How employers are denying their workers permanent jobs

Employers are exploiting legal loopholes in the Employment Act (2007) to deny workers permanent employment.

This denies workers many benefits such as annual leave, medical insurance, housing and other allowances, and contributions to pension schemes.

A growing number of Kenyans are now working under fixed-term or contractual arrangements, with some going for years without transitioning to permanent roles.

The Employment Act 2007 recognises various types of employment contracts, including probationary contracts, which are intended to be of limited duration.

It is these short-term contracts that are now ="https://www.standardmedia.co.ke/national/article/2001517880/relief-for-workers-as-ruto-declares-pension-and-gratuity-tax-exempt">being inappropriately extended< for years, often without justifiable cause.

Section 42(2) of the Employment Act states:
“A probationary period shall not be more than six months but it may be extended for a further period of not more than six months with the agreement of the employee.”

Clause 3 further provides:
“No employer shall employ an employee under a probationary contract for more than the aggregate period provided under subsection (2).”

Yet despite these stipulations, many employers have resorted to using outsourcing agencies to perpetuate short-term contracts and evade responsibilities tied to permanent employment. The issue was brought into focus during Labour Day celebrations yesterday by the Central Organisation of Trade Unions (COTU) Secretary-General Francis Atwoli.

Atwoli urged foreign and local companies to stop outsourcing labour and instead hire workers directly, arguing that the practice undermines workers’ rights and entrenches exploitation.

“People are hired through the back door, outsourced at lower rates. They don’t pay taxes, they don’t contribute to Collective Bargaining Agreements, and there is no binding contract. They are slaves in our industries. This cannot be allowed in a free Kenya,” said Atwoli.

One of the key losses faced by contract workers is gratuity. This is a lump-sum payment made by an employer when an employee leaves their job, typically based on the employee’s salary and years of service.

While gratuity may also be paid in cases of termination due to injury or illness. However, failure to convert long-serving contract workers into permanent employees has effectively denied many their right to this benefit.

Speaking at the Labour Day event at Uhuru Gardens in Nairobi, President William Ruto announced a significant reform: gratuity will now be exempt from taxation.

“Additionally, all pensions and gratuity payments for both the public and private sectors will now be tax-exempt. This reform is a recognition of the service and sacrifice of senior citizens and workers, and a step toward ensuring that retirement is met with dignity, not distress,” said the President.

Lawyer Felix Muteti agrees that employers are manipulating legal grey areas to avoid granting workers permanent status. “There is a need to protect employees. The law must be reviewed to ensure sufficient safeguards are in place. That said, employment courts have played a critical role in addressing these gaps,” he noted.

He added: “The notion that one can retain a worker as a casual or on temporary terms indefinitely is, in fact, unlawful.”

In 2018, Esther Njeri Maina sued Kenyatta University for failing to recognise her as a permanent employee after nine consecutive years on contract. Initially hired in 2009 as a secretary on casual terms, she was repeatedly asked to sign short-term contracts, the most recent of which began in October 2018.

="https://www.standardmedia.co.ke/national/article/2001517857/workers-suffer-as-atwoli-too-young-to-retire-at-75">Njeri contended that she signed< the contracts under duress and that she had been denied maternity leave and sick leave entitlements. She also claimed she did not fully understand the terms, particularly concerning salary and benefits.

The Labour Court ruled in her favour, declaring that her prolonged service entitled her to permanent and pensionable terms. The court found that the university had violated her right to fair labour practices and ordered that her remuneration and benefits reflect permanent employment status.

While outsourcing is not illegal under Kenyan law, it is increasingly being abused. According to legal experts and labour rights groups, many outsourcing firms fail to comply with the provisions of the Employment Act, which recognises outsourced workers as employees of the outsourcing agency, not the client company.

The Act stipulates that outsourced employees must be provided with written contracts detailing their roles, wages, working hours, and other terms and conditions. Furthermore, it prohibits discrimination and requires equal treatment in terms of pay, working conditions, and access to benefits.