Final Dues in Kenya: What Is Owed When Employment Ends?

When employment ends in Kenya, an employee is not automatically entitled to a standard “terminal package”.

What is actually payable depends on how the employment ended, what had already accrued, the employee’s contract or collective bargaining agreement, and whether the termination was lawful.

Some amounts, such as salary already earned, may be due regardless of why employment ended. Others, such as severance pay, arise only in specific circumstances.

The most important distinction is this:

Final dues are not the same thing as compensation for unfair termination.

An employee can be fully entitled to final dues even where the dismissal was lawful. Equally, an employee whose termination was unfair may be entitled to additional compensation on top of their ordinary final dues.

Final dues at a glance

Possible payment	When it may be due
Salary up to the last day worked	Generally due whenever earned and unpaid
Accrued annual leave	Due where leave has accrued and remains payable
Notice pay	Where the required notice was not served or paid, unless lawful summary dismissal or another exception applies
Severance pay	Only on redundancy
Service pay	Potentially under section 35, but generally not where the employee was covered by NSSF, a pension, provident fund or qualifying gratuity/service scheme
Gratuity	Only where provided by the contract, CBA, policy or applicable scheme
Overtime, commissions or allowances	Where already earned and contractually or legally payable
Compensation for unfair termination	Only where unfair termination is established or agreed
Certificate of service	Generally mandatory for employees who served at least four consecutive weeks

The starting point should therefore always be: why and how did the employment relationship end?

1. Salary up to the last working day

The most basic final due is unpaid salary for work already performed.

Section 18 of the Employment Act governs when wages and salaries become due. It also expressly provides that even where an employee is lawfully summarily dismissed, the employee must still be paid the money, allowances and benefits due up to the date of dismissal. (new.kenyalaw.org)

This means that summary dismissal does not wipe out salary already earned.

For example, if an employee earning KES 90,000 per month is dismissed halfway through the month, the employer still has to account for the portion of salary earned up to the termination date, subject to lawful deductions.

The same principle applies when a fixed-term contract expires. Section 18 requires the employer to pay wages and allowances that had been earned but remained unpaid when the contract came to an end. (new.kenyalaw.org)

2. Accrued annual leave

An employee is generally entitled to at least 21 working days of paid annual leave after every 12 consecutive months of service.

Where employment ends after at least two completed months in a leave-earning period, section 28 provides for leave to accrue at not less than 1.75 days for each completed month in that period. (new.kenyalaw.org)

If leave has accrued and remains properly payable when employment ends, it should be included in the final computation.

Recent Employment and Labour Relations Court decisions continue to recognise accrued leave as part of terminal dues. (new.kenyalaw.org)

Can an employee claim unused leave going back many years?

Not necessarily.

Section 28(4) requires annual leave to be taken within the statutory leave cycle, with the balance generally being taken not later than 18 months after the end of the leave-earning period.

Recent decisions have repeatedly declined claims seeking to accumulate leave indefinitely, unless there was a proper basis for the carry-forward, such as leave having been requested and refused. (new.kenyalaw.org) (new.kenyalaw.org)

Employees and employers should therefore keep proper leave records rather than waiting until termination to reconstruct several years of leave history.

3. Notice pay

For monthly-paid employees, the Employment Act generally provides for at least 28 days’ written notice of termination unless the contract gives a longer period. (new.kenyalaw.org)

Many employment contracts simply use one month.

If an employer terminates employment immediately instead of allowing the employee to serve the applicable notice period, the employer will generally have to pay salary in lieu of notice under section 36.

The contract should always be checked because it may provide for a longer notice period, such as two or three months.

When is notice pay not due?

Notice pay may not arise where:

• the employee receives and serves the required notice;
• the employment ends through lawful summary dismissal;
• a fixed-term contract simply expires according to its agreed terms, subject to what the contract provides;
• the parties mutually agree otherwise; or
• another lawful basis for termination without notice applies.

