In Kenya’s dynamic economic landscape, businesses frequently face the challenging decision to restructure, which may result in redundancies. For both employers and employees, understanding the strict legal framework governing this process is critical. A misstep can lead to costly litigation for employers or result in an unfair loss of livelihood for employees.
What Is Redundancy in Kenya?
Redundancy refers to the loss of employment arising from an employer’s operational needs — not the employee’s misconduct or poor performance. It occurs when a job position becomes superfluous, unnecessary, or economically unsustainable.
Under Section 2 of the Employment Act, 2007, redundancy is defined as:
“The loss of employment, occupation, job, or career by involuntary means through no fault of the employee, involving termination of employment at the initiative of the employer, where the services of an employee are superfluous.”
In simpler terms, redundancy occurs when the position itself is no longer needed, not because the employee did anything wrong. It is distinct from dismissal for misconduct or poor performance
Redundancy is also commonly referred to as retrenchment, downsizing, or layoffs.
In what situations does redundancy occur in Kenya?
Redundancy may lawfully occur in Kenya in several common scenarios, such as: –
- Business restructuring or reorganization that eliminates or merges roles.
- Introduction of new technology or automation is making some roles unnecessary.
- Decline in business, reduced revenue, or loss of major contracts leading to cost-cutting.
- Closure of a department, branch, or the entire business.
- Outsourcing of non-core functions (e.g., security, cleaning, catering) so in-house roles are no longer needed.
The key is that the position (job) becomes unnecessary, not that the employer wants to get rid of a particular individual.
What is the legal framework governing redundancy in Kenya?
The main legal instruments regulating redundancy in Kenya are:
- Constitution of Kenya, 2010 – especially Article 41 (right to fair labour practices) and Article 47 (right to fair administrative action).
- Employment Act, 2007 – particularly section 40 on termination on account of redundancy, plus sections 35, 36, 45, and 49 on termination, unfair dismissal, and remedies.
- Labour Relations Act, 2007 – dealing with trade unions and collective bargaining agreements (CBAs).
- Fair Administrative Action Act, 2015 – requiring lawful, reasonable, and procedurally fair administrative actions, including redundancy decisions by public employers.
- Judicial precedents from the Employment and Labour Relations Court (ELRC).
Kenyan courts have held that employers must strictly comply with section 40 and constitutional standards for redundancy to be lawful.
What is the legal procedure for redundancy in Kenya?
Section 40 of the Employment Act sets out a strict, mandatory procedure. Failure to follow it renders the redundancy automatically unfair, regardless of justification.
Step 1: Issue Redundancy Notices
Two notices must be issued:
- Notice to the employee or the employee’s union
- Notice to the Local Labour Officer
Timeline:
- Unionized employees: 1 month notice to the union + local labour office
- Non-unionized employees: 1 month notice to the employee + labour office
Step 2: Consultations
The employer must engage in genuine consultations on:
- Reasons for redundancy
- Alternatives to redundancy
- Selection criteria
- Severance pays
- Redeployment possibilities
Step 3: Apply Fair Selection Criteria
Selection must be based on:
- Seniority in time
- Skill, ability, and reliability
- Performance records
- Any agreed criteria in a CBA or contract
- Disciplinary history
Step 4: Payment of Redundancy Dues
Before termination takes effect, the employer must pay all statutory entitlements and benefits.
Step 5: Issue Termination Letter
A formal redundancy termination letter must be issued once all statutory dues have been settled.
What is the Role of a Trade Union in the Process?
If employees are unionized, the employer cannot deal directly with them regarding redundancy terms. The employer must:
- Notify the Union one month in advance.
- Engage in dialogue/negotiation with the Union regarding the extent of the redundancy and mitigation measures.
- The union participates in consultations, negotiations, and verification of selection criteria.
- Adhere to any specific redundancy clauses in the Collective Bargaining Agreement (CBA).
If an employee does not belong to a union, the employer deals directly with the employee but must still notify the Labour Officer. The Labour Officer acts as a neutral regulator to ensure compliance with the law.
What happens if an employee does not belong to a trade union?
Non-unionised employees are still fully protected under the Employment Act.
For non-unionised employees:
- The employer must notify the affected employee personally in writing, and also notify the Labour Officer at least one month before the intended redundancy.
- The employer must consult directly with these employees regarding reasons, alternatives, and packages.
- If a CBA exists but the employer has applied its redundancy benefits to unionised employees, courts have held that non-unionised employees should not be put at a disadvantage solely because they are not unionisable or not union members.
