How to Find and Pay Contractors in Kenya: A Guide for US Employers
With its strong tech industry and English as one of its official languages, Kenya is a great place for US companies to hire remotely. Learn best practices for hiring and paying contractors there.
Published on May 27, 2022
Contracts of employment 📑Although a contracts of employment may be verbal, it must be accompanied by a written contract, unless the term of employment is only a few days. Any contracts that are longer than three months must be written, however. In Kenya, a written contract is called a "written statement of particulars." These statements must include:
- the employee's name
- the employee's age
- the permanent address of the employee
- the sex of the employee
- the employer's name
- the date of the start of employment
- the job description
- the place of work
- the work hours
- the type of contract, and whether it is for a fixed period or unspecified period
- the salary or rate of pay, and schedule in which employee will be paid
- the worker benefits
Contract for an unspecified period of timeIf no fixed period of employment is stated in a written statement, the contract is assumed to be indefinite. The employer and employee may terminate the contract at any point with written notice, but if a collective agreement specifies a worker's tenure restrictions, an employer must comply.
Contract for specified period of time 🗓If an employment contract does have a fixed period, or a specific end date, the employer-employee relationship must end on that date. Contracts for specified periods of time may be extended for no longer than a month.
Contract for a specific task (piecework employment) 👷♀️This contract is for independent contract work, where a worker is hired for a specific task or project. Once the task or project is complete, the contract ends.
Contract for casual employmentCasual employees do not work for more than twenty-four hours at a time, and are paid at the end of the day. A casual employee is not considered an independent contractor because they usually rely on directives from an employer. The employer usually provides tools for casual employees as well.
Hiring Foreign Contractors 👩💻A global business hiring in Kenya has many options for hiring workers. An employer may decide to hire an independent contractor because it is unclear how long a certain job will take, or how much work is available. Hiring contractors also typically cuts down the cost of payroll, as employers do not have income tax obligations, or social security taxes. They are also not required to pay for a contractor's statutory benefits. Instead, a contractor operates as their own entity, and pays their own taxes.
Tax obligations for foreign contractorsThe Kenya Revenue Authority uses a source-based tax system. This means that that income is subject to tax in Kenya only if it was obtained from Kenya. The Kenya Revenue Authority defines foreign income as: "income earned outside Kenya which would have been taxable in Kenya under Kenyan tax laws if it had been accrued or derived in Kenya or deemed to have accrued in or derived in Kenya."There are some exceptions, however. Employment income earned outside Kenya may be taxable in Kenya if the income is administered by a Kenyan resident individual. Kenyan income tax also applies to business income where a Kenyan operates their business partly in Kenya and partly outside Kenya.
The Employment Act and the Regulation of Wages and Conditions of Employment Act ⚖️While many employment regulations do not apply to contract workers, there are some acts that define the basic conditions of employment, of which any employer hiring in Kenya should be informed. This includes rules governing wages, working conditions, leave, and basic rights.Rules governing leave benefits, maximum working hours, and minimum wage do not actually apply to contractors because contractors are not in an employer-employee relationship, and therefore are not entitled to statutory benefits. Unlike regular employees, a contractor uses their own tools and methods to perform work. They also set their own rates for the work performed.
Forced laborOne of the employment laws that applies to all individuals, however, is the law against forced labor. The Employment Act defines forced labor as work that is involuntary and enforced by threat of penalty. Forced labor does not include:
- military service
- civic obligations
- work enforced by a court of law as punishment, as long the work is supervised by a public authority
- emergency work or services, such as in the event of a natural disaster or war.
- community service
Finding the right independent contractor 🕵️♂️Now that you know the basics of employment in Kenya, you can start to search for talent to hire. It's not always easy to find talent, especially when hiring from another country. Here are a few tips for making sure that you end up with the best person for a contract position.
Job search sitesThe first step in posting your company's job opening is to find a reputable job search site. In Kenya, popular job search sites include Brighter Monday, Career Point Kenya, and MyJobMag.
Role description 📝Companies tend to attract more applicants on job sites if they provide a detailed job description. In your job posting, make sure to include the job's specific duties, the ideal candidate's skillset, and the wages or salary. You will also need to specify what type of contract being offered, whether it's a contract for a fixed period, for a specific task, etc.The two official languages spoken in Kenya are English and Swahili. While you may be seeking an English speaker to contract for your company, it still would make sense for you to post the job description in Swahili.To translate the job description, you will need to hire a translation service. Seamless Events is one translation service used in Kenya that can assist in translating job materials, including job postings. Elite Translators is another translation service that can translate materials in multiple African languages, including Swahili.