Notice pay should therefore never be added automatically without first examining how the employment ended.

What if the employee resigns?

Notice obligations apply to employees too.

An employee who resigns without serving the required notice may become liable to the employer for the equivalent notice period.

The Employment and Labour Relations Court confirmed this principle in Ndeg’eri v Sankara Nairobi, where an employee who resigned with immediate effect was held liable for one month’s salary in lieu of notice. (new.kenyalaw.org)

There is, however, an important exception.

If an employee gives notice and the employer tells them to leave immediately

Suppose an employee gives the employer one month’s notice and intends to work through the month.

The employer responds:

“There is no need to serve the notice. Today will be your last day.”

Section 38 of the Employment Act provides that where the employer waives all or part of the employee’s resignation notice, the employer must pay the employee for the waived portion unless the parties agree otherwise. (new.kenyalaw.org)

The courts continue to enforce this provision. (new.kenyalaw.org)

This is frequently overlooked.

4. Severance pay

Severance pay is not payable whenever employment ends.

Under section 40 of the Employment Act, severance pay is a specific entitlement arising where employment is terminated through redundancy.

The minimum statutory severance pay is:

15 days’ pay for every completed year of service.

(new.kenyalaw.org)

For example, if an employee has completed six years of service and is declared redundant, the statutory minimum severance component is based on:

15 days × 6 completed years

A contract or CBA may provide a more favourable formula, such as 20, 30 or even more days per completed year.

What else must be paid in a redundancy?

Section 40 also requires, among other things:

• accrued leave to be paid;
• at least one month’s notice or one month’s pay in lieu; and
• severance pay of not less than 15 days’ pay for every completed year.

Recent decisions continue to treat these as core statutory redundancy entitlements. (new.kenyalaw.org)

A person who resigns, is dismissed for misconduct, or simply reaches the end of a fixed-term contract does not become entitled to severance pay merely because employment has ended. (new.kenyalaw.org)

5. Service pay

Service pay is often confused with severance pay.

They are different.

Section 35(5) provides for service pay in qualifying circumstances where a monthly-paid employee’s contract is terminated.

However, section 35(6) excludes employees who are members of certain alternative schemes, including:

• the National Social Security Fund;
• a registered pension or provident fund;
• a gratuity or service pay scheme established under a CBA; or
• another employer-operated scheme whose terms are more favourable.

(new.kenyalaw.org)

This is why many formally employed workers who were contributing to NSSF are not entitled to a separate statutory service-pay award.

The ELRC reaffirmed this in 2026, holding that an employee who was an NSSF member was not entitled to service pay under section 35(6). (new.kenyalaw.org)

How much is service pay?

Unlike redundancy severance, section 35 does not itself state a universal number of days for service pay.

In the absence of a better contractual term, courts have commonly applied 15 days’ pay for each completed year of service in qualifying cases. A 2025 appeal adopted that approach when reassessing a service-pay award. (new.kenyalaw.org)

But the entitlement should first be established before calculating the amount.

6. Gratuity

Gratuity is another term frequently mixed up with service pay and severance.

There is no general rule that every employee receives gratuity on termination.

Gratuity usually arises because it is provided for in:

• the employment contract;
• a collective bargaining agreement;
• an employer policy;
• a retirement or gratuity scheme; or
• another binding agreement.

The employee should therefore check the actual contractual terms.

A court will not ordinarily invent a gratuity entitlement where none exists.

For example, in a 2026 case, the ELRC distinguished benefits actually provided by the employer from a separate service-charge claim for which there was no contractual or CBA basis. (new.kenyalaw.org)

Is gratuity taxed?

There was an important change in 2025.

KRA confirms that the Finance Act, 2025 exempted gratuity earned from 1 July 2025 from income tax.

Gratuity attributable to periods before 1 July 2025 remains subject to the transitional tax treatment explained by KRA. (kra.go.ke)

This distinction can matter significantly for long-serving employees receiving gratuity covering several years.

