Since the onset of the COVID-19 pandemic, it’s become increasingly difficult for employers to retain their original levels of staff. Employers who need to right-size their personnel should consider redundancy as a legal and fair way of reducing their workforce.

The law requires that when terminating an employee on account of redundancy, the employer is required to personally notify the employee and the labour officer in writing . This notice must justify the redundancy by giving the underlying reasons. In addition the employer is required to give not less than one month’s notice or one month’s wages in lieu of notice. Courts have held that these notices and their duration of 30 days under this provision are mandatory.

Therefore to terminate an employee immediately, an employer should expect to make a cumulative payment in lieu of notice of 60 days. This includes 30 days payment in lieu of notice and 30 days payment in lieu of redundancy notice.

In addition to notice pay, an employer must be prepared to pay severance pay. Severance pay is one of the terminal benefits due where an employment is terminated on account of redundancy.

The law requires severance pay of 15 days to be paid for each completed year of service. In calculating the completed years of the service, the courts have subtracted the commencement of employment from the last day of service. Where there are extra days after this calculation that do not comprise a complete year, the courts have held the law does not have a provision for pro- rata severance pay and one cannot claim severance pay based on an incomplete period of service.

In determining what denominator to use in calculating the daily rate in severance pay the courts have settled on 30 with the reasoning that severance payment is a function of the days in a year and not days in a year actually worked by the employee.

For example in a case where an employee earning KES. 23,000 worked from March 2011 to December 2020 the severance pay will be calculated as follows:

December 2020 – March 2011 = 8 years.

23,000 ÷ 30 x 15 x 8 = 92,000.

To terminate through redundancy, you should prepare the discharge notice to properly capture the amounts and where necessary explain to the employee on the reasons justifying the redundancy and how payments have been calculated.

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Harry Karanja
Harry KaranjaManaging Partner
Harry Karanja is an Advocate of the High Court of Kenya with diplomas in Communication, IT and Consultancy and 13 years experience in commercial law and dispute resolution.