Who is really the Employer?
Secondment is a well-established feature of Kenya’s employment landscape, particularly where organisations need to share expertise, meet short-term staffing needs, foster collaboration between organisations, or facilitate mobility within a group of companies. But when an employee works under the direction of one organisation while remaining employed by another, a deceptively simple question arises: who is really the employer?
What is Secondment?
Secondment is the temporary transfer of an employee from a primary or home employer to another organization known as the host employer, for a defined period, without terminating the original employment contract or creating a new one. The employee remains the primary employer’s employee while the host organisation directs the employee’s work for the duration of the arrangement, with the expectation that the employee returns to the primary employer once it concludes.
A secondment must be distinguished from a transfer. A transfer severs the employment relationship with the original employer, whereas in a secondment, the employment relationship with the original employer is maintained. The Employment and Labour Relations Court (ELRC) in Mary Nyangasi Ratemo & 9 others v Kenya Police Staff Sacco Limited & another [2013] KEELRC 791 (KLR) put it this way:
“In situations where an employee has been transferred, the original employer who transfers the employee is, in law, no longer regarded as his employer. Instead, the company which the employee has been transferred to is now regarded as his employer. The opposite is however the case where an employee has been seconded. In such a situation, the company which seconds the employee remains the employer at all material times and not the company to which the employee is seconded. … The ordinary meaning of secondment as a temporary transfer is on the face of it the connotation that the employee is subject to recall by his employer. So he is not a permanent employee of the other. … Therefore, so long as the contract is not terminated, a new contract is not made, and the employee continues to be in the employment of the original employer.”
Secondment can apply in a range of situations, including where an employee is seconded to a different position or department within the same organization, or to a subsidiary, or to an entirely separate organization.
Some practical examples include: where a bank sends a systems analyst to its Ugandan subsidiary to roll out a platform; a government agency places an officer with a parastatal for a defined period; or, a multinational moves a Nairobi-based employee into a regional project team domiciled in a sister company. In each case, the employee retains employment with his original employer while taking day-to-day direction from another.
This creates a tripartite relationship between the primary employer, the host employer, and the employee, and the respective rights and obligations need to be clearly documented.
The Legal Underpinnings of the Secondment Arrangement
There is no standalone legislation governing secondment in Kenya’s private sector. Instead, secondment sits at the intersection of the Employment Act, 2007, general contract law, and the terms of the secondment agreement itself. This means the agreement carries considerably more legal weight than parties often appreciate when drafting it.
There are, however, several legislative provisions providing for secondment in the public sector:
- Sections 73 & 138 of the County Governments Act provide for secondment of national government staff to county governments, designed to ensure that seconded officers retain their pension benefits, gratuity, or other terminal benefits.
- Section 42 of the Public Service Commission Act (PSC Act) empowers the Commission to second a public officer to another public body at the officer’s request, with the host organisation bearing the costs, remuneration, and benefits due, for a period not exceeding six years.
- Sections 13 & 16 of the Foreign Service Act allow the Cabinet Secretary for Foreign Affairs, with the agreement of the PSC, to second Ministry officers to any intergovernmental organization or agency. They also allow the PSC to second staff from other Ministries to any Mission, with the relevant Cabinet Secretaries agreeing on the employment and financial terms.
For the private sector, here are a few key principles drawn from general employment law:
- The primary employer remains the employer. Secondment does not, in itself, terminate the original contract, nor does it create a new one with the host. The primary employer is responsible for continuity of service, statutory obligations, and disciplinary authority over the contract of employment, unless the secondment agreement expressly provides otherwise.
- The host directs the work of the employee. The host employer may assign tasks, determine the place of work, and supervise day-to-day performance. However, it cannot terminate the underlying employment contract. Where the arrangement breaks down, its usual recourse is to end the secondment and return the employee, leaving the termination decision with the primary employer.
- Section 10 of the Employment Act applies. A secondment constitutes a variation to the terms of employment, and must therefore be documented in writing and agreed by the employee. A secondment imposed unilaterally without consultation with the employee is vulnerable to challenge as an unfair labour practice.
Key considerations in a Secondment Arrangement
Beyond the general framework set out above, various factors determine how a secondment arrangement plays out in practice and how it holds up in court.
Control over the Employee
While the roles of the primary and host employers appear clear and distinguishable in the discussion above, they are far more nuanced in practice. Courts have consistently looked past the label to ask who, in substance, exercised control over the employee.
In Kenya Methodist University v Kaungania & another [2022] KECA 90 (KLR), the Court of Appeal held that the substantive and principal employer in a secondment is whichever entity actually assigns the employee’s duties and pays their salary. The seconding entity remains only the nominal employer, whose powers and duties are reinstated upon the end of the secondment and are residual during the secondment.
In that case, two clergy of the Methodist Church of Kenya were placed with Kenya Methodist University (KeMU) on secondment, subject to the ongoing approval of the Church’s Presiding Bishop. When the Bishop withdrew that approval and recalled them, KeMU treated their contracts as terminated. The Court of Appeal disagreed and held that, since KeMU had issued the appointment letters, paid the salaries, and applied its own disciplinary rules, it was the substantive employer and could not rely on the Bishop’s recall to end a fixed-term contract early. The termination was found unfair.