7. Overtime, commissions, allowances and other earned benefits

Final dues can also include amounts that had already accrued before termination.

Depending on the employee’s terms, these might include:

• approved overtime;
• unpaid commissions;
• earned bonuses;
• travelling allowances;
• service charge;
• reimbursements;
• public holiday or rest-day pay;
• accrued contractual allowances; or
• other benefits already earned under a contract, CBA or employment policy.

These claims are not automatically payable simply because an employee lists them as “final dues”.

The employee must still establish the contractual, statutory or factual basis for the payment.

For example, in Matsyi v Solo, the court rejected or allowed individual heads of claim separately depending on the evidence supporting each entitlement. (new.kenyalaw.org)

This is why final dues should ideally be itemised, rather than paid as one unexplained lump sum.

8. Compensation for unfair termination

This is not an ordinary final due.

If an employer terminates employment unfairly, the employee may pursue remedies under section 49 of the Employment Act.

One possible remedy is compensation of up to 12 months’ gross salary. (new.kenyalaw.org)

But 12 months is the maximum, not an automatic award.

The court considers factors including:

• length of service;
• the circumstances of termination;
• the employee’s conduct;
• the possibility of obtaining alternative employment;
• whether the employee contributed to the termination;
• amounts already paid by the employer; and
• other relevant circumstances.

An employee cannot therefore simply calculate:

“My employment was terminated, so I am owed 12 months’ salary.”

The unfairness of the termination must first be established, and the amount of compensation is then assessed.

For example, in Nyangun v Cafesserie Limited, the court found the termination unfair but awarded three months’ salary, not twelve. (new.kenyalaw.org)

What happens after lawful summary dismissal?

A common misconception is that an employee who is summarily dismissed “gets nothing”.

That is incorrect.

Lawful summary dismissal can remove the entitlement to notice pay.

It does not ordinarily erase money the employee had already earned.

Section 18(4) expressly requires payment of money, allowances and benefits due up to the dismissal date even where summary dismissal is lawful. (new.kenyalaw.org)

Depending on the facts, final dues may therefore still include:

• salary already earned;
• valid accrued leave;
• earned commissions;
• reimbursements; and
• other benefits already accrued under the contract.

However, contractual benefits can sometimes be forfeited where the relevant contract or CBA expressly makes them unavailable following summary dismissal.

That issue has to be checked against the actual terms. (new.kenyalaw.org)

What is owed when a fixed-term contract expires?

Where a fixed-term contract reaches its agreed end date and simply expires, the employee is generally entitled to amounts already earned, including:

• salary up to the final date;
• applicable allowances;
• properly accrued leave; and
• any gratuity or end-of-contract benefit expressly provided for.

There is not automatically a right to be paid for the months that would have followed after the agreed expiry date.

The ELRC has continued to reject claims seeking salary for an unexpired contractual period where there is no contractual or legal basis for such anticipatory income. (new.kenyalaw.org)

Whether notice is required before expiry should be checked against the contract itself.

What is owed when an employee resigns?

A lawful resignation does not forfeit amounts the employee has already earned.

The employer should still account for matters such as:

• salary through the final working date;
• accrued leave properly payable;
• earned allowances, commissions or reimbursements; and
• contractual gratuity or benefits, where applicable.

The notice position must then be checked separately.

If the employee did not serve the required notice, the employer may have a claim for notice pay.

If the employee did give notice but the employer waived it, section 38 may instead require the employer to pay the employee for the waived period.

Certificate of service

A certificate of service is not money, but it is still an important statutory entitlement.

Section 51 of the Employment Act requires an employer to issue a certificate of service when employment ends where the employee worked for at least four consecutive weeks. (new.kenyalaw.org)

The certificate should state matters including:

• the employer’s name and address;
• the employee’s name;
• commencement date;
• nature and usual place of employment; and
• termination date.

The employer is not required to give a positive recommendation or testimonial.

The certificate simply records the employment relationship.

