Employer of Record in Kenya: Legal Risks for Foreign Companies Hiring Remote Staff

A foreign company that wants to hire in Kenya without setting up a local entity often turns to an employer of record (EOR). The EOR becomes the legal employer of the worker, runs payroll and compliance, and the client directs the day-to-day work. It is a workable model, but it does not remove Kenyan employment, immigration or data protection law. We did not find a Kenyan statute that regulates employers of record by name, so this guide applies the general law to the main risks of an employer of record in Kenya.

Who is the employer?

The Employment Act defines an employer as any person, public body, firm, corporation or company that has entered into a contract of service to employ an individual, and includes its agent, foreman, manager or factor. A contract of service is an agreement, oral or written, express or implied, to employ or serve as an employee. The label in the paperwork therefore matters less than who actually contracts with, pays, directs and disciplines the worker.

In Mekubo v Vivo Energy Kenya Limited, a driver sued the company where he worked, which said a human resources outsourcing firm had seconded him to it. The ELRC found that his contracts, leave forms and a warning letter were all with the outsourcing firm, treated the client’s timesheets as a record of attendance, and held that he had not proved an employment relationship with the client. It recognised triangular arrangements, where the owner of the work does not directly employ the worker.

That is a first-instance, fact-specific judgment, and the claimant had no contract with the client. The contrast is Kenya Methodist University v Kaungania, where the Court of Appeal treated the host that issued its own appointment letters, paid the salary and set the duties as the principal employer, even though the workers were described as seconded. The lesson for an EOR structure is that the EOR must really be the employer: it should sign the contracts, pay the wages, hold the leave and disciplinary records, and run the termination process. The client should not issue appointment letters or pay the worker directly.

The worker still gets the Employment Act

Section 3(6) of the Employment Act makes its terms minimum terms and declares void any agreement to relinquish, vary or amend them. A template drafted for an employment-at-will jurisdiction does not displace the Kenyan floor, which includes twenty-one working days of annual leave (section 28), maternity and paternity leave (section 29), sick leave (section 30), twenty-eight days’ written notice for monthly-paid staff (section 35), severance of at least fifteen days’ pay per completed year on redundancy (section 40), and a fair reason and fair procedure before termination (sections 41, 43 and 45). Unfair termination can attract up to twelve months’ gross pay (section 49(1)(c)).

The risk is that the client drives dismissal decisions. The EOR remains the respondent in any Employment and Labour Relations Court (ELRC) claim and must be able to show a valid reason and a fair process. See our guide to the show cause letter for what that process needs.

If there is no EOR: hiring directly without a Kenyan entity

Section 3(1) applies the Employment Act to all employees employed under a contract of service by any employer, which on its face includes a foreign employer with no Kenyan presence. Section 23 lets the Cabinet Secretary require an employer that is not incorporated or resident in Kenya to pay a bond equal to one month’s wages for all its employees in Kenya. Section 86(2) gives the ELRC sole jurisdiction over such complaints.

On tax, the Tribunal’s judgment in Safaricom PLC v Commissioner of Domestic Taxes quotes the Income Tax Act’s definition of “employer” as including a resident person responsible for paying emoluments and any agent, manager or representative so responsible in Kenya on behalf of a non-resident employer. It also records that section 37 requires an employer paying emoluments to deduct and account for PAYE. Who bears those duties depends on who employs and pays, so take tax advice on the contract and invoicing.

Invoicing has also changed. The Kenya Revenue Authority’s summary of the Finance Act 2026 says that employee-related costs such as salaries, wages and statutory deductions are treated as disbursements for VAT where a supplier provides labour, outsourcing or employee placement services, and that most of the Act’s amendments took effect on 1 July 2026. An EOR’s services may fall within that description, so ask how the EOR will invoice salary costs and its own fee.

Immigration, data and classification risks

Foreign nationals working in Kenya

If the worker is not a Kenyan citizen, the permit question arises whatever the structure. Section 45(5) of the Kenya Citizenship and Immigration Act deems a person who performs work commonly done by an employee, for another’s benefit or at that person’s request, to be in employment with that other person. Section 45(2) requires the employer to obtain a work permit or pass before granting employment, and section 53 makes employing a foreign national without authority an offence. An EOR does not cure that, so settle the permit route before the start date. See our guides to work permit classes and the digital nomad permit.

Employee data crosses borders

Under section 4(b) of the Data Protection Act, the Act applies to a controller or processor not established in Kenya that processes the personal data of data subjects located in Kenya. Section 25 requires, among other principles, that personal data is not transferred outside Kenya unless there is proof of adequate safeguards or the data subject’s consent, and sections 48 and 49 set conditions for transfers. The EOR agreement should therefore deal with who is controller and processor, the transfer basis and security.

Do not use the contractor label to avoid the issue

Some clients engage Kenyan workers as contractors instead. In Mekubo, the court repeated the common-law factors used to decide whether a person is an employee: control, ownership of the tools of work, the chance of profit or risk of loss, and integration. A full-time worker under one client’s direction risks being treated as an employee whatever the contract says. Our guide to employee classification explains how that test plays out.

What to put in an employer of record agreement

The following is our recommendation. Name the EOR as the employer and say what the client may and may not do, for example that only the EOR signs employment documents. Allocate employment liabilities, with an indemnity for claims caused by the client’s instructions. Require the client to give notice before any proposed dismissal and to supply evidence and witnesses for a hearing. Require evidence of payroll and statutory compliance, add data processing and transfer terms, and plan the exit, including moving the workers into the client’s own Kenyan entity.