Interviews 👥The most convenient method of interviewing job candidates is virtually, whether those candidates live abroad or locally. Just make sure you're mindful of the time difference!Kenya is in the East Africa Time Zone (EAT). This means the country is eight hours ahead of Pacific Standard Time, or five hours ahead of Eastern Standard Time. When you are scheduling an interview, try to schedule it for the early morning, if possible, so the meeting falls during normal working hours in Kenya.
Paying International Contractors 💸When it comes to paying an international contractor, companies have a few options. Below is a list of some of the payment options available when making international payments.
Bank transfers using SWIFT 🏛SWIFT stands for The Society for Worldwide Interbank Financial Telecommunications. SWIFT is a trusted network of banks used by financial institutions around the world, and many companies depend on it to wire electronic funds to contractors because it's a secure process, with little risk that the international money transfer will not arrive in the recipient's bank account.Fund transfers with SWIFT are conducted through a standardized system of codes that communicate different instructions for electronic fund transfers. Each bank or financial institution is assigned its own, unique code, called a SWIFT code or a Bank Identifier Code (BIC) that is either eight digits or 11 digits long.One con to SWIFT is that a fee is deducted each time there is a transfer. Unfortunately, these bank fees can add up, and reduce payments while hiking up payroll costs for your company. Another downside is that SWIFT fees are unpredictable: banks may charge a different fee for each transfer, even if transfers have been routed through that bank previously.
Money transfer companies 💳Remitly, Xoom (owned by PayPal), and Wise (formerly Transferwise), are just a few of the money transfer companies that conveniently operate online. Some transfer companies require company-issued debit cards to access funds, and a fee is charged every time the debit card is used. Instead of having direct access to payments, payees will have to go through the trouble of using one of these cards or withdrawing money from the service, which includes a withdrawal fee.When the payer makes a request for an wire transfer of funds from their bank to their worker's bank, they must provide:
- The recipient's contact information, including their name and address
- The recipient's bank details, including their bank account number and routing number
- The receiving bank's details, which include the name of the bank, address, and bank identifier (e.g., the routing number or the SWIFT code)
- The reason for the transfer
Traditional money transfer services 🏦You have probably heard of international transfer companies such as Western Union and MoneyGram. These traditional money transfer services are conveniently found online as well as in most major cities. One advantage to using these services is that they often have better markups on currency rates; however, these companies still charge percent-based fees or add markup fees for currency exchange.
Cryptocurrencies 🤑While cryptocurrency has been a hot topic recently, as businesses like Facebook are creating their own digital currency, not everyone has a system set up for sending or receiving crypto. Even with a system for receiving crypto as payment, digital currency will still be subject to exchange rates and possible fees.The Central Bank of Kenya Act, in addition to other laws, regulate local transfers and international money order transfers. Currently, cryptocurrency is not considered legal tender in Kenya, and no entity is allowed to remit payment with cryptocurrency such as Dogecoin or Bitcoin.
International Compliance ✅It is critical that a company is compliant with a country's labor laws if they intend to grow their business there. Certain requirements must be met in order to accept services from contractors, but many companies fall short without the proper support. Sometimes, companies try to limit their payroll costs and have their employees classified as independent contractors, resulting in major penalties. Even honest mistakes can lead to major legal trouble if a company isn't aware of a country's employment laws.Many companies find that hiring a team of HR experts is a prudent way to eliminate risks of misclassification of employees. With HR services like Pilot, a team of experts can help you navigate the complexities of hiring abroad.
The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.
Partnering with Pilot 🤝Our team of HR experts at Pilot can handle your company's payroll, benefits, compliance, and any other HR needs. Pilot's platform has fully supported hiring employees and contractors since day one, and we can help you figure out which option is best for your company. This way, you can focus on the other aspects of running a business that ensure your company's future as a global business.Contractors love us, too. Our payroll system supports payments in over 240 countries around the world. Unlike other payroll services, we don't mark up exchange rates, and we never require contractors to use an e-wallet to access their funds.
Going global isn't daunting when you partner with Pilot. 🤝
Book a FREE, no-obligation demo with one of our experts now.Schedule a demo