Career advice · Updated October 2026

Redundancy in Kenya: The Lawful Process, Selection Criteria and Severance Pay

Restructuring, falling sales, automation and mergers all lead to job cuts, and the word “redundancy” now appears in letters from banks, media houses, manufacturers and NGOs alike. Redundancy in Kenya is lawful, but only if the employer follows section 40 of the Employment Act, 2007. Miss a step and the job losses can be found unfair, with compensation on top of the redundancy package. Here is what the law requires, how the money is worked out, and what to check if your name is on the list.

What counts as redundancy

Section 2 of the Act defines redundancy as the loss of employment, occupation, job or career by involuntary means, through no fault of the employee, at the employer’s initiative, where the employee’s services are superfluous. It includes what are commonly called abolition of office, job or occupation, and loss of employment.

Two things follow. First, redundancy is about the job, not the person: it is not a tool for removing someone whose performance or conduct is the real concern. That needs the separate fair process in section 41, explained in our guide to unfair termination in Kenya. Second, the employer must be able to show the operational reason is genuine, because section 45(2) requires a valid and fair reason “based on the operational requirements of the employer”.

The seven conditions in section 40

Section 40(1) says an employer shall not terminate a contract on account of redundancy unless it complies with all of these:

Section 40(2) excludes terminations caused by insolvency, which are dealt with under Part VIII of the Act instead.

The notice must lead to real consultation

The notice is not a formality. In the leading case, Kenya Airways Ltd v Aviation & Allied Workers Union Kenya & 3 others (2014), the Court of Appeal held that the notices under section 40(1) are not merely for information, and drew on International Labour Organization standards to find that the employer must consult on the redundancies. The court set aside an order reinstating 447 employees, accepting that the redundancy itself was genuine. But the majority upheld the finding that the selection process was unfair, and awarded each employee six months’ gross salary as damages, on top of three months’ pay in lieu of notice and severance of 20 days per completed year under the collective agreement.

The lesson for employers is that a sound business reason does not cure an unfair process. For employees, it shows why you should ask how and why you were selected.

How redundancy pay is calculated

The statutory minimum package has three parts: one month’s notice or pay in lieu, cash for untaken leave, and severance. Your contract or a collective agreement can give more, and the higher figure applies.

Severance is counted in completed years. Someone with seven years and ten months’ service gets severance for seven years. The Act says “fifteen days pay” but does not say how a day’s pay is worked out, so check whether your contract or CBA uses basic or gross salary and whether it divides monthly pay by 30 or by working days.

Worked example (for illustration): Achieng earns KSh 60,000 a month and has seven completed years of service. If a day’s pay is taken as monthly pay divided by 30, it is KSh 2,000, so:

• Severance: 15 days × KSh 2,000 × 7 years = KSh 210,000
• Notice pay in lieu: one month = KSh 60,000
• Untaken leave: paid in cash at her daily rate, on top

If her contract divides by 26 working days instead, a day’s pay is about KSh 2,307.69 and severance rises to roughly KSh 242,308. Business Radar’s severance pay calculator lets you try both methods, and our terminal dues calculator adds the other items. To see how PAYE affects your final month, use the net salary calculator.

You should also receive salary for days worked, any gratuity or bonus your contract promises, and a certificate of service under section 51. Pension and NSSF savings stay yours; Business Radar explains what you can withdraw when you leave a job. Our annual leave guide shows how leave days are counted.

Selection criteria: the step most often challenged

Section 40(1)(c) requires the employer to consider seniority in time together with skill, ability and reliability, within the class of employees affected. In practice that means:

• defining the pool fairly, so similar roles are compared with each other;
• using objective, documented criteria, such as length of service, qualifications, appraisal records and disciplinary history;
• applying the criteria consistently, and being able to show the scores; and
• not targeting union members, people on leave, pregnant employees or anyone for a reason listed in section 46.

If your role is abolished and then quickly re-advertised under a new title with the same duties, that may be evidence the redundancy was not genuine. Keep the advert.

What to do if you receive a redundancy notice

1. Read the notice carefully. It should give the reasons and the extent of the redundancy. Note the date and confirm the labour officer was notified.
2. Ask questions in writing. Request the selection criteria, your score, and whether alternatives such as redeployment, reduced hours or voluntary early retirement were considered.
3. Check the numbers. Compare the package with your contract, HR manual and any CBA, and with the statutory minimums above.
4. Think before signing a discharge. Many employers ask staff to sign a settlement accepting the package in full and final settlement. Get advice from your union or a lawyer first if you believe the process was unfair.
5. Complain in time. A labour officer complaint should be lodged within three months under section 47(1). Court claims are generally limited to three years under section 89.

For employers planning job cuts

Start with a written business case, define the affected roles and the selection criteria, then send the section 40 notices with real time to consult before any termination date. Keep minutes of consultations, explain the criteria to each affected person, pay the package on or before the exit date, and issue certificates of service. Our termination notice guide covers notice and pay in lieu, and the plain-English guide to the Employment Act covers the rest of your obligations.

Facing redundancy? Refresh your CV with the free CV builder, read our guide to writing a CV that gets shortlisted, and browse the latest jobs in Kenya.

Key takeaways

• Redundancy in Kenya means a job is no longer needed, through no fault of the employee, and the employer must prove the reason is genuine.
• Section 40 requires notice to the union or employee and to the labour officer, fair selection, cash for leave, one month’s notice or pay in lieu, and severance.
• Statutory severance is at least 15 days’ pay for each completed year of service; contracts and CBAs often give more.
• Courts expect genuine consultation and fair, documented selection criteria, and award compensation where these are missing.
• Check your package, ask for your selection score, and get advice before signing a full and final discharge.

Frequently asked questions

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