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The Wage Councils is constituted in accordance with Labour Institutions Act 2007.

The Act establishes two wages councils: a general wages council and an agricultural wages council. The Cabinet Secretary is mandated to establish any other sectoral wages council on a need basis subject to the consultation of the National Labour Board.

A wages council shall consist of the following members appointed by the Cabinet Secretary–

• a chairperson;
• not more than three members nominated by the Board representing trade unions;
• not more than three members nominated by the Board representing employers; and
• not more than three independent members.

The members of the wages council are appointed for a period of three years and are entrusted with the following functions:

• to investigate remuneration and conditions of employment in any sector;
• invite and consider written and oral representation, in prescribed manner, from interested parties; and
• make recommendations to the Cabinet Secretary on minimum wage remuneration and conditions of employment.

Additionally, the Agricultural wages council may recommend to the Cabinet Secretary, minimum remuneration and conditions of employment of employees employed in the agricultural sector or any sector in which no other wages order is applicable.

On the recommendation of these Councils, the Cabinet Secretary may issue Wages Order setting minimum rates of remuneration (usually published on May 1^st Each year). Minimum wages vary by occupational sectors, skill levels and geographical areas.

Wages Order

A wages order:

• sets the minimum rates of remuneration;
• specify the types and manner of deductions as well as the maximum amount/percentage of deductions;
• maximum amount deducted from pay in respect of rations supplied by the employer;
• regulate task based and piece work;
• regulate outwork, casual work and contract work; and
• other related terms on remuneration.

While determining the minimum wage, the Wage Council should take into account the following factors:

• the needs of workers and their families, taking into account the general level of wages in the country, the cost of living, social security benefits and the relative living standards of other social groups;
• economic factors, including the requirements of economic development, levels of productivity and the desirability of attaining and maintaining a high level of employment and the need to encourage investment;
• the ability of employers to carry on their business successfully;
• the operation of small, medium and micro enterprises;
• the alleviation of poverty;
• the minimum subsistence level; and
• the likely impact of any proposed conditions.

An employer who fails to pay statutory minimum wage or provide a worker with conditions of employment as provided under the Wages Order commits an offence.

In a top-down employee recognition system, an employee’s supervisor witnesses and recognizes their contributions. Top-down recognition can take many forms. Some examples are:

1. Years of Service Award

In recognition of an employee’s continued contributions to an organization over several years, a ‘Years of Service’ award can be given at specific intervals or milestones. ‘Years of Service’ awards do not often involve financial compensation, but may include a gift of some kind. Commonly offered awards include plaques, engraved pens, or group greeting cards.

2. Employee Appreciation Day

Employee Appreciation Day was created in 1995 by Dr. Bob Nelson as a way for companies to encourage conversation about daily recognition, celebrated on the first Friday of March. It is a day for companies to thank their employees for their hard work and effort throughout the year. This day was created for the purpose of strengthening the bond between employer and employee.

Organizations have been known to celebrate Employee Appreciation Day with small company-funded events like barbecues, or small office parties. Additional financial compensation is not often an element of Employee Appreciation Day.

3. Annual Bonuses

An annual bonus is a financial compensation given to employees in addition to their base pay. Annual bonuses are given once per year, usually at the end of the fourth business quarter. Annual bonuses can be given for a multitude of reasons, but are usually based on performance, either the performance of the organization, the individual or both.

For example, Benard’s sales numbers exceeded her quota for four consecutive business quarters. To recognize her achievements throughout the year, Emma is given an annual bonus in addition to her base salary and commissions.

4. Quarterly Bonuses

Quarterly bonuses are similar to annual bonuses but are metered out on a more frequent basis (per business quarter). Quarterly bonuses are most commonly given as part of a heavily performance-based compensation model. Sales organizations are common adopters of the quarterly bonus structure.

For example, Amina landed ABC Limited its largest customer this quarter. In recognition of that achievement, Amina is given a quarterly bonus at the end of the quarter.

5. Spot Bonuses

Many organizations choose to thank workers ‘on the spot’ for achievements that merit particular notice. These bonuses are generally given in recognition of an employee exhibiting exceptional productivity. They are most often given by a direct manager, an indirect manager, or senior co-worker in the organization, but can also be given by co-workers as part of a peer-to-peer recognition program.

The on-the-spot nature dictates that spot bonuses are given at an irregular cadence, in contrast to annual and quarterly bonuses.

For example, Fatima’s attention to detail and quick thinking saved the company from losing a long-time client. In recognition of her valuable contribution, Fatima is given a Kshs. 50,000 spot bonus.

