Embassy of the Republic of Korea

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Embassy of the

Republic of Korea

Presentation on key Labour Laws in Kenya

17 November 2014

Serena Hotel, Nairobi

www.pwc.com/ke

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PwC Kenya

Agenda

1) Background / Introductions

2) Key Labour Law highlights and considerations for employers:

A. Employment Act

B. Work Injury Benefits Act (“WIBA”)

C. The Occupational Safety and Health Act (“OSH”) Act D. The National Social Security Fund (“NSSF”) Act 2013 E. The Labour Relations Act

3) Best practice

4) Q&As and Thank you

2 November 2014 Embassy of the Republic of Korea

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PwC

Background

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PwC Kenya

Background

Key employer organisations in Kenya:

 The Central Organisation of Trade Unions (“COTU”),

 Federation of Kenyan Employers (“FKE”)

Along with the Government of Kenya, they are responsible for review and drafting of revised labour laws in Kenya such as:

 The Employment Act 2007

 The Occupational Safety and Health Act 2001

 The Work Injury Benefits Act 2007

 The National Social Security Fund Act 2013

 The Labour Relations Act 2007

Embassy of the Republic of Korea

4 November 2014

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PwC

Key Labour Law highlights and considerations for employers

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PwC Kenya

A - Employment Act – Key highlights

 Recommended that employers have written contracts with all of their employees to avoid future disputes – certain key information must be included

 Payment of wages and salaries must be made to employees by due dates

 Employees who have worked for >12 months are entitled to at least 21 days of annual leave with full pay

 There is no maximum working hours set out in the Act however an employee should have at least 1 rest day a week.

6 November 2014

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PwC Kenya

A - Employment Act – Key highlights cont.

 After two months of service, employees are entitled to sick leave of at least 7 days with full pay and thereafter 7 days on half pay subject to medical

certification

 Female employees entitled to 3 months maternity leave with full pay, while a male employee is entitled to 2 weeks paternity leave with full pay.

 Discrimination and sexual harassment in the workplace is prohibited

 Equal opportunities in employment should be promoted

 Employment of children <13yrs of age prohibited.

7 November 2014

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PwC Kenya

A - Employment Act – Key highlights cont.

 Termination of employment

 Employers must make payments for services provided by an employee where they have worked for >1yr; As a minimum, service pay calculated at 15 days of current salary for every year worked

 Employees on probation period (up to 6mths) not entitled to receive service payments

 To avoid potential claims from employees, employers should make sure they give valid reasons for termination of employment and give advance notice of termination in line with employment agreement

8 November 2014

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PwC Kenya

A - Employment Act – Key highlights cont.

 Deduction of statutory payments from wages/salary

 Under the Kenya Income Tax rules, it is the employer’s obligation to ensure that any PAYE, NSSF, NHIF contributions are withheld from employees and paid to the Kenya Revenue Authority

 Deadline for making PAYE payments: 9^th of the following month

 Penalty for unpaid tax: 20%

 Penalty for failure to account for PAYE: 25%

 Interest on outstanding tax: 2% per month!

9 November 2014

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PwC Kenya

B - Work Injury Benefits Act (“WIBA”) – Key highlights

 All employers are liable to pay compensation to an employee injured at work or in the performance of their duties (unless caused by deliberate and wilful

misconduct of employee)

 Every employers must maintain an insurance policy to cover work injury accidents that may happen to staff

 The premiums payable for the WIBA insurance is dependent on the salary of all employees – employers must maintain record of employee earnings

 Different compensation limits apply depending on whether employee suffers a temporary or permanent disability.

10 November 2014

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PwC Kenya

B - Work Injury Benefits Act (“WIBA”) – Key highlights cont.

 Employers are encouraged to pay the medical expenses incurred by employees as a result of a work-related accident.

 Employers (or insurers) must settle a claim for compensation under WIBA within 90 days of lodgement of application.

 Range of penalties assessable on employers for non-compliance:

i. Fines between KES 100,000 – KES 200,000;

ii. Imprisonment for 3mths to 1 year; or iii. Both.

11 November 2014

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C - The Occupational Safety and Health (“OSH”) Act– Key highlights

 Every employer should ensure the safety, health and welfare of all persons

“lawfully present” in their workplace – this includes: employees, clients, members of the general public

 A risk assessment must be carried out on the premises and a “certificate of registration” of the property is required before it can be used

 Employers must undertake a safety and health audit every 12 months – must be carried out by an external safety and health advisor/consultant

 If employees are going to be handling dangerous chemicals, machinery and tools, employers must ensure that they will be properly trained and protective clothes/accident prevention measures should be in place.

