The cornerstone of any successful employer-employee relationship is a well-crafted employment contract. The Employment Act No. 11 of 2007 (“Employment Act”) serves as the primary legal framework regulating employment relationship in Kenya. It outlines the rights and responsibilities of both employers and employees, the types of employment contracts and their specifics.
An employment contract is a legally binding agreement between an employer and an employee that outlines the terms and conditions of their working relationship. It specifies crucial details such as job responsibilities, compensation, working hours, benefits, and any other relevant terms that both parties have agreed upon. The contract serves as a reference point to prevent misunderstandings and disputes by clearly defining the rights and obligations of both the employer and the employee throughout their time working together.
1. Types of Employment Contracts
A contract of employment can either be oral or written. However, having a written contract is prudent to ensure clarity and maintain a record of the agreed terms. The Employment Act makes it is mandatory to have a written contract where the employment period spans more than three months.
The Employment Act acknowledges these contract types:
a. Contract for unspecified period – these have no set ending date and are often referred to as “permanent” contracts.
b. Contract for specified period- also called fixed-term contracts – these contracts have clear start and end dates. These contracts may include a provision on renewal of the contract upon expiry. The employer retains the discretion of renewal, even where there is a clause for renewal. Courts have generally affirmed that fixed-term contracts do not automatically imply contract renewal solely due to the existence of a renewal clause. Where an employer wishes not to renew a fixed term contract, they should communicate to the employee the intention not to renew the contract prior to the expiry of the contract. This was evident in the case of Registered Trustees of the Presbyterian Church of East Africa & another v. Ruth Gathoni Ngotho-Kariuki (2017) eKLR where the court of appeal held that “…. fixed term contracts carry no rights, obligations, or expectations beyond the date of expiry. Accordingly, any claim based after the expiry of the contract ought not to have been maintained.”
For good practice, it’s advisable that if you are an employer with a renewal clause in a fixed-term contract, refrain from grounding the renewal to specific conditions like performance. Instead, anchor the decision for renewal on the employer’s discretion.
c. Contract for specific task (piece work) – tied to a particular task, this contract ends upon task completion. This is often project-based.
d. Casual employment contract- used on a need basis, typically for irregular or seasonal tasks. As an employer, avoid engaging casual employees for an uninterrupted period exceeding 1 month. If the tasks cannot be completed within a timeframe of less than 3 months or more, consider employing individuals through fixed-term contracts that include an option for renewal. Section 37 of the Employment Act establishes a compulsory provision that converts such casual employment into term contracts. For reference, see the Court of Appeal rulings in Chemelil Sugar Company vs. Ebrahim Ochieng Otuon & 2 Others [2015] eKLR and Nanyuki Water & Sewage Company Limited v. Benson Mwiti Ntiritu & 4 others [2018] eKLR.
Noteworthy, each category of the employment contract carries distinct attributes that impact working conditions, benefits, and the overall nature of the employment relationship.
2. Factors that determine the type of employment contract to enter
The type of employment contract that an employer and employee may enter is determined by several factors, including:
a. The nature of work.
The specific job role and responsibilities can influence the type of contract. For example, full-time, part-time, temporary, or fixed-term contracts may be chosen based on the nature of the work.
b. Company policies.
Employers often have established policies that dictate the types of contracts they offer. These policies may be influenced by industry standards and company needs.
c. Business needs
The business model and operational needs of the employer can also influence the type of contract. For instance, businesses that experience seasonal fluctuations may depend on temporary contracts to address increased demand during peak periods.
d. Budget and resources
Financial considerations, such as the available budget for salaries and benefits, can impact the type of contract offered.
e. Duration and project scope
The length of the project or the need for a specific skill set might lead to fixed-term or project-based contracts.
f. Market Trends
Prevailing trends in the job market, such as remote work and part-time work are becoming more common and can influence the types of contracts that employers are willing to offer.
g. Industry Standards
Certain industries have norms and practices when it comes to employment contracts. For instance, in the entertainment industry actors, musicians, filmmakers, and artists often work on a per-project basis, where contracts are structured around the specific duration and scope of a particular project or production.
h. Mutual agreement
Ultimately, both the employer and the employee need to agree on the terms of the contract. Negotiations might involve factors like salary, benefits, working hours, and contract duration.
3. Essential Terms and Conditions
An employment contract needs to include key terms that ensure fairness and clarity and are crucial for creating clear expectations. These terms are outlined in the Employment Act. They include:
- Personal information of the employee, including their name, age, permanent address, and gender.
- Employer’s identity.
- Detailed job description.
- Commencement date of employment.
- Nature and duration of the contract.
- Work location.
- Stipulated working hours.
- The remuneration, scale or rate of remuneration, the method of calculating that remuneration and details of any other benefits.
- Entitlements such as annual leave, public holidays, holiday pay, sick leave, injury coverage, pensions, and pension schemes.
- Contract termination including the notice periods for termination.
- Worksite specifics or multiple work locations, if applicable.
- Collective agreements that impact terms and conditions of employment if applicable.
- For work outside Kenya for over a month, details about the work period, currency of remuneration, additional compensation, and return terms. -Section 83 of the Employment Act requires that these be in a certain form and reported to the Ministry.
A statement on the applicable disciplinary and grievance rules and procedures.
How We Can Assist
Getting employment contracts right is not just about compliance, it’s about building a foundation for thriving workplaces where both employers and employees can contribute to a prosperous future.
At HRFleek, we are here to offer guidance regarding the suitable employment contract choices and assist you in creating precisely tailored contracts. Our proficiency ensures that your employment agreements align with the legal parameters outlined in the Employment Act 2007, all the while accommodating the distinctive intricacies of your organization.
For any enquiries on this or any other matter do not hesitate to contact us via email through info@hrfleek.com.
Contact Person & Contributor
Faith Khaemba – Associate Advocate