treatment of employees while helping employers remain compliant with redundancy regulations.


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