12 November 2014

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PwC Kenya

C - The Occupational Safety and Health (“OSH”) Act– Key highlights cont.

 Where an accident in a workplace causes death, employer must inform their local Occupational Safety and Health officer within 24 hours and send a written report within 7 days of the incident.

 All employers with >20 employees must establish a safety and health committee in order to manage and deal with health and safety risks in the workplace

 Range of penalties assessable on employers for non-compliance:

i. Fines between KES 100,000 – KES 500,000 ii. Imprisonment for up 3mths or 6mths; or iii. Both.

13 November 2014

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PwC Kenya

D - The National Social Security Fund (“NSSF”) Act 2013 – Key Highlights

NOTE: These new regulations are not yet in force however it is important to understand employer’s obligations.

 All employers with >1 employee over the age of 18 must register with the NSSF, remit contributions and file returns every month for all employees (fine of KES 50,000 for failure to register).

 Limited exemptions for persons excluded from making contributions – diplomats, expats who are in Kenya for <3yrs with approval for exemption

 If your company is already making NSSF contributions under the old NSSF Provident Fund Scheme no new employer registration required BUT must ensure that all existing employees are registered and historic contributions are up to date – otherwise risk of NSSF enquiry!!

14 November 2014

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PwC Kenya

D - The National Social Security Fund (“NSSF”) Act 2013 – Key Highlights cont.

 Tier I contributions: 6% contributions payable by employer and employee up to a monthly maximum cap of KES 720 for 2014 ( KES 360 each)

 Tier II contributions –6% contributions payable by employer and

employee up to a maximum monthly cap of KES 1,440 for 2014 (KES 720 each)

 Both Tier I and Tier II contributions will increase on an annual basis depending on the Kenya National Earnings Average

 New rules allow an employer to remit Tier II contributions into an approved retirement benefit scheme

15 November 2014

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PwC Kenya

D - The National Social Security Fund (“NSSF”) Act 2013 – Key Highlights cont.

Examples of contribution rates payable by employers and employees:

16 November 2014

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PwC Kenya

E – The Labour Relations Act – Key Highlights

 There are a number of trade unions established in Kenya – these unions can be very powerful and influential.

 It is important for overseas companies looking to set up / registered in Kenya to understand whether their industry has specific trade unions which govern the terms and condition of employment for employees within a particular sector (for example, airline industry, chemical industry, commercial food industry, textile and tailor industry etc).

 Trade unions can legally organize strikes and lock outs depending on the nature of the dispute between the trade union and the company /

government – However companies operating in the “essential services”

industry are prohibited from having strikes/lock-outs.

17 November 2014

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E – The Labour Relations Act – Key Highlights cont.

 Trade unions can negotiate collective agreements which are binding on a company on behalf of all members of union

 Employers are required to disclose all the relevant information to a trade union that will allow the trade union to negotiate on behalf of employees.

 The law prohibits employees and employers being discriminated upon due to their membership / participation in a trade union

 Penalties for non-compliance with regulations ranges from KES 10,000 to KES 40,000.

18 November 2014

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PwC

Best practice

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PwC Kenya

Best practice

 Seek professional guidance on understanding how labour laws may affect your business specifically

 Ensure that business registration, trading licences and insurance are all up-to- date and valid

 Issue employment contracts to all employees and minimise “verbal agreements”

to avoid potential disputes

 Ensure that you draft and publish a staff handbook which sets out company policy and procedures (in accordance with labour laws) which should be followed by all staff (including disciplinary procedures)

 Consider outsourcing of HR / payroll functions if there is insufficient internal capacity

 Consult with your embassy – can they assist with lobbying?

 Comply with the laws of the land! What may work overseas might not be applicable here in Kenya.

20 November 2014

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PwC

Q & As & Thank You

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Q & As & Thank You

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, [insert legal name of the PwC firm], its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2014 PricewaterhouseCoopers Limited. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers Limited which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

Your presenters today were:

Sam Mensah Shreya Shah

+254 (0) 20 285 5119 +254 (0) 20 285 5389

samuel.mensah@ke.pwc.com shreya.shah@ke.pwc.com