6. Peer-to-Peer Recognition

In a peer-to-peer recognition system, managers, as well as other co-workers, are all empowered to recognize and reward the contributions of their colleagues. Some of the most common forms of peer recognition are:

• Gold Stars

Some organizations encourage employees to recognize one another’s contributions through the giving of small mementos. Gold stars are a good example of this type of recognition. These stars are sometimes given a tangible value and can be exchanged for real-life items.

For example: Despite an already busy schedule of coding, Jason decides to help out his colleague in the marketing department, who is having trouble implementing a new tool. He earned a gold star from his colleague Harrison in return for the impactful assistance he offered.

• Verbal Praise

Verbal praise is perhaps the oldest and longest-standing form of peer-to-peer recognition in the workplace. Verbal praise is given by colleagues, generally in an ad-hoc fashion, in recognition of a staff member’s valuable contribution. Although nearly always informal in nature, verbal praise is occasionally solicited as part of a formal staff recognition program.

For example, ABC Limited newest customer was extremely impressed with Emma’s timeliness and attention to detail. At the beginning of their sales strategy meeting, Emma’s colleagues all congratulated her on the achievement, showing their appreciation for her efforts.

• Microbonuses

Microbonuses are small monetary rewards given frequently by one colleague to another in recognition of a valuable contribution. Although micro bonuses can be given by managers to their direct reports, they can also be given by other colleagues, and even from a direct report to a manager.

Microbonuses provide several unique benefits. Like spot bonuses, staff recognition in the form of micro bonuses can be given in the very moment that a valuable contribution is made by an employee. Employee recognition given in the moment has the greatest potential for impact because the action is rewarded almost immediately when it is top-of-mind.

Due to their small nature, microbonues can be given often, providing multiple positive instances of employee recognition without dramatically altering an employee’s compensation.

For example, James new update to the company’s landing page improved conversion by 60 percent, and brought in three new signups in one day. James’ colleague Elisa gave him a microbonus because those new signups became part of her sales pipeline.

 

Despite the Employment and Labour Relations Court having been granted original jurisdiction on all employment and labour relations matters, that jurisdiction can by law be donated to the lower courts.

In exercise of the powers conferred by Section 29 (3) and (4) (b) of the Employment and Labour Relations Court Act, 2011, the Chief Justice appointed all Magistrates of the   rank of Senior Resident Magistrates and above, vide a gazette notice, as Special Magistrates designated to hear and determine the following   employment and   labour   relations   cases within   their respective areas of jurisdiction:

• Disputes arising from contracts of employment (excluding trade disputes under the Labour Relations Act, 2007) where employees gross   monthly pay   does   not   exceed   Kshs. 80,000.00 as commenced and continued in accordance with the Employment and Labour Relations Court (Procedure) Rules, 2016.
• Matters relating to the following specific areas: –
• offences under the Work Injury Benefits Act, 2007
• offences under the Employment Act, 2007
• offences under the Labour Institutions Act, 2007
• offences under Occupational Safety and Health Act, 2007; and
• offences under the Labour Relations Act, 2007

The obligations of employers under the Work Injury and Benefits Act are as follows:

Employer to provide Insurance Cover

Every employer must obtain and maintain an insurance policy, with an insurer approved by the Cabinet Secretary in respect of any liability that the employer may incur under this Act to any of its employees.

The Cabinet Secretary may exempt from the provisions of insurance policy, an employer who provides and maintains in force a security which consist of an undertaking by a surety approved by the Cabinet Secretary to make good, any failure by the employer to discharge any liability which the employer may incur under the Act to any of its employees up to an amount approved by the Cabinet secretary.

Employer to keep Records

An employer must keep a register or other record of the earnings and other prescribed particulars of all employees, at all reasonable times produce the register or record on demand to the Director for inspection, retain the register, and record or reproduction referred at least six years after the date of the last entry in that register or record.

Compensation of Injured Employee

An employee involved in an accident resulting in the employee’s disablement or death is entitled to the benefits provided for under this Act.

An employer is liable to pay compensation in accordance with the provisions of this Act to an employee injured while at work.

Where poor performance is shown to be reason for termination, the employer is placed at a high level of proof as outlined in Section 43 of the Employment Act. Where the employer fails to do so, the termination shall be deemed to have been unfair within the meaning of Section 45.

