Employee or Independent Contractor? Kenyan Law on a Foreign Company’s Remote Worker

A foreign company relocating one worker to Kenya often asks whether it can treat her as an independent contractor to avoid local payroll. Kenyan law does not let the label decide. This article explains how the employee or independent contractor question is approached for a foreign company’s remote worker in Kenya, what the Employment Act says, and what follows from each answer.

The label does not decide

The Employment Act, 2007 defines an employee as a person employed for wages or a salary, and a contract of service as an agreement, oral or written, express or implied, to employ or serve as an employee for a period of time. Section 3(1) applies the Act to all employees employed under a contract of service. Nothing in these definitions turns on what the parties call the arrangement.

The Employment and Labour Relations Court applies that approach in practice. In Cynthia Anyango Adhiambo v Eidu Education Limited [2025] KEELRC 2276 (KLR), an employee was moved onto a consultancy agreement. She kept her title and job description, worked defined hours, could not take other assignments and was supervised. The court looked past the consultancy label, held that the relationship had been one of employer and employee throughout, and then assessed the termination of the “consultancy” under the unfair termination provisions of the Act.

The practical test is therefore how the relationship works: who controls the work and the hours, whether the worker is integrated into the business, whether she can take other clients, and who bears the commercial risk. A worker with a fixed salary, one employer, set hours and a manager is an employee on that reasoning, whatever the contract says.

Features that point toward a contractor include defined deliverables rather than hours, the freedom to choose methods and tools, the right to send a substitute, invoicing for results, and a genuine ability to serve other clients. Features that point toward an employee include a monthly salary, a reporting line, set working hours, company equipment, exclusivity and a job title inside the organisation chart. No single feature is decisive, and a court weighs them together.

Does Kenyan employment law apply to a U.S. contract?

This is the less certain part. Section 35(1) of the Act refers to contracts “made to be performed in Kenya” for its notice provisions, and section 88 preserves rights under a lawful contract of service made outside Kenya. Together they point to Kenyan protections applying to work performed here, even under a foreign contract. Part XI deals separately with foreign contracts of service attested by a labour officer, which is a different scenario. We have searched for a reported Kenyan decision squarely on a U.S.-law employment contract with a worker based in Kenya and have not found one, so a foreign employer should plan on the cautious assumption that Kenyan law may be applied.

What follows from each classification

An employee in Kenya brings the Act’s protections and the employer’s statutory duties. A contract of three months or more must be in writing under section 9(1). Termination must follow the fair reason and fair procedure rules, and the employer carries the burden of proving the reason under section 43. Unfair termination under section 45 can lead to compensation of up to twelve months’ gross salary under section 49. The tax and social security consequences are covered in our article on payroll registration for a foreign employer.

A true contractor falls outside the Employment Act and the payroll deductions, but she carries her own tax and social security position and has no statutory protection against dismissal. The risk is that a contractor label applied to an employee in substance does not remove those protections; it only delays the dispute until the relationship ends. The misclassification then arrives together with a claim for unfair termination and, potentially, a payroll compliance question for the period she worked. Our guide to ride-hailing drivers as employees or contractors shows how the same substance test works in a different sector.

The permit does not settle the question

The Class N permit is available both to a person working under an employment contract for a company registered abroad and to a self-employed person serving clients outside Kenya, as explained in our guide to the Class N digital nomad permit. The permit therefore fits either structure and says nothing about which one is correct. The facts of the working relationship decide that.

A written contract helps but does not protect a mislabelled arrangement. If the employer wants to rely on a contractor structure, the contract should describe the real relationship and the real working practice should match it, because a court will read the practice, not the paper.

Choosing a structure

If the employer wants control over hours and duties, the safe course is to treat the worker as an employee and decide who the employer is in Kenya. That can be the U.S. company directly, an employer of record, or a Kenyan subsidiary. If the employer wants a contractor, the relationship has to look like one: defined deliverables, freedom over hours and methods, the right to serve other clients, and her own invoicing.