Kenya, which hosts the largest and the most diversified economy in East and Central Africa, is rising through the ranks to become a choice destination for foreign direct investment (FDI). Its strong growth prospects for international business are bolstered by a rising, urbanized middle class and a surging demand for high-value goods and services. As global brands increasingly invest in Kenya, the infrastructure is also advancing and the country is becoming the region’s premier economic, commercial, financial and logistics hub.
- Kenya’s location makes it a strategic gateway for multinational companies (MNCs) looking to gain access to the fast-growing East and Central Africa regions.
- The economy has recorded considerable progress in the past few years, with the growth rate expected to trend upward by more than 6% in upcoming years.
- The country has been ranked by the World Bank among the most favorable in Africa for the ease of doing business, earning high marks in access to credit, energy supply and corporate tax.
- Several trade preferential arrangements benefit Kenya, including the African Growth and Opportunities Act (AGOA) passed by the U.S. as well as the Economic Partnership Agreement (EPA), which grants duty free access to EU countries and other participants.
- Kenya is ranked as the second best country for innovation in Sub-Saharan Africa, according to the Global Innovation Index, with a particularly strong performance in research and development (R&D), logistics and labor productivity.
- The country offers a large English-speaking workforce, which is also among the region’s top educated, according to the World Bank. Qualified talent can be hired at cost-effective rates across industries and levels of expertise.
What should MNCs know about labor regulations before expanding or hiring in Kenya?
Kenya’s framework for employment and labor relations legislation is relatively new compared to many other countries around the globe. The current statutes are just over a decade old, following the promulgation of the country’s Constitution in 2010. These statutes have significantly changed labor law in certain aspects, greatly expanding the rights of employees. MNCs should note that because the legal framework is so new, it is still evolving and many of the shifts are aimed at improving labor conditions for workers. Offering an employee-friendly workplace can empower MNCs with a distinct competitive advantage.
How do employment contracts work in Kenya?
While both oral and written labor contracts are recognized in Kenya, a contract for a period of more than three months should be confirmed in writing.
MNCs should also note that, when a contract is written, there are some basic requirements that must be fulfilled in order for the terms to be valid. For example, the contract must be accompanied by a signature or a fingerprint of the employee to signify she or he has agreed to its terms.
There must also be an additional witness to the contract, which cannot be the employer. It is the duty of the employer to ensure a contract is written properly when required by law to avoid legal risk.
Are there any special regulations about terminations that MNCs should note?
When it comes to terminating an employee in Kenya, there is also legal risk that MNCs must understand. For example, the termination of an employee in Kenya must be for just cause or valid and fair reasons. This means a termination can be executed if it is related to the employee’s conduct, capacity and compatibility.
A termination can also be executed based on the operational requirements of the employer. However, an employee has the right to be heard prior to termination due to misconduct, poor performance or incapacity.
Different procedures are applicable and employers in Kenya, especially MNCs, should always exercise caution and seek expert advice. Specific protocol requirements will depend on the grounds and the mode of termination.
How has the business landscape in Kenya evolved in recent years?
Flexible work arrangements between employers and employees are becoming increasingly common in Kenya. Therefore, MNCs may want to explore how an employee’s work schedule can be structured to fit in a flexible time arrangement.
Remote work arrangements are also rapidly being embraced by many workplaces in Kenya, a trend sparked by the COVID-19 pandemic. While internet penetration still remains below 50%, connectivity continues to rise and the country offers some of the fastest internet speeds in Africa. Virtual work options may give MNCs a leg up when it comes to hiring in Kenya.
Why are some MNCs turning to the Employer of Record (EOR) model for hiring in Kenya?
While Kenya offers one of the most favorable environments in Africa for investment, expansion and hiring, there are still risks and challenges that can hamper success.
For example, the regulatory framework of the country is still in its early stages and the requirements are still evolving. As with any international business expansion, the HR team back in the home country is likely to be unfamiliar with the country’s regulations and customs.
Setting up a business as a foreigner can also be difficult in Kenya, with there being requirements for additional fees, local representation and registered capital. Instead of establishing a legal entity and hiring directly, MNCs often determine the EOR model to be a more viable, nimble solution for testing the waters in Kenya.
By partnering with a local EOR, such as GoGlobal, the MNC circumvents the pitfalls of setting up a company and administering cross-border payroll. At the same time, they mitigate many of the risks, requirements and restrictions that typically come along with hiring in Kenya – while still gaining access to the country’s cost-effective, productive talent pool.
How does GoGlobal help MNCs thrive in Kenya?
We have a track record of success in building fully compliant workforces all around the globe. GoGlobal’s innovative EOR solutions allow our clients to focus on the core business development activities that help them scale and reach new heights in Kenya – without being held back by the paperwork and requirements of HR processes.
When an MNC works with GoGlobal in Kenya, we assume the legal risks and take on the burdensome administrative tasks – such as employee termination – associated with managing a workforce.
Our goal is to help our clients provide an outstanding employee experience, while also maintaining compliance and mitigating risks. Before we onboard the worker, our local team in Kenya will meet one-on-one with him or her to thoroughly explain how the EOR arrangement operates. That same dedicated team remains the point of contact for both the client and client-worker throughout the arrangement. We are here to answer any questions that come up in payroll, taxation or benefits.
Thanks to our expertise in local requirements, customs and remote work, we infuse agility, efficiency and peace of mind into the end-to-end global hiring experience.