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Global Payroll Team
Written by Global Payroll Team
Last updated May 7, 2026
Expert Reviewed
Payroll in Kenya
Tax in Kenya
Immigration in Kenya

Kenya map

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Employer of Record/PEO and Payroll Services in Kenya

Mercans provides comprehensive payroll, professional employer organization (PEO), and human resources (HR) services in Kenya. These services help companies manage payroll, tax withholding, statutory contributions, and HR responsibilities efficiently, allowing them to focus on their core business operations while remaining compliant in the Kenyan market.

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Doing Business in Kenya

Doing business in Kenya requires understanding local company registration, licensing, tax, immigration, and labor law requirements. Kenya remains one of East Africa’s key commercial hubs, with opportunities in agriculture, manufacturing, financial services, logistics, telecommunications, technology, and consumer markets.

Entity Registration and Incorporation Requirements

A business must meet the relevant legal requirements to register and incorporate in Kenya. Incorporation typically involves choosing a business name, registering with the relevant government authorities, obtaining any required licenses and permits, and filing the appropriate statutory documents.

Banking

Banking Hours: Banking hours vary by institution and branch, but many banks commonly operate from Monday to Friday during standard daytime business hours.

Working Week

The standard office working week is commonly from Monday to Friday from 8:00 am to 5:00 pm, although actual working hours may vary by sector and wage order.

Labor Law

Labor law in Kenya governs the rights and obligations of employers and employees in the workplace. Key legislation includes the Employment Act 2007, the Labour Relations Act 2007, the Labour Institutions Act 2007, and the Occupational Safety and Health Act 2007. These laws cover matters such as wages, leave, notice, working time, health and safety, and termination.

Main Industries

Agriculture, manufacturing, financial services, trade, transport, tourism, information and communications technology

GDP Growth

4.7%

Dates & Numbers

dd/mm/yyyy

Official State Name

Republic of Kenya

Population

56.43 million

Capital

Nairobi

Major Languages

English, Swahili

Currency

Kenyan Shilling (KES)

Internet Domain

.ke

International Dialing Code

+254

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Kenya
Nairobi, KE
3:55 pm, May 13, 2026
23°C
broken clouds
60 %
Wind Gust: 0 mph
Clouds: 75%
Sunrise: 6:27 am
Sunset: 6:30 pm

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Payroll

Payroll in Kenya involves calculating and paying employees’ wages, withholding PAYE, and administering statutory deductions and contributions such as NSSF, the Social Health Insurance Fund where applicable, and the Affordable Housing Levy. Employers may manage payroll internally or outsource it to a professional payroll service provider, but they must comply with Kenyan tax and employment laws.

It is acceptable to provide employees with online payslips

Payslip

Payroll reports should be retained in line with applicable tax, payroll, and employment record-keeping requirements

Reports

Employees receive paid annual leave of at least 21 working days after every 12 consecutive months of service

Annual Leave

Employees receive paid sick leave of 7 days with full pay and 7 days with half pay, subject to the statutory conditions

Sick Leave

3 months of paid maternity leave and 14 days of paid paternity leave

Maternity & Paternity Leave

28 days

Employee Termination

There are no provisions mandated by law regarding the 13thmonth salary

13th month salary

The minimum wage varies depending on occupation and geographical location under the applicable wage orders

Minimum Wage

Overtime entitlement and rates depend on the applicable wage order and working arrangement

Overtime

Severance pay is generally payable in redundancy cases at not less than 15 days’ pay for each completed year of service

Severance Pay

PEO Kenya

Mercans PEO (Professional Employer Organization) services in Kenya provide a comprehensive HR outsourcing solution for foreign companies to establish a local presence, compliantly hire and manage employees, handle HR, payroll, benefits, tax compliance, and other administrative tasks, while reducing costs and administrative burden.

Through our Kenya PEO, we provide services that are flexible and cost-effective for companies seeking to outsource their HR and payroll processes. As a Professional Employer Organization, Mercans offers a range of services including employee benefits, payroll administration, and compliance with Kenya employment laws. By entrusting their HR and payroll needs to Mercans, companies can focus on their core business activities and ensure a smooth and efficient HR operation.

Partnering with our Kenya PEO presents the fastest and most efficient way to enter the Kenya market.

Contact us to explore how PEO Kenya solutions from Mercans can support your seamless expansion!

Benefits of Hiring an Employee through a PEO in Kenya

Looking to expand your business in East Africa? Partnering with a PEO in Kenya provides a streamlined, cost-effective solution for hiring and managing employees while ensuring full compliance with local labor laws. Here’s how a Kenya PEO can support your business expansion:

Swift Market Entry

A PEO Kenya enables your business to hire local employees and begin operations quickly. This eliminates the need to set up a legal entity, allowing you to enter the Kenyan market faster and focus on your core business objectives.

Adherence to Local Employment Laws

Kenya’s labor laws govern employee rights, compensation, benefits, and working conditions. A Kenya PEO helps your business adhere to local employment regulations, including tax withholding and statutory contributions, reducing compliance risk.

Cost-Efficient Business Operations

Setting up a legal presence in Kenya involves considerable costs, from registration fees to office space and staffing. A PEO in Kenya allows you to bypass many of these costs by outsourcing HR functions such as payroll, taxes, and employee benefits management, helping you operate more efficiently.

Minimized Compliance Risks

Kenya’s labor and tax rules may change over time, and non-compliance can lead to penalties or disputes. A PEO Kenya helps mitigate these risks by staying updated on local regulations and supporting compliant employment practices.