Failure to issue one can amount to an offence.

Can an employer deduct money from final dues?

Yes, but not arbitrarily.

Section 19 of the Employment Act permits specified deductions, including certain:

• statutory deductions;
• pension or provident contributions;
• agreed loan repayments;
• overpayments;
• losses attributable to an employee in the circumstances provided by law; and
• amounts authorised under a written agreement, court order, CBA or other lawful basis.

(new.kenyalaw.org)

An employer cannot simply deduct whatever amount it considers fair because an employee is leaving.

The basis for each deduction should be identifiable.

Section 20 also requires an itemised pay statement showing gross pay, deductions and net payment for employees covered by that provision. (new.kenyalaw.org)

For final dues, a written breakdown is therefore good practice and can prevent substantial disputes later.

Does the employer have seven days to pay final dues?

There is no universal rule saying every employee’s entire terminal package must always be paid within seven days of termination.

This misconception probably arises from section 18(5)(b).

That provision requires an employer, following dismissal, to submit specified information to the labour officer within seven days. It does not create a general seven-day deadline for payment of every possible terminal benefit. (new.kenyalaw.org)

Certain amounts are nevertheless already due under the normal wage-payment provisions, while other termination processes impose their own payment requirements.

In redundancy, for example, recent authority emphasises that the statutory section 40 payments are part of the redundancy process and are not something the employer should simply postpone indefinitely after termination. (new.kenyalaw.org)

The safer approach is to compute and settle final dues promptly and provide the employee with a proper breakdown.

Are final dues taxed?

Often, yes.

Salary, notice pay and many employment-related terminal payments remain subject to the ordinary tax rules.

KRA specifically states that payment in lieu of notice is taxable, and compensation received on termination of employment is also generally taxable employment income. (kra.go.ke)

Section 49(2) of the Employment Act also expressly provides that compensation awarded under the unfair-termination remedies is subject to statutory deductions. (new.kenyalaw.org)

There are exceptions and special rules, including the current gratuity exemption discussed above.

An employee should therefore distinguish between the gross terminal entitlement and the net amount ultimately received after lawful statutory deductions.

Worked example: ordinary termination without notice

Assume an employee:

• earns KES 100,000 per month;
• is terminated immediately by the employer;
• is entitled to one month’s notice;
• has properly accrued leave worth KES 35,000; and
• has KES 60,000 salary already earned but unpaid.

Their ordinary final-dues computation might include:

Item	Amount
Unpaid salary	KES 60,000
One month’s notice pay	KES 100,000
Accrued leave	KES 35,000
Gross final dues	KES 195,000

Statutory deductions may then apply.

If the dismissal was also unfair, compensation under section 49 would be a separate question, not part of this basic calculation.

Worked example: redundancy

Assume an employee:

• earns KES 80,000 per month;
• has completed five years of service;
• is declared redundant;
• has accrued leave worth KES 40,000; and
• is paid one month’s salary instead of serving the redundancy notice.

At the statutory minimum, the relevant components could include:

Notice pay

KES 80,000

Accrued leave

KES 40,000

Severance

15 days’ pay × 5 completed years.

The precise payroll calculation should be checked against the applicable wage basis, contract or CBA, but the statutory entitlement is not less than 15 days’ pay for every completed year.

If the contract or CBA provides 30 days per year instead, the more favourable contractual term applies.

Common mistakes employees make

Assuming every termination attracts severance

It does not.

Severance is specifically linked to redundancy.

Assuming long service automatically creates gratuity

It does not.

The contract, CBA, policy or applicable scheme must provide a basis for gratuity.

Claiming service pay despite NSSF membership

Section 35(6) generally excludes employees covered by NSSF and specified alternative schemes.

Automatically adding 12 months’ salary

Twelve months is the statutory ceiling for unfair-termination compensation, not a standard final benefit.

Ignoring deductions

A quoted gross figure is not necessarily what will reach the employee’s bank account.