The employer must show that in arriving at the decision of noting the poor performance of an employee:

1. Whether the employee was aware of the level of job performance required including whether the employee was provided with a job description and clear job expectations,
2. Whether suitable tools and instruction or supervision was accorded to the employee to enable him reach the standard,
3. Whether an employment policy or practice was put in place to measure good performance as against poor performance,
4. The measures that were in place to enable them assess the performance of each employee and further, for example, a Performance Improvement Plan (PIP),
5. The measures they have taken to address poor performance once the policy or evaluation system has been put in place; it will not suffice to just say that one has been terminated for poor performance as the effort leading to this decision must be established,
6. If after the appraisal, an employee is given time to improve on his performance, having been aware of the improvement areas as well documented in the performance appraisal and having been informed of a specific time frame within which to improve, the appraisal must include a warning that should the employee’s performance not improve his employment would be terminated,
7. demonstrate that before terminating the employee all efforts necessary were put in place to support the poor performing employee

Beyond having such an evaluation measure, and before termination on the ground of poor performance, the employer is required to:

1. Explain to the employee, in a language the employee understands, the reason for which the employer is considering termination. The employee is entitled to have another employee or a shop floor union representative of his choice present during this explanation.
2. As well as conducting the explanation in person, give a notice outlining in detail the instances of poor performance, the support the employer has given to the employee to enable him improve in the specified areas, the right of the employee to defend himself, the right to representation and the time within which the employee should give his response to the notice.
3. Observe the rules of natural justice by notifying the employee of the impending hearing and the grounds for the disciplinary hearing to enable the employee prepare to defend himself.
4. Hear the employee’s representations and the representations of the person who has accompanied the employee to the disciplinary hearing, if any.
5. Notify the employee of its decision to terminate or retain him after considering his defense.
6. In the event a decision is made to terminate an employee on the reasons for poor performance, the employee must be called again and in the presence of another employee of their choice, the reasons for termination shared with the employee.

The Employment Act, 2007 makes a distinction between termination and dismissal.  It distinguishes unfair termination and wrongful dismissal.

Wrongful Dismissal

An employer is required to give notice to his employee before terminating the employee’s contract of service.

Section 44 of the Employment Act provides that an employer may only resort to summary dismissal when the employee has, by his or her conduct fundamentally breached his or her obligations arising under the contract of service.  It is only a misconduct that is gross in nature that will entitle the employer to summarily dismiss an employee.

The section goes on to give instances of misconduct which amount to gross misconduct as to justify the summary dismissal of an employee. The courts have held that the list given by Section 44 is not exhaustive and the behavior of an employee can be construed as being that which fundamentally breaches their obligation under the employment contact.

Where an employee is summarily dismissed for any other reason outside the confines of fundamental breach of employment contract, then that action by the employer amounts to wrongful dismissal.

Unfair Termination

Termination of employment will be unfair if the court finds that in all the circumstances of the case, it is based on invalid reason or if the reason itself or the procedure of termination are themselves not fair.  Specifically, it will be unfair if it relates to;

• A female employee’s pregnancy,
• The going on leave of an employee,
• An employee’s membership of a trade union,
• The participation of an employee in the activities of a trade union,
• The employee’s seeking office in a trade union, or his refusal to join or withdraw from a trade union,
• An employee’s race, colour, tribe, sex, religion, political opinion or affiliation, national extraction, nationality, social origin, marital status, HIV status or disability,
• An employee’s initiation of a complaint or legal proceedings against the employer unless done irresponsibly, or
• An employee’s participation in a lawful strike.

According to Section 45(3) only an employee who has been in continuous employment for a period not less than thirteen months immediately before the date of termination has the right to complain that he has been unfairly terminated.

Remedies for wrongful dismissal and unfair termination are provided for in Sections 49 and 50 of the Employment Act.

Remedies for Unfair Termination.

1. Compensation – includes payment of damages equivalent of a number of months’ wages or salary not exceeding twelve months based on the gross monthly wage or salary of the employee at the time of dismissal together with any other accrued benefits including: –

• Payment in lieu of notice of termination (not less than 1 months’ salary as provided under the Employment Act but can exceed this amount if the contract of service or the CBA provides so);
• Payment for any accrued leave days;
• Payment for overtime worked;
• Payment for days worked but not paid for at the time of termination of employment;
• Service pay for every year worked, the terms of which shall be fixed.

Service pay is not applicable where an employee is a member of a registered pension or provident fund scheme under the Retirement Benefits Act (No. 3 of 1997); a gratuity or service pay scheme established under a collective agreement; any other scheme established and operated by an employer whose terms are more favourable than those of the service pay scheme established under this section; and the National Social Security Fund.

• Gratuity in case of termination through redundancy. Gratuity is payable for every 15 days of each year of service.

