Kenya Service Pay Explained: 15 Days Per Year and Who Is Excluded

What the rule says and where it comes from

Service pay sits in Part VI of the Employment Act, 2007, which is Chapter 226 of the Laws of Kenya in its revised edition. Section 35(5) says an employee whose contract has been terminated under section 35(1)(c) is entitled to service pay for every year worked, on terms that must be fixed. The official text is published by Kenya Law at new.kenyalaw.org, and that is the text to check first.

One point needs care. The 15-day measure is repeated across Kenyan law firm guides, payroll sites and the Employment and Labour Relations Court's own reasoning in cases, but the subsection sentence in the official text does not spell out the number. Before you rely on 15 days in a dispute, read the full section and any schedule or regulation that sets the rate, and read the employee's contract, which can set a higher figure.

How to work out service pay, step by step

1. Confirm the contract is one that section 35(1) covers. A contract to pay wages daily ends at the close of any day without notice under section 35(1)(a), so the service pay route does not fit it. Contracts paid at intervals of one month or more end on 28 days' written notice under section 35(1)(c), and that is the route that leads to section 35(5).
2. Check the exclusions in section 35(6). If the employee is a member of any of the four schemes listed there, stop. No service pay is due under that subsection.
3. Count completed years only. Work from the start date to the last working day and keep only full years. A part year does not add to the total, although some sources read the Act's wording more broadly, so confirm the approach with HR.
4. Find the daily basic rate. Divide the monthly basic pay by the divisor you have agreed. Many calculators use 30 days, while some use 26 working days. Use basic pay, not housing, transport or overtime allowances, unless the contract says otherwise.
5. Multiply the daily rate by 15, then by the number of completed years. That is the statutory amount on the 15-day measure.
6. Compare the result with the contract and any collective agreement. The higher of the statutory amount and the contract's terms is the figure to pay.

A worked example with real numbers

Take an employee on a monthly contract with a basic salary of KES 60,000. She has worked four completed years and four months, and her employer ends the contract by written notice. She is not a member of NSSF and her employer runs no pension or gratuity scheme. She is therefore a candidate for service pay.

Using a 30-day divisor, the daily rate is KES 2,000. Fifteen days at that rate gives KES 30,000 for each completed year. Four completed years give KES 120,000. The four extra months do not count, so they add nothing.

Using a 26-working-day divisor, the daily rate is about KES 2,308. The same method gives about KES 138,460. The gap of more than KES 18,000 comes entirely from the divisor, which is why the calculation should state the divisor in writing. Settle the method with HR before the final payslip is prepared.

The cases that change the answer

The table below sets out the situations that most often change the result. The first column describes the case, the second gives the answer under the Act as read in this guide, and the third gives the reason.

No statutory cap on the 15-day measure appears in the official sources. The contract is the main limit in practice. An employer can offer more than the statutory minimum, and a contract that offers less cannot override the Act for the statutory items.

Automation has a limit here. A worked figure cannot tell you whether a scheme is registered, whether an employer's remittances were made, or how a court will read a particular contract. Those facts sit in documents and in judgment, not in a formula.

Common mistakes

The first mistake is using gross pay. Most guides in this area point to basic pay as the base, so a payslip with large allowances will produce a much larger figure if gross is used. Check the contract's definition of basic pay before running any number.

The second mistake is treating NSSF membership as proof of exclusion without checking that contributions were recorded. Kenyan courts have not spoken with one voice on this point. In Hassanath Wanjiku v Vanela House of Coffee, the court held that NSSF membership excluded service pay even where the employer had not remitted, while a 2017 judgment, Martin Ireri Ndwiga v Olerai Management Company, described service pay as dues owed to an employee who did not enjoy statutory deductions. Pull the NSSF statement and the remittance records before deciding.

The third mistake is applying the service pay rules to a redundancy. A redundancy exit falls under section 40, which has its own process and its own payment. Using the wrong section can lead to the wrong figure and the wrong letter.

The fourth mistake is rounding up part years. Four years and eleven months is still four completed years under the readings most sources give, and the extra months should be dealt with under the contract and leave rules, not added to service pay.

Service pay is not redundancy severance

Section 40 of the Employment Act, 2007 deals with redundancy. Where a role is made redundant, the employer must notify the labour officer in writing and consult the affected employees, and the severance payment is at least 15 days' pay for each completed year of service. The rate looks the same as service pay, which is why the two are often mixed up.

The trigger is different. Service pay follows a contract ended by notice under section 35(1)(c), and section 35(6) removes it for certain scheme members. Redundancy severance follows a redundancy decision under section 40. The exclusions in section 35(6) are written for section 35, so on their wording they do not automatically remove a redundancy payment. Several guides state that NSSF membership does not block statutory severance, but that reading should be confirmed with a lawyer for each case.

A redundancy also brings notice pay and accrued leave under the Act's rules on final dues. Service pay does not replace those items. Check each one separately on the final statement.

What to check with HR or a lawyer

Ask HR for the employment contract, the statement of terms, and the payslips for the final 12 months, so the basic pay can be confirmed. Ask for the NSSF statement and proof that contributions were remitted each month. Confirm whether the employee belongs to a registered pension or provident fund, a gratuity scheme under a collective agreement, or an employer scheme, and ask for the rules of each.

Confirm the divisor, the start date and the end date in writing, and record the number of completed years. Check whether the termination was by notice under section 35(1)(c) or by another route, because the route decides which section applies. If the employer is considering a redundancy or any change to pay or roles, the notice, consultation and severance rules of the Employment Act apply, and the change should be agreed with the employee or checked with a lawyer before it is made. Ask the payroll team how the final package is taxed under the Income Tax Act, and check the current treatment with the Kenya Revenue Authority.

This explains the rule in general terms; it is not legal or tax advice for your case.

How AI workers handle this routine work

Employers with many leavers each year can have an AI worker pull start dates, basic pay and scheme membership from the payroll and HR records, count completed years on the divisor the business has chosen, and prepare a draft exit statement for HR to check. The worker flags any missing NSSF or pension record for a person to follow up. It does not decide whether an exclusion applies or whether a redundancy process was followed. HR and, where needed, a lawyer still make those calls, and the draft is only as accurate as the records behind it.