Access to Skilled Local Workforce

Kenya is known for its rapidly growing, youthful, and skilled labor force, particularly in sectors such as technology, finance, agriculture, and education. A Kenya PEO can help you access local talent familiar with the regional market and business environment.

Simplified HR and Payroll Management

Managing payroll and HR tasks across borders can be complex. A PEO in Kenya handles employee-related functions, helping ensure that payroll, benefits, and tax compliance are managed accurately and on time.

Flexible Workforce Scaling

Whether you’re hiring a handful of employees or planning a larger workforce in Kenya, a Kenya PEO offers scalable solutions that adapt to your business needs. You can scale operations without taking on the full administrative burden of a local entity.

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Tax and Social Security

In Kenya, employers must comply with payroll tax and statutory contribution obligations. These include PAYE, National Social Security Fund contributions, and other applicable deductions and levies such as the Social Health Insurance Fund and the Affordable Housing Levy where required. The exact obligations depend on the employer, employee earnings, and the applicable legislation.

Tax

Employers must deduct and remit PAYE under the prevailing individual income tax bands. Corporate income tax is generally 30% for resident companies, while VAT is generally charged at 16% on taxable supplies. Kenya applies progressive personal income tax rates, with the highest band currently at 35%.

30%

Corporate Income Tax

35%

Personal Income Tax

N/A

Sales Tax

16%

VAT

Social Security

Kenya’s statutory payroll deductions may include NSSF pension contributions, Social Health Insurance Fund contributions, and the Affordable Housing Levy, depending on the applicable rules. NSSF contributions are based on a tiered structure, while other deductions may be calculated as a percentage of income or payroll.

Varies

Social Security Rate

Varies

Social Security Rate for Employers

Varies

Social Security Rate for Employees

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Employment Law

Employment law in Kenya governs the rights and obligations of employers and employees in the workplace. It includes laws related to hiring, wages, hours of work, leave, termination, labor relations, and workplace safety.

Employment Agreement

An employment agreement in Kenya is a contract between an employer and an employee that outlines the terms and conditions of the employment relationship, including duties, compensation, benefits, and termination provisions. Contracts for periods amounting to 3 months or more are generally required to be in writing.

Working condition

In Kenya, work hours and overtime rules may vary depending on the employment arrangement and the applicable wage order. Employees are generally entitled to weekly rest periods and statutory protections relating to safety, health, and fair working conditions.

Leaves

In Kenya, employees are entitled to various types of leave, including annual leave, sick leave, maternity leave, and paternity leave, with the relevant rules and minimum entitlements set out in the Employment Act and any applicable collective bargaining agreement.

Employment termination

Employment termination in Kenya must comply with the employment contract, the Employment Act, and any applicable collective bargaining agreement. Employers are generally required to follow fair procedure and have a valid reason for termination where the law requires it.

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28 days

Minimum notice period for terminating an employee paid monthly

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Varies by year

Total number of public holidays

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Varies

Working hours per week

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Varies

Total number of days for Compassionate & Bereavement Leave

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Immigration

Employees moving to Kenya for work purposes generally need a valid work permit and, where applicable, the appropriate visa or immigration status. Applications are submitted online through the Foreign Nationals Service portal and require employer and employee supporting documentation.

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Residency permits

For employees who have come to Kenya for work, the relevant work permit and foreign national registration requirements must be completed in order to reside and work legally in the country. The exact requirements depend on the permit class, the employee’s nationality, and the purpose of stay.

Work Permit Validity

Typically up to 2 years, subject to the permit class and renewal approval

Required Documents

Duly filled and signed application Form 25

Signed cover letter from the employer addressed to the Director General of Immigration Services

Copies of the foreign national’s passport bio-data page

Current immigration status if already in Kenya

Recent colored passport-size photograph

Valid Tax Compliance Certificate for the company and, in renewal cases, any other required tax compliance documents

Compliant, reliable, error-free and touchless payroll in Kenya

Build the best team and hire top talent compliantly in Kenya. Get in touch with Kenya payroll outsourcing & PEO specialists for a free consultation!

This document was prepared for informational purposes only. As local laws & regulations keeps on changing. Please consult your tax & legal advisors as well.
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    FAQs

    What is an Employer of Record (EOR) in Kenya and how does it support foreign companies?

    An Employer of Record in Kenya, provided by Mercans, serves as the legal employer for your team in the country. Mercans manages employment contracts, payroll processing, tax withholdings, and labor law compliance so your company can hire employees in Kenya quickly and legally without setting up a local entity.

    Why should businesses use an EOR instead of setting up a legal entity in Kenya?

    Working with Mercans as your EOR in Kenya eliminates the need to register a company locally. This approach reduces setup time and cost, ensures compliance with Kenyan employment and tax laws, and allows you to start operations immediately while Mercans handles all HR and payroll responsibilities.

    How does payroll outsourcing in Kenya ensure compliance with tax and labor regulations?

    Mercans’ payroll outsourcing services in Kenya guarantee full compliance with local tax, labor, and social security requirements. Salaries, deductions, and statutory filings are managed accurately and on time, minimizing legal risks and ensuring smooth payroll operations under Kenyan law.

    Can an Employer of Record in Kenya hire employees and manage work permits for international companies?

    Yes. Mercans can hire employees on behalf of your company and manage the entire process for work permits, visas, and residence approvals for foreign staff. This ensures your business can operate in Kenya without delays or compliance challenges.

    What are the key benefits of using EOR and payroll services in Kenya for global expansion?

    Partnering with Mercans for EOR and payroll in Kenya offers fast market entry, complete compliance, reduced administrative workload, access to local HR and payroll expertise, and the flexibility to scale your workforce as your business grows.

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