A Practical Guide to Lawful Retrenchment in Kenya

Retrenchment is one of the most legally sensitive employment actions an organisation can undertake. Kenya's Employment Act, 2007 imposes specific procedural requirements on employers that must be strictly observed to avoid costly unfair dismissal claims before the Employment and Labour Relations Court.

Before initiating a retrenchment process, employers should conduct a genuine business assessment demonstrating that the redundancy is necessitated by operational, economic, or structural reasons. Decisions driven by personal reasons unrelated to the employment position are likely to be set aside by the court.

The Act requires that an employer give at least one month's notice to the National Employment Authority and the affected employees' trade union (if applicable) before implementing any retrenchment. This notice must set out the reasons for the retrenchment, the number of employees affected, and the proposed selection criteria.

Selection criteria for retrenchment must be objective, non-discriminatory, and transparently applied. Common criteria include length of service, skills and competencies, and performance records. Employers should maintain comprehensive documentation of the selection process to withstand scrutiny in any subsequent legal challenge.

The quantum of severance pay is prescribed in the Employment Act — not less than fifteen days' pay for each completed year of service. Employers should ensure that final dues, including outstanding leave pay and any notice pay in lieu of notice, are computed accurately and paid promptly.