A redundancy in Kenya is lawful only where the employer can show both a genuine business reason and a fair process under section 40 of the Employment Act 2007. In practice that means proving the loss of the role, notifying the employee and the labour officer, consulting meaningfully, selecting on objective criteria, and paying severance and final dues correctly. The Employment and Labour Relations Court tests each limb, and a failure on any one can render the dismissal unfair.
Section 2 of the Employment Act defines redundancy as the loss of employment through no fault of the employee, where the employer’s need for that work has ceased or diminished. The reason is therefore the role, not the person. That distinction matters, because the courts treat a “redundancy” used to disguise a performance or disciplinary dismissal as unfair.
The governing standard comes from the Court of Appeal in Kenya Airways Limited v Aviation & Allied Workers Union Kenya & 3 others [2014] eKLR: a redundancy is lawful only where there is substantive justification for declaring it and procedural fairness in carrying it out. The airline could establish a commercial reason but could not show how it had selected the employees it released, and so failed the second limb. Read together with sections 43 and 45 — under which an employer must prove the reason for a termination, failing which it is unfair — the message is that the burden of proving both the reason and the process sits squarely on the employer.
Two related statutes can add obligations. The Labour Relations Act 2007 governs consultation with a recognised union under a collective bargaining agreement, which may prescribe its own notice and selection rules. For public bodies, the Fair Administrative Action Act 2015 layers on administrative-fairness duties. Disputes are heard by the Employment and Labour Relations Court (ELRC).
1. Establish and document the business case. Before anything else, fix the commercial reason — restructuring, automation, closure of a function, a downturn — and record it. This is the evidence of substantive justification.
2. Give the statutory notices. Section 40(1)(a) and (b) require written notice of the intended redundancy both to the affected employee (or, where the employee is a union member, to the union and the labour officer) and to the labour officer for the area. Notice to the labour officer is frequently overlooked and is a common reason redundancies are struck down.
3. Consult genuinely. Consultation must be real and aimed at exploring whether the redundancy, or its scale, can be avoided — redeployment, reduced hours, voluntary exit. The notice period must be a genuine period, not a formality. In Mwikali v Flame Tree Africa Limited [2025] KEELRC 1809 (KLR), requiring the employee to hand over company property on the very day notice was issued defeated both the notice and the consultation, making the process unfair.
4. Select on objective criteria. Section 40(1)(c) requires selection with due regard to seniority, skill, ability and reliability. In London Distillers (K) Limited v Kenya Union of Commercial Food & Allied Workers [2025] KECA 216 (KLR), the Court of Appeal confirmed that these factors must be weighed together — an employer cannot lean on one (say, skill) and ignore another (say, seniority). The defensible tool is a written, scored selection matrix applied consistently across the affected pool. Selection must also be non-discriminatory: section 5 prohibits discrimination on grounds such as sex, pregnancy, disability, HIV status and others, so a matrix that disproportionately removes a protected group invites a separate claim.
5. Pay terminal dues correctly. On termination the employee is entitled to severance pay of at least 15 days’ pay for each completed year of service, notice pay under section 35 (or pay in lieu under section 36), accrued but untaken leave, and a certificate of service under section 51. Statutory deductions — SHIF, NSSF, PAYE and the Affordable Housing Levy — must be reconciled, and the tax treatment of each component checked, in the final settlement.
Employers often default to “last in, first out” (LIFO). LIFO can be one input, and seniority is expressly a statutory factor, but applying LIFO mechanically and ignoring skill, ability and reliability is exactly the single-factor approach the Court of Appeal warned against in London Distillers. The safer course is a transparent matrix that scores every affected employee against all the section 40 factors, retains the scoring, and can be produced if the decision is challenged.
Where the workforce is unionised, the recognition agreement and any CBA will usually require consultation with the union and may set enhanced terms. Where numbers are significant, courts expect correspondingly more rigorous consultation and a clearer paper trail. The Supreme Court’s reasoning in the Gatuma v Kenya Breweries line of authority underscores the broader principle: unilateral changes to terms or structure imposed without genuine consultation amount to an unfair labour practice, even where a business reason exists.
Under section 49, the ELRC can award up to 12 months’ gross salary in compensation for unfair termination, alongside the terminal dues, and in principle can order reinstatement or re-engagement, though that is uncommon in genuine redundancies. In our experience most successful challenges turn not on the commercial decision — courts rarely second-guess a real business reason — but on procedure: a missing notice to the labour officer, consultation treated as a box-ticking exercise, a selection the employer cannot explain, or miscalculated final dues. Because the burden of proving fairness rests on the employer, contemporaneous records are the difference between a defensible process and an expensive one.
Related reading: For guidance on structuring redundancies within a wider restructuring or business transfer, see our Workforce Transitions in Kenya guide.
This article is for general information only and does not constitute legal advice.
Substantive justification — a genuine business reason for the loss of the role — and procedural fairness in carrying it out, as confirmed in Kenya Airways v Aviation & Allied Workers Union [2014] eKLR.
The affected employee, or their union where applicable, and the labour officer for the area — in writing, before the termination takes effect. The notice to the labour officer is a frequent point of failure.
Not on its own. Seniority is a statutory factor, but courts require it to be weighed together with skill, ability and reliability; a mechanical LIFO that ignores the other factors risks being held arbitrary.
Severance is at least 15 days’ pay per completed year of service, in addition to notice pay (or pay in lieu), accrued leave and a certificate of service, with statutory deductions reconciled.
Up to 12 months’ gross salary in compensation under section 49, plus terminal dues. Reinstatement or re-engagement is possible in principle but uncommon in genuine redundancies.