The case is a useful reminder that the primary employer on paper will not automatically retain that status or the authority that comes with it if the host is the one actually exercising the functions of the employer.
Continuity of the Employment Relationship
Another key question to ask is what happens to the primary employer’s obligations once a secondment is underway, particularly where the arrangement is not properly documented.
This was addressed in Samuel Ngovu & 11 others v Tana & Athi River Development Authority (TARDA) & another [2018] KEELRC 219 (KLR). There, TARDA stopped paying a group of employees’ salaries and informally moved them to a different parastatal without documenting either a transfer or a secondment. The ELRC held that a transfer changes the employer while a secondment does not, and that a seconding employer’s obligations, including paying salary, continue unless the original contract is lawfully terminated or replaced. An employer cannot informally shift staff elsewhere and treat its own obligations as lapsed by default. This was similarly the case in Mary Nyangasi Ratemo & 9 others v Kenya Police Staff Sacco Limited & another [2013] KEELRC 791 (KLR).
These cases show that an arrangement is judged by its substance and not its label. In Kaungania, that meant looking past the secondment title to find the true employer. In Samuel Ngovu, it meant holding the primary employer to its obligations because neither a proper transfer nor a proper secondment had been documented. Ultimately, an employer that wants its intended arrangement to hold up needs to ensure that both the substance and the paperwork match that intention.
Tax Implications in the Secondment Arrangement
Secondment arrangements can also have tax implications, particularly in relation to PAYE. The tax treatment will depend on the structure of the arrangement, specifically, which entity genuinely bears the employment costs, since that is what determines who is treated as the principal employer for tax purposes.
In Safaricom PLC v Commissioner of Domestic Taxes [2024] KETAT 1772 (KLR), the Tax Appeals Tribunal considered a cross-border secondment arrangement between Safaricom and its Ethiopian subsidiary, and emphasised that the obligation to deduct and remit PAYE is linked to the employer-employee relationship for tax purposes. The Tribunal found that the host entity, which directed the secondees’ work and ultimately bore their employment costs, was the principal employer, while the seconding entity, which merely disbursed salaries as a paying agent before being reimbursed, was the residual employer.
This highlights the importance of clearly documenting the parties’ respective responsibilities for remuneration, statutory deductions and other employment costs. Employers should also ensure that the actual operation of the secondment is consistent with the arrangement documented in the secondment agreement and with applicable KRA requirements.
Where a secondment involves an employee working across jurisdictions, additional tax considerations may arise, including the source of employment income and the tax obligations that may arise in the host jurisdiction. Such arrangements should therefore be assessed on their specific facts before the secondment begins.
A growing area of practice
Secondment was once largely associated with the public sector and multinational head offices. However, companies increasingly second staff into regional subsidiaries, joint venture or project entities, and skills-transfer arrangements linked to donor or government-funded projects. The growth of remote and hybrid work has also blurred the line between a formal secondment and an employee simply reporting to a different team indefinitely. This is the kind of drift that tends to surface later as a dispute if left undocumented.
Key Considerations in drafting the Secondment Agreement
Because courts and tax authorities both look closely at the underlying documentation, the secondment agreement itself carries significant weight. At minimum, it should address:
- Term or Duration: The agreement should have a fixed end date, clear terms of termination, and a clear trigger for return. It should also be clear on who has authority to extend the arrangement.
- Payment and statutory deductions: The agreement should be clear on the source of salary, responsibility for statutory deductions, and which entity is treated as the employer for PAYE purposes. Ambiguity on this point is precisely what invites a KRA reassessment.
- Disciplinary and termination authority: The agreement should confirm that the primary employer retains authority to terminate the substantive contract, and should set out how the host may end the secondment early.
- Continuity of benefits: The agreement should address pension, medical cover, and leave accrual, and how these are preserved during the secondment.
- Return and reintegration: The agreement should be clear on the role, grade, and terms to which the employee returns.
- Consultation and consent: The agreement should be a result of consensus from the employee rather than a unilateral instruction, as it is a material variation of their terms of employment. (See Mary Nyangasi Ratemo & 9 others v Kenya Police Staff Sacco Limited & another [2013] KEELRC 791 (KLR))
Conclusion
Secondment is a legitimate and useful tool for skills transfer, group mobility, and addressing short-term staffing needs without the cost of a permanent hire. However, it is a contract-driven arrangement, which means the secondment agreement is the primary governing document. The employers most exposed are typically those who treat secondment as an informal understanding instead of formalising a properly negotiated tripartite agreement.
A well-drafted secondment agreement can help clarify the respective responsibilities of the primary employer, host organisation and employee, while reducing the risk of disputes over employment status, remuneration, discipline and return to the original role.
HRFLEEK can support your organisation with drafting and reviewing secondment agreements, employment contracts, and other HR documentation. Get in touch with us at info@hrfleek.com.