Withholding of salaries by employers: legal rights and remedies in Kenya

Withholding of salaries by employers in Kenya is generally prohibited under the Employment Act, 2007, except under certain specific legally recognized circumstances. This practice presents significant challenges for affected employees and has broader implications for the labour market and economy. Employers are required to pay employees their agreed-upon salaries according to contractual terms and legal provisions.

1. Legal Protection for Employee Renumeration in Kenya

1. The Employment Act 2007

Article 41 of the Constitution of Kenya enshrines Fair Labour Relation Practices, while the Employment Act serves as Kenya’s primary labour relations legislation and provides essential protections for workers. Under Section 17(1) it mandates that salaries must be paid by the 10th day of the following month either in person at the workplace or through bank transfer with the employee’s consent. While Section 19 provides for statutory and employee authorized deductions, Section 90 specifically provides for fines up to KES. 100,000 or imprisonment of up to 6 months to employers who illegally withhold wages.

Indeed, Courts have lived up to ensuring the employees provide consent for deductions to be made. In Jane Muthoni v. Greenpark Services Ltd [2019] eKLR, the employer deducted 30% of wages for “training costs” without written consent. The court ruled that the deductions were illegal under Section 19 and awarded KES 450,000 in refunds and damages.

2. The Labour Institutions Act (No. 12 of 2016)

To ensure employees are well protected from unscrupulous employers and exploitative practices, Section 73 mandates employers to maintain payroll records accordingly for at least five years. Section 64 empowers Labour Officers to mediate disputes and issue binding orders.

3. Regulations on Wage Payments

Stemming from the Labour Institutions Act and the Employment Act, several regulations have a bearing on wages such as the Regulation of Wages (General) (Amendment) Order 2022, the Regulation of Wages and Conditions of Employment Act among others. These regulations stipulate that salaries must be paid via bank transfer or cheque unless the employee agrees to cash payments where the employer must provide itemized payslips that show gross pay, deductions, and net pay.

2. Possible Remedies for Employees

1. Amicable Negotiations

As part of best practices, employees are advised to maintain proper records of their employment contract, payslips, communications with their employer over delayed payments. Usually, the first step entails issuing a formal demand citing Section 17 of the Employment Act through a demand letter seeking to have the withheld sums paid out within seven (7) days.

2. Filing a Complaint with the Labour Office

This entails lodging a complaint to the local labour officer who will then summon the employer and attempt to solve the issue through mediation. Depending on the outcome, the labour officer will issue a Certificate of Resolved or Unresolved dispute after which the disgruntled employee may proceed to Court. In case the employer ignores the Labour Officer, the issue may be lodged before the Employment Labour Relations Court (ELRC) for determination seeking for attachment of the employer’s property to recover the owed amount.

3. Escalation to the Employment and Labour Relations Court (ELRC)

Compared to mediation, litigation is more time consuming and would be the most preferrable option where the employer fails to comply with the orders of the labour officer or where an employee remains unsatisfied with their decision.

During these instances of pursuit of their right, the employee may face subtle retaliation from the employer either through demotion, reduction of salary or benefits, denial of access to facilities initially freely enjoyed among other possible scenarios. In these instances, Section 46(h) of the Employment Act protects against dismissal for asserting fair administrative and employment related rights. If dismissed, the employee can proceed to file a claim for unfair termination as well as constructive dismissal.

In extreme circumstances, the employer may declare bankruptcy. Employees are encouraged to register as preferential creditors under the Insolvency Act where wages owed within 4 months before bankruptcy would be given priority during the liquidation process. For instance, in Francis Mwangi Gichuhi v. Kevina Construction Ltd [2018] eKLR, the employer withheld 3 months of wages, citing cash flow issues. The court ordered the immediate payment of wages with 12% interest, emphasizing that financial hardship does not excuse failure to meet statutory obligations.

Upon successful litigation, Courts may order for full payment of arrears, reinstatement where the dismissal is related to the wage dispute, compensation through general damages among other remedies.

C. Employer Legal Compliance and Best Practices

1. 1. Record-Keeping and Payroll Management

Employers are encouraged to implement automated systems to track payroll to ensure timely payments and regularly audit payroll to ensure compliance with wage payment laws.

In the era of strict data protection compliance, employers should maintain thorough records of:

• Signed employment contracts.

• Payslips, bank statements, and other payment evidence.

• Employee consent forms for any authorized deductions.

2. Handling Financial Hardship

Many are the instances where an employer faces financial uncertainty or constraints to sustain operations and its current work force. As most organizations are profit oriented, harsh economic turns and steep market fluctuations may lead to marginal gains. Employers may negotiate payment plans by arranging for written agreements with employees to defer wages, including a clear repayment schedule.

Conclusion

In all instances pertaining to employment and labour relations matters, both employers and employees are encouraged to seek legal advice. Engaging the services of a legal practitioner not only mitigates litigation risks but also helps in setting standards for best practices by employers. By consulting with legal experts, they will be able to avoid illegal withholdings, improper deductions and compliance issues.

Withholding an employee’s salary without a valid legal or agreed-upon reason is a violation of basic labor rights and can result in serious legal consequences for employers. Exceptions to this rule, such as statutory deductions, court orders, or mutual agreements between the employer and employee, must be clearly documented and justified. Employers must ensure that wages are paid on time and transparently to avoid legal complications and protect their business reputation. If an employer withholds salary without proper grounds, the employee has the right to seek legal action through the Labour Office or the Industrial Court. It’s essential for employers to comply with the terms set out in the Employment Act, 2007, and ensure that any salary withholding or deductions are fully documented and legally justified.

Need Assistance?

Bellmac Consulting LLP offers expert guidance on recovery of withheld renumeration, employer compliance, and dispute resolution.