2. Payment for unexpired term of contract.
3. Payment of damages for workplace defamation.
4. Reinstatement

• Reinstate the employee and treat the employee in all respects as if the employee’s employment had not been terminated; or
• Re-engage the employee in work comparable to that in which the employee was employed prior to his dismissal, or other reasonably suitable work, at the same wages.

5. Issuance of a Certificate of service.

This is a statutory requirement under the Employment Act regardless of the nature and circumstances of termination of the employee unless the employment has continued for a period of less than four consecutive weeks.

An employer is not bound to give to an employee a testimonial, reference or certificate relating to the character or performance of that employee.

A certificate of service must contain: –

• The name of the employer and his postal address;
• The name of the employee;
• The date when employment of the employee commenced;
• The nature and usual place of employment of the employee;
• The date when the employment of the employee ceased; and
• Such other particulars as may be prescribed.

REDUNDANCY

Redundancy occurs when an employee is terminated because his job/service is no longer required by the employer. In a redundancy, there is no fault on the part of either the employee or the employer. Redundancy may be caused by factors such as economic conditions, business efficiency or technological development.

Redundancy may occur under various circumstances including and not limited to:

• Closure of a plant, factory, or other workplace, with the total or near-total loss of jobs,
• Job losses arising from a reduction in staffing requirements due to efficiency gains or falling demand for the company’s products or services, and
• Job losses arising from a downsizing in operations or restructuring of the workforce following, for example, privatisation or merging causes.

Redundancy results in severance of the legal relationship of a worker and employer as it existed immediately before the circumstances that brought about the loss of job.

Below is the processes and procedure to the followed in terminating the employment contract because of redundancy.

Termination of Employees on account of Redundancy

For the termination of employment on account of redundancy to be valid and fair, the redundancy process must be carried out in accordance with the employment laws to avoid any claims for compensation from employees for unfair termination that may arise in future.

Legal Provisions on Redundancy

• The Constitution of Kenya, 2010

Article 41(1) of the Constitution of Kenya 2010, provides that every person has the right to fair labour practices. This right exists even at the point of termination of an employee by requiring that an employee is given the reasons for the termination and accorded a fair hearing before termination.

• The Employment Act 2007

The Employment Act, 2007 (the “Act”) is the primary legislation dealing with employment matters in Kenya. The Act declares and defines the fundamental rights of employees and provide basic conditions of employment of employees.

Section 2 of the Act defines Redundancy to mean “the loss of employment, occupation, job or career by involuntary means through no fault of an employee, involving termination of employment at the initiative of the employer, where the services of an employee are superfluous and the practices commonly known as abolition of office, job or occupation and loss of employment.”

Redundancy has also been referred to as “retrenchment”, “lay-off, “staff downsizing”, and “staff rationalization” among others. The terms are used interchangeably.

The procedure for termination of employment on account of redundancy is set out in section 40 of the Act. The section provides as follows;

An employer shall not terminate a contract of service on account of redundancy unless the employer complies with the following conditions: –

1. where the employee is a member of a trade union, the employer notifies the union to which the employee is a member and the labour officer in charge of the area where the employee is employed of the reasons for, and the extent of, the intended redundancy not less than a month prior to the date of the intended date of termination on account of redundancy;
2. where an employee is not a member of a trade union, the employer notifies the employee personally in writing and the labour officer;
3. the employer has, in the selection of employees to be declared redundant had due regard to seniority in time and to the skill, ability and reliability of each employee of the particular class of employees affected by the redundancy;
4. where there is in existence a collective agreement between an employer and a trade union setting out terminal benefits payable upon redundancy; the employer has not placed the employee at a disadvantage for being or not being a member of the trade union;
5. the employer has where leave is due to an employee who is declared redundant, paid off the leave in cash;
6. the employer has paid an employee declared redundant not less than one month’s notice or one month’s wages in lieu of notice; and
7. the employer has paid to an employee declared redundant severance pay at the rate of not less than fifteen days’ pay for each completed year of service.”

The procedure set out in section 40 of the Act are mandatory and must be strictly followed for the redundancy to be valid.

The court held in the case of Hesbon Ngaruiya Waigi Vs Equatorial Commercial Bank Limited (2013) eKLR that:

“These conditions outlined in the law are mandatory and not left to the choice of the employer. Redundancies affect workers’ livelihoods and where this must be done by an employer must put into consideration the provisions of the law.”