Common mistakes employers make

Paying one unexplained lump sum

A figure such as:

“Final dues: KES 320,000”

may create more disagreement than it resolves.

A better computation separates salary, leave, notice, gratuity, severance, deductions and net payment.

Treating final dues as conditional on accepting the termination

Accrued salary and other established statutory or contractual entitlements do not disappear simply because an employee challenges the dismissal.

Calling service pay “severance”

The two have different legal foundations and should be identified correctly.

Withholding accrued dues because of misconduct

A lawful summary dismissal can affect notice and some contractual benefits, but salary and other amounts already earned must still be accounted for.

Forgetting the certificate of service

Payment is not the employer’s only obligation when employment ends.

What should an employee ask for?

Where the amount is unclear, an employee should ask for a written computation showing:

1. the final salary period;
2. leave balance used in the calculation;
3. notice pay, if any;
4. severance, service pay or gratuity, if any;
5. commissions, overtime or other accrued benefits;
6. every deduction made;
7. the net amount payable; and
8. the certificate of service.

This allows the employee to identify the actual disagreement rather than simply saying “my final dues are wrong”.

How long do you have to bring an employment claim?

Employment claims should not be left indefinitely.

The current Employment Act provides a general limitation period of three years for claims arising from employment, while claims characterised as continuing injury or damage are subject to a shorter period of 12 months after the continuing injury ceases. (new.kenyalaw.org)

Recent decisions continue to apply these limits to claims involving matters such as historical leave, underpayments and other continuing employment breaches. (new.kenyalaw.org)

Employees who dispute their terminal dues should therefore deal with the issue promptly.

Frequently asked questions

Is everyone entitled to severance pay?

No.

Severance pay is a statutory entitlement arising specifically from redundancy under section 40 of the Employment Act.

Is everyone entitled to service pay?

No.

Employees who were members of NSSF or certain pension, provident, gratuity or service-pay schemes are generally excluded under section 35(6).

Does summary dismissal mean I get no final dues?

No.

Even after lawful summary dismissal, money and benefits already earned up to the dismissal date remain payable.

Do I get one month’s notice pay if I resign?

Normally, no.

If you resign, you ordinarily give the notice rather than receive it.

However, if you properly give notice and the employer tells you not to serve the remainder, section 38 generally requires the employer to pay for the waived portion unless you agree otherwise.

Can my employer withhold my final salary because I have not cleared?

A clearance process can identify legitimate company property, loans or other lawful liabilities, but it does not create an unlimited right to withhold earned wages.

Any deduction must have a lawful basis under section 19 or another applicable law or agreement.

Is compensation for unfair termination part of final dues?

Not in the ordinary sense.

Final dues are amounts that have accrued or become payable when the employment relationship ends.

Unfair-termination compensation is a separate remedy that arises if the termination is successfully challenged or the employer agrees to compensate the employee.

Can I claim unused leave for my entire period of employment?

Not automatically.

Annual leave is intended to be taken rather than accumulated indefinitely, and section 28(4) limits the ordinary carry-over period.

The facts and employment records should be reviewed where historical leave is disputed.

Are final dues subject to PAYE?

Many components are taxable.

Salary, notice pay and termination compensation are generally subject to the applicable tax rules. Gratuity earned from 1 July 2025 is subject to the newer exemption announced by KRA. (kra.go.ke)

The practical rule

When employment ends, do not begin by asking:

“How much severance am I entitled to?”

Start by asking:

How did the employment end? What had already accrued? What does the contract provide? Was proper notice given? Was this a redundancy? Was the employee covered by NSSF or another retirement scheme?

Once those questions are answered, the final-dues calculation becomes much clearer.

A proper terminal computation should separate each entitlement rather than hiding everything inside one lump-sum figure.

This guide provides general information on Kenyan employment law as at 18 September 2026. It is not legal advice on a specific termination. Employment contracts, collective agreements, workplace policies and the circumstances of termination can materially change the amounts payable.