Terminal dues in Kenya: what you owe when an employee leaves

When someone leaves, the final payslip is the one most likely to end up in front of a labour officer. It is also the one most often done by hand, at speed, in the last week of the month. Here is what Kenyan law requires you to pay, and the order to work it out in.

What terminal dues are made of

Whatever the reason for leaving, the final payment normally has four components:

1. Wages up to the last day worked, prorated for the part-month.
2. Accrued but untaken annual leave, paid in cash.
3. Notice pay, where notice was not given or not worked.
4. Service pay or severance, where it applies.

Add any contractual items — an outstanding commission, an approved bonus, unclaimed per diems — and deduct anything genuinely owed to the employer, such as an outstanding salary advance or staff loan.

Proration: the part-month

If someone leaves on the 12th, they are paid for the days actually worked. Whether you prorate on calendar days or working days should be stated in the contract and applied consistently, because the two produce different answers and inconsistency is what gets challenged.

Accrued leave

Annual leave accrues at 1.75 days per completed month of service. Take the accrued figure, subtract days already taken, and value the remainder at the employee's current daily rate. See our guide to leave entitlement for how accrual works in full.

Notice pay

Where the contract requires notice and it is not worked, the employer pays in lieu — commonly one month's salary, but the contract governs. Notice is a two-way obligation: an employee who leaves without notice may equally owe the employer.

Service pay under section 35(5)

Service pay is the part employers most often get wrong. Under section 35(5) of the Employment Act, it is payable to an employee whose contract is terminated — but only where that employee is not covered by an alternative scheme. If the employee is a member of NSSF, or a registered pension or provident fund, or a gratuity scheme under their contract, the statutory service pay obligation does not arise.

Since NSSF membership is mandatory for employees, in most modern Kenyan payrolls statutory service pay does not apply. Gratuity, by contrast, is purely contractual: if your contract or policy promises it, you owe it, on the terms you wrote.

Severance: redundancy only

Severance pay is not a general exit entitlement. It arises under section 40, in redundancy, at a minimum of 15 days' pay for each completed year of service, based on the last monthly wage. Redundancy also carries procedural obligations, including at least one month's written notice to the affected employee and to the labour officer. Getting the process wrong is a more common source of awards than getting the arithmetic wrong.

Pay it promptly

Final dues should be settled without delay — seven days after termination is the benchmark generally applied, and the Employment and Labour Relations Court has repeatedly awarded interest from the date of separation where employers dragged it out. A delayed final payment converts a routine exit into a claim.

A checklist for the last payslip

• Termination date recorded, and the employee actually marked as terminated in payroll
• Part-month prorated on the basis stated in the contract
• Accrued leave balance confirmed and valued
• Notice worked, waived or paid — and documented
• Gratuity checked against the contract; service pay checked against scheme membership
• Severance calculated only if this is a redundancy
• Advances and loans recovered
• Statutory deductions applied to the final gross
• P9 issued and the employee removed from next month's run

How Yolaworks handles exits

Yolaworks HR prorates the final month on working days, carries the untaken leave balance into the final payslip automatically, recovers outstanding loans and advances, and removes the employee from the next cycle so they cannot be paid twice. The termination is recorded with an audit trail. Free for 30 days, no card needed.