Fixed-Term Contracts Under the Employment Act, 2007
The Employment Act, 2007, recognises fixed-term contracts as a lawful form of employment. Section 10(3)(c) provides that a contract of service may be expressed to be for a fixed period, and upon the expiry of that period, the contract terminates automatically by “effluxion of time” without requiring notice.
The Employment Act does not limit how many times a fixed-term contract may be renewed, nor does it prescribe a maximum cumulative duration. This silence has generated significant litigation.
Probationary Contracts: Section 42
Section 42 of the Employment Act governs probation with specific constraints:
1. Maximum initial period of six months, and may be extended for a further period not exceeding six months, but only with the employee’s written agreement.
2. No employer may employ a person on a probationary contract for more than twelve months in total.
3. A probationary contract must be in writing and expressly state its probationary nature.
4. Either party may terminate the contract by giving seven (7) days’ notice or, in the case of the employer, by paying seven days’ wages in lieu (Section 42(1)).
In Pamba v Kenya Hospital Association [2025] KEELRC 1776, the Employment and Labour Relations Court (ELRC) held that an employer cannot unilaterally extend probation without the employee’s consent, and that once the probationary period lapses without confirmation or lawful extension, the employee is deemed confirmed in employment. This creates permanency by default.
When Does a Fixed-Term Contract Create Permanency?
Kenyan courts have identified several circumstances where a fixed-term contract may be treated as creating permanent or ongoing employment:
1. Continued Work Beyond Expiry Without a New Contract
Where an employee continues working after a fixed-term contract expires and no new contract is executed, the courts have held that a new employment relationship arises, on the same terms as the expired contract. This converts the arrangement into an indefinite (permanent) engagement, unless there is evidence that the parties intended otherwise.
2. Successive Renewals Over Extended Periods
The landmark 2025 case of Gichuki v Kenya Power & Lighting Company Plc [2025] KEELRC 2578 is a watershed moment. The facts:
a) The employee was engaged in 2015 on a three-month contract as a meter reader.
b) The contract was repeatedly renewed in three-month blocks for over eight (8) years.
c) The work was continuous and identical to that performed by permanent staff.
The ELRC held that repeatedly renewing short-term contracts over a prolonged period, without transitioning the employee to permanent status, violated the employee’s constitutional right to fair labour practices under Article 41 of the Constitution.
3. The Legitimate Expectation Doctrine
The doctrine of legitimate expectation has been the most contested area. The Court of Appeal in Transparency International Kenya v Teresa Carlo Omondi [2023] KECA 174 held that:
a) A fixed-term contract terminates automatically by effluxion of time.
b) The doctrine of legitimate expectation does not arise in the context of fixed-term contract renewal.
c) Non-renewal of a fixed-term contract cannot constitute unfair termination.
This was celebrated by employers as settling the matter. However, subsequent ELRC decisions have introduced nuance:
ELRC (2025): In Changalwa v Unga Limited [2025] KEELRC 1389:
a) The employee worked under successive fixed-term contracts for thirteen (13) consecutive years.
b) He was included in a gratuity scheme reserved for permanent staff.
c) The court found that despite the fixed-term label, the employer’s conduct (inclusion in permanent staff benefits, continuous engagement) created a legitimate expectation.
4. Probation Lapses Without Action
Where an employer fails to confirm, extend (with consent), or terminate an employee before the probation period expires, the employee is deemed confirmed. This creates permanency through inaction.
Managing Fixed Term Contracts Without Creating Permanency
Contract Drafting
1. State the fixed term explicitly. Include the precise start and end dates. Avoid language such as “renewable” or “subject to renewal” which can imply an expectation of continuity.
2. Define the business reason. Tie the contract to a specific project, funding cycle, seasonal need, or temporary vacancy. Courts examine if the nature of the fixed-term arrangement genuinely corresponds to a temporary necessity.
3. Incorporate a non-renewal provision. Clearly specify that the contract will automatically conclude on the specified end date, and that neither party is required to extend it.
4. Exclude permanency indicators. Avoid including benefits such as gratuity programs, awards for long service, pension contributions, or any other perks that are solely linked to permanent positions, unless there is a specific intention to do so.
During the Contract
5. Track expiry dates. Establish a system that notifies you of contracts nearing their expiration at least 30 days prior. Never allow an employee to continue working after expiry without either a new contract or a clear exit.
6. Issue renewal or non-renewal notices. While not strictly required by law for expiry by effluxion of time, issuing written notice of non-renewal at least 30 days before expiry demonstrates good faith and reduces litigation risk.
7. Limit the number of successive renewals. While no statutory cap exists, the Gichuki decision suggests that more than say two to three consecutive renewals of short-term contracts for the same role significantly increases permanency risk. If the role is ongoing, consider converting to permanent employment.
8. Differentiate from permanent staff. Fixed-term employees should not be included in benefits, schemes, or processes reserved for permanent staff unless required by law or Collective Bargaining Agreements.
9. Document performance separately. Do not use the same appraisal system, promotion pathways, or performance improvement processes used for permanent staff, unless they are applied uniformly to all employees regardless of contract type.
Managing Probation
10. Confirm or exit before expiry. Before the probation period ends, issue a written confirmation letter or a termination notice with seven (7) days’ notice. Silence equals confirmation.
11. Obtain written consent for extensions. If extending probation, do so before the initial period expires, with documented employee agreement specifying the new end date and reasons for extension.
12. Do not exceed twelve (12) months. The aggregate probation period (initial plus extension) must not exceed twelve months under any circumstances.
13. Separate probation from fixed-term duration. Where a fixed-term contract includes probation, ensure the probation period is clearly distinguishable from the fixed term itself. A two-year fixed-term contract with a six-month probation means the employee is confirmed after six months but still on a fixed-term basis.
At Contract End
14. Execute a clean exit. On the expiry date, ensure the employee ceases work, returns company property, and receives their final dues (including any accrued leave). Process the exit on the same day.
15. Avoid gaps and re-engagement. If you intend to re-engage the employee on a new fixed-term contract, execute the new contract before or on the same day the old one expires. A gap followed by re-engagement on identical terms can still suggest continuity.
16. Pay terminal benefits promptly. Section 17 of the Employment Act requires payment of all wages due on or before the next working day after termination. Delays invite claims.
Conclusion
The Kenyan legal landscape on fixed-term contracts (FTCs) is evolving rapidly. The Court of Appeal’s 2023 decision in Transparency International v Omondi gave employers comfort that FTCs expire cleanly without creating renewal obligations. But the 2025 ELRC decisions in Gichuki, Changalwa, and Pamba demonstrate that courts will look beyond contractual labels to the substance of the employment relationship.
The key principle is clear: form must match substance. If the employment is intended to be permanent, then the contract should reflect that permanence. If the role is temporary, it is essential to handle the contract with care: clearly defined terms, monitored expiration dates, exits, adherence to probationary requirements, and avoidance of actions that could confuse fixed-term contracts with permanent positions. Employers who adopt this strategy will maintain the advantages of fixed-term contracts while steering clear of the expensive implications that can arise from courts enforcing permanency.
The real value of a good fixed-term contract and probation framework shows up long before a dispute reaches the ELRC. At HRFleek, we help employers audit existing arrangements, draft contracts that reflect genuine temporary need, and put tracking systems in place so expiry dates and probation confirmations never slip through unnoticed. Get in touch at info@hrfleek.com to book a consultation.