Non-unionised employees may seek advice and representation from advocates and can still challenge unfair redundancy in court
What are the Legal Entitlements (Benefits) for a Redundant Employee?
Under Section 40(1), an employee declared redundant is entitled to:
- Severance Pay: Minimum of 15 days’ basic salary for each completed year of service.
- Notice Pay: Payment in lieu of notice (usually one month) if the employee is not required to work during the notice period.
- Leave Days: Cash payment for any accrued but untaken annual leave.
- Salary: Payment of all wages up to the date of termination.
- Certificate of Service: A mandatory document stating the nature and duration of employment.
What is the Criteria for Selection of Employees?
The selection criteria for employees to be laid off, retrenched, or made redundant must be: Fair, Objective, Transparent, and Non-discriminatory.
The general principle is LIFO (Last In, First Out), meaning employees hired most recently are the first to be laid off.
However, Section 40(1)(c) clarifies that LIFO is not absolute. The employer must also consider:
- Skill: Does the employee possess unique skills vital for the survival of the business?
- Ability & Reliability: Performance records and disciplinary history.
- Seniority: Length of service.
What are the Consequences of Unfair Selection Criteria?
If an employer uses criteria that are discriminatory, arbitrary, targeted, not discussed during consultations, not applied consistently, or not objective (e.g., targeting older employees, pregnant women, or specific tribes), the redundancy becomes unfair and unlawful.
- Recourse: The employee can sue for unfair and unlawful termination in the Employment and Labour Relations Court.
- Consequence: The court may declare the redundancy unfair and unlawful and order the employer to :
- pay compensation for unfair termination (up to 12 months’ salary).
- payment of any underpaid severance or other benefits.
- In rare cases, reinstatement of employees (though courts are cautious about this remedy)
On what basis can an employee claim that the redundancy process was unfair?
Common grounds on which Kenyan employees challenge redundancy include:
- Lack of or defective one‑month redundancy notification to the union/employee and Labour Officer.
- Absence of meaningful consultation before the decision was finalized.
- Use of unfair, discriminatory, or opaque selection criteria.
- Failure to pay statutory severance pay, correct notice pay, or accrued leave.
- Redundancy is used as a disguised disciplinary measure or targeting specific employees (e.g., whistle‑blowers, pregnant employees, union leaders).
- Failure to consider reasonable alternatives, such as redeployment where available.
If the court is satisfied on these grounds, it will likely declare the termination unfair and award remedies.
What remedies do Kenyan courts grant for unfair redundancy?
Courts may award:
- Compensation for unfair termination, up to 12 months’ gross salary, depending on factors such as length of service, employee’s conduct, and manner of dismissal.
- Payment of any unpaid terminal dues, including severance, notice pay, leave, and benefits under a CBA or contract.
- In appropriate cases, reinstatement or re-engagement, especially where the employment relationship is still viable, and the employee wishes to resume work.
- Declarations that the redundancy process was unlawful, and sometimes orders on the costs of the suit.
The exact remedy depends on the specific facts and judicial discretion.
What key considerations must employers keep in mind during redundancy?
Employers planning redundancies in Kenya should be extremely careful to comply with the Employment Act, the Constitution, and case law.
Key considerations include:
- Ensure redundancy is a last resort, after exploring alternatives like reduced hours, pay adjustments, voluntary exits, or redeployment.
- Maintain clear documentation of business reasons, selection criteria, consultation minutes, and internal approvals.
- Apply objective, transparent, and consistent selection criteria aligned with section 40(1)(c).
- Strictly comply with notice and consultation requirements, including the Labour Officer and trade union where applicable.
- Compute and pay all terminal dues in full and on time, referencing any CBA or HR manual that grants better terms.
- Avoid discriminatory impacts and be mindful of special categories (pregnant employees, persons with disabilities, union officials, etc.).
Engaging employment law counsel early in the process greatly reduces the risk of litigation.
What is the Kenyan courts’ stance on redundancy? (Key case law)
Kenyan courts recognize that redundancy is a managerial prerogative, but insist on strict compliance with law and fair labour practices. Several leading decisions illustrate this balance.