In the case of Francis Maina Kamau Vs Lee Construction (2014) eKLR, the court emphasised the importance of observing the conditions on the Act in declaring an employee redundant. The Court held that:

“Where an employer declares a redundancy, the conditions set out in Section 40 of the Employment Act must be observed and where the employer fails to do so, the termination becomes unfair termination within the meaning of Section 45 of the Employment Act.”

A summary of the steps to be followed on termination of employee’s contract on account of redundancy under Section 40 of the Employment Act are set out below as follows:

Step 1:          Notice of Intended Redundancy

The employer must give notice of the intended retrenchment programme. The notice should be for not less than 30 days prior to the date of the intended date of termination on account of redundancy. Where the employment contract or Collective Bargaining Agreement (CBA) provide for a longer period than 30 days, then the notice must comply with the longer period.

Where the employee is a member of a trade union, the notice should be given to the trade union to which the employee is a member and to the labour officer in charge of the area where the employee is employed.

Where the employee is not a member of a trade union, the notice should be given to the employee personally in writing and also to the labour officer;

The notice must state the reasons for, and the extent of, the intended redundancy.

The employer is required to have consultation with the employee or their trade union with an aim of finding a way out of the intended redundancy or the best way of implementing it, if it is inevitable. Such consultations must be genuine rather than merely going through the motions to comply with the law.

In the case of Kenya Airways Limited Vs Aviation Allied Workers Union Kenya & 3 Others [2014] eKLR (Civil Appeal No. 46 of 2013), the court stated that the purpose of the notice under section 40(1)(a) and (b) of the Employment Act is to elicit consultation the between the parties. Consultation gives the parties an opportunity to consider “measures to be taken to avert or to minimize the terminations and measures to mitigate the adverse effects of any terminations on the workers concerned such as finding alternative employment”.

This is in line with Article 13 of Recommendation No. 166 of the International Labour Organisation (ILO), Convention No. 158-Termination of Employment Convention, 1982 which requires consultation between the employers and the employees or their representatives before termination of employment under redundancy. Article 41(1) of the Kenyan Constitution also guarantees the employee’s right to fair labour relations including the right to be notified of the intended redundancy and the reasons thereof and an opportunity to consult on the redundancy.

Step 2:         Criteria for Selection of Employee for Termination

In selection of the employees to be declared redundant, the employer must have due regard to the seniority in time, skill, ability and reliability of each employee in the group of employees affected by the retrenchment.

The selection criteria for identifying the employees to be retrenched must be objective and must not be based on discriminatory or subjective factors as such as membership to trade union, race, age, and gender among others. The selection criteria should be precise and documented and the employee scored on the basis of their seniority, skill, ability and reliability. The criteria listed in the Employment Act are not the only factors that an employer can consider. Any other objective criteria may be considered.

In the case of Kenya Plantation and Agricultural Workers’ Union Vs Harvest Limited [2014] eKLR, the court stated on the issue of the criteria for selection of employees to be declared redundant, that “the idea of last in first out satisfies the seniority criterion.  As far as skill, ability and reliability are concerned, it is the opinion of the court that the employer must have, prior to the redundancy exercise, instituted objective qualifications for skill, ability and reliability attached to the office held by the workers against which the skills, ability and reliability possessed by the individual workers targeted in the redundancy will be scored or measured against. The employer, in the court’s opinion, must demonstrate the objective score sheet and the ranking of the targeted employees against that score sheet with respect to the selection factors set out in section 40(1) (c) of the Act failing which, it is difficult to establish compliance with the section.  The court also holds that the selection parameters in section 40(1) (c) are not in alternative so that in a redundancy process, the employer must establish that all the parameters have been taken into account and in an objective manner.  It is the opinion of the court that the employer enjoys the discretion to place given weights on each of the parameters but none can be applied in exclusion of the others.

The employer should not place the employee at a disadvantage for being or not being a member of the trade union. Where there is a CBA setting out the terminal benefits payable on redundancy, the benefits should apply equally to all employees.

Step 3:         Payment of Dues

An employee who is declared redundant is entitled to payment as follows;

• Salary up to the date of termination on account of redundancy;
• Accrued leave days paid off in cash;
• One month’s notice or one month’s wages in lieu of notice; and
• Severance pay at the rate of not less than fifteen days’ pay for each completed year of service.

Where there exists a CBA between the employer and the trade union with better terms than those provided in the Act, the employee shall be entitled to be paid the higher rates in the CBA.

The employer must demonstrate that he has complied with the conditions of section 40 of the Act and the burden of proving that the procedure for declaring an employee redundant as set out in section 40 of the Act has been complied with is on the employer.