In Kenya, the Employment Act sets the minimum terms and conditions of employment and recognises different types of contracts. Each type of contract has different implications on an employee’s rights to benefits, notice, termination, and job security.
Every employee is entitled to a contract of employment as a matter of right. It is therefore vital that employers choose the right contract type to ensure compliance with the law while balancing flexibility and business needs.
This article explains the types of employment contracts under the Employment Act, their implications, and the legal framework that governs them.
Legal Basis of Employment Contracts in Kenya
The Employment Act, 2007 (Sections 9–17) provides the statutory framework for employment contracts. It outlines:
- Form of contract: An employment contract can be oral or written, express or implied. However, if employment lasts more than 3 months, a written contract is required.
- Minimum content: An employment contract must indicate the employee’s job description, wages, working hours, leave entitlement, and termination provisions.
- Implied terms: The Employment Act sets the minimum terms and conditions of an employee, including the right to statutory benefits, leave, safe working conditions, fairness and non-discrimination, even if not expressly stated in the contract. This, however, does not prevent the parties from setting terms and conditions higher than what is provided under the Act.
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Types of Employment Contracts under Kenyan Law
1. Permanent (Indefinite) Contracts
This is the most common contract type for long-term employees, particularly core staff and roles that are essential to a business. It is most commonly referred to as a “permanent and pensionable” contract.
Key features:
- No fixed end date.
- An employee enjoys statutory rights such as leave, notice, redundancy protection, and benefits.
- Termination requires lawful reason, notice, and adherence to due process (Section 35 of the Employment Act).
2. Fixed-Term Contracts
These contracts specify a start and end date. Fixed-term contracts are best suited for time-limited work or project-based work particularly where funding is also project-based.
Key features:
- Automatically terminates at the end of the agreed period (unless renewed).
- No notice is required at expiry unless the contract provides otherwise.
- Courts have ruled that repeated renewals can imply permanency (see KUDHEIHA v Aga Khan University Hospital [2017]).
3. Casual Employment
Defined under Section 2 of the Act as work paid at the end of the day and not exceeding 24 hours at a time. This type of contract is best suited for seasonal or occasional tasks, e.g. farm labour.
Key features:
- Payment is made daily.
- No entitlement to leave, notice, or benefits.
- However, if a casual worker works continuously for one month, or performs work for more than 2 months that is not seasonal, the law deems the contract converted to term employment (Section 37).
4. Probationary Contracts
Probation is expressly provided under Section 42 of the Act. An employer uses probationary contracts to test the suitability of new hires. Therefore, a probationary contract is temporary and cannot exceed the timelines set by the Act.
Key features:
- Initial period: up to 6 months (extendable to 12 months with employee consent).
- Termination of a probationary contract requires at least 7 days’ notice by either party.
- Employee rights are limited, but unfair dismissal still applies.
5. Piece-Rate Contracts
In this type of contract, employees are paid according to the amount of work completed rather than hours worked. It is best suited for output-driven industries.
Key features:
- Common in the manufacturing and agricultural sectors.
- Employers must ensure compliance with minimum wage laws.
- Section 20 requires employers to maintain records of work done and wages paid.
6. Seasonal Contracts
Though not expressly defined in the Act, courts recognise them where work is tied to specific seasons.
Key features:
- Typically used in agriculture, hospitality, or tourism.
- Rights such as leave and benefits accrue proportionately.
- Courts often scrutinise to prevent abuse (e.g., disguising permanent roles as seasonal).
7. Apprenticeship and Internship Contracts
These apply to trainees under vocational or professional training, making them suitable for skill transfer and graduate training programs.
Key features:
- Governed by both the Employment Act and sector-specific laws (e.g., Industrial Training Act).
- Interns may or may not be paid, but must receive a safe and structured learning environment.
- Apprenticeship agreements must be registered under Section 2 of the Industrial Training Act.
Common Pitfalls in Employment Contracts
- Oral contracts beyond 3 months – illegal under Section 9(2).
- Failure to issue written particulars – employers risk penalties and employee claims.
- Misuse of casual contracts – courts can reclassify as permanent employment.
- Unclear termination clauses – leading to disputes and unfair dismissal claims.
Practical Advice for Employers and Employees
- For Employers: Every employee is entitled to a contract. Make sure they are provided with one. Ensure that every written contract complies with the Employment Act and reflects the actual working relationship.
- For Employees: Read and understand your contract before signing it; seek legal advice if terms seem unfair.
- For Both: Keep in mind that statutory minimums override any unfavourable contract term.
Conclusion: Choosing the Right Employment Contract
Employment contracts are not just formalities—they define the rights, obligations, and protections of both employers and employees. The Employment Act sets clear rules on different contract types, but compliance and fairness are key to avoiding costly disputes.
Need help drafting or reviewing an employment contract? Contact Wacu Mureithi & Co. Advocates for expert legal advice on Kenyan employment law via email or by booking a consultation.
FAQs
1. Do employment contracts in Kenya have to be in writing?
Yes, if the contract is for more than 3 months. Oral contracts are only valid for shorter periods.
2. Can a fixed-term contract be renewed indefinitely?
Yes, but repeated renewals may imply permanency under Kenyan case law.
3. What happens if a casual employee works continuously?
The law deems the contract converted into a term or permanent contract after 1–2 months.
4. How long can probation last?
Up to 6 months, extendable to 12 months with the employee’s consent.
5. Can employers terminate contracts without notice?
Only in cases of gross misconduct or where the contract lawfully provides for it. Otherwise, statutory notice or pay in lieu must be given.