- Kisii University v Kenya University Staff Union (Civil Appeal E145 of 2022) KECA 656 (KLR)
The Court of Appeal affirmed that redundancy must be both substantively justified and procedurally fair. It faulted the employer for unilateral action and a lack of genuine consultation, holding that the process was unlawful for failing to meet the standards set by section 40 of the Act and Article 47 of the Constitution. - Gatuma v Kenya Breweries Ltd & 3 Others KESC 52 (Supreme Court)
The Supreme Court considered redundancy, re-employment on altered terms, and constitutional rights under Article 41. It reaffirmed that unilateral variation of terms without consultation is an unfair labour practice but upheld the redundancy as proper notices were issued, the union was consulted, and severance was paid, underscoring the importance of strict procedural compliance. - Kenya Airways v Aviation & Allied Workers Union (2014)
Maraga J said the following in his judgment:
“Termination of employment on account of redundancy is justified if there is substantive justification for declaring redundancy and there is procedural fairness in the consequent retrenchment. Given the fact that for a period of about five years the appellant’s profits had continually dipped, I find that the appellant was justified in declaring redundancy. The appellant, however, failed to meet that statutory threshold of procedural fairness in the implementation of its redundancy decision in that it failed to give notice to the labour officer and a proper and adequate notice to the affected employees or their union; it failed to hold meaningful consultations with the affected employees or their union; and its selection of the affected employees was not based on an objective and open criteria.
76. However, having found that redundancy was justified, I hold that the remedy of reinstatement with back wages was, in the circumstances, not efficacious and I accordingly set aside the learned Judge’s order of reinstatement in its entirety and substitute it with an award of damages equivalent to six months’ salary to each of the 447 retrenched employees. This award will be in addition to the payments the appellant has offered to make to those retrenched employees. As stated in Section 49(2) of the Employment Act, these payments shall be subject to the relevant statutory deductions. The parties having each partly succeeded, I make no order as to costs.
Generally, the precedents show that:
- Courts will declare redundancies unlawful where there is no proof of genuine consultation or where the decision is presented as a fait accompli.
- Courts are reluctant to interfere with business decisions if the employer demonstrates a genuine economic rationale and full compliance with section 40.
- Failure to apply fair selection criteria, or to treat unionisable and non-unionisable staff equitably on severance where a CBA exists, can attract substantial compensation.
Frequently Asked Questions (FAQ)
Q1: Is notice pay different from severance pay?
Yes. Notice pay compensates for the employer not giving or allowing the employee to work their termination notice period, while severance pay is a distinct statutory redundancy benefit of at least 15 days’ pay per completed year of service.
Q2. Can an employer handpick who to declare redundant?
No. The employer must use fair and objective criteria, considering seniority, skills, ability, and reliability, and must avoid discriminatory or victimizing selections.
Q3. Does an employer have to consult employees individually where there is a union?
The employer must consult the recognized trade union representing unionisable employees and may also communicate with individual employees, but cannot use individual consultation to undermine the union’s role.
Q4. Are short-term or fixed-term employees entitled to redundancy benefits?
Fixed-term contracts that expire naturally may not amount to redundancy, but if terminated early for redundancy reasons, the employee is generally entitled to redundancy benefits unless the law or contract provides otherwise.
Q5. Can redundancy be challenged if the company is genuinely in financial trouble?
Yes. Even with genuine financial distress, the employer must comply with section 40 procedures; non-compliance can still render the termination unfair.
Q6. Are non-unionised employees entitled to the same severance rate as unionised staff where a CBA exists?
Courts have held that non-unionisable staff should not be placed at a disadvantage simply because they are not union members, where a CBA guides redundancy benefits.
How Njaga & Co. Advocates LLP Can Assist
At Njaga & Co. Advocates LLP’s Employment and Law department, we provide end-to-end employment law support for both employers and employees.
For Employers
- Drafting redundancy notices
- Advising on lawful redundancy procedures
- Conducting consultations
- Preparing selection criteria
- Drafting termination letters
- Representing employers in labour disputes
- Ensuring compliance with the Employment Act and CBAs
For Employees
- Reviewing redundancy notices
- Assessing the fairness of the process
- Calculating redundancy dues
- Filing claims at the ELRC
- Negotiating settlements
- Challenging unfair termination
Our approach is strategic, compliant, and client‑centred, ensuring fairness, transparency, and legal protection for all parties.
Disclaimer: This article provides general information and does not substitute legal advice on specific circumstances of any individual or organization. While the information is accurate as of the date published, we cannot guarantee it remains accurate at the time you read it or that it will stay current. Before acting on any of this information, please seek professional legal advice tailored to your situation.
