Employer of Record Kenya: The Complete Guide for Foreign Companies (2025)

An Employer of Record (EOR) is a third-party organisation that becomes the legal employer for your workers in Kenya, handling all employment-related responsibilities while you maintain day-to-day control of your team.

What is an Employer of Record and How Does It Work in Kenya?

An Employer of Record (EOR) is a service provider that legally employs staff on behalf of another company. In Kenya, this arrangement allows foreign companies to hire local talent without establishing their own legal entity in the country.

When you engage an EOR like BaseKenya, we become the legal employer for your Kenyan staff. This means we handle employment contracts, payroll processing, statutory deductions, and compliance with Kenyan labour laws. You maintain complete control over the work your employees perform, their schedules, and their day-to-day management.

The EOR model is particularly valuable for foreign companies that want to test the Kenyan market, need to hire quickly, or want to avoid the complexity and cost of setting up a local entity.

EOR vs. Setting Up a Legal Entity: Cost and Timeline Comparison

For many foreign companies, the decision comes down to EOR versus establishing a legal entity. Here is how the options compare:

Factor	EOR	Local Entity
Setup Time	5-10 business days	3-8 weeks
Setup Cost	Minimal (EOR fees only)	$3,000 - $10,000+
Ongoing Cost	$199/employee/month	Accounting, legal, office costs
Compliance Burden	EOR handles all	Your responsibility
Employment Liability	EOR assumes risk	Your company assumes risk
Local Director Required	No	Yes (for most structures)

The EOR route is typically faster and more cost-effective for companies with fewer than 10-15 employees or those testing market entry. Establishing a local entity becomes more economical at scale or when you need full operational control and branding.

Kenya Statutory Requirements: PAYE, NSSF, NHIF, and Housing Levy

Kenyan employers must comply with several statutory deduction requirements. Here is what the EOR manages on your behalf:

PAYE (Pay As You Earn)

PAYE is Kenya's income tax withholding system. Employers must deduct PAYE from employees' salaries based on progressive tax bands ranging from 10% to 35%. The deducted amounts must be remitted to the Kenya Revenue Authority (KRA) by the 9th of the following month.

NSSF (National Social Security Fund)

NSSF provides retirement benefits for employees. The new NSSF Act (2013) introduced a two-tier contribution system. Tier I contributions are mandatory up to a ceiling, while Tier II contributions apply to earnings above that ceiling. Total monthly contributions can reach KES 4,320 per employee, split between employer and employee.

SHIF (Social Health Insurance Fund) - Formerly NHIF

The SHIF replaced NHIF in 2024. All employees must contribute 2.75% of their gross salary toward national health insurance. Employers deduct this from payroll and remit to the Social Health Authority (SHA).

Affordable Housing Levy

Introduced in 2023, this levy requires both employers and employees to contribute 1.5% of the employee's gross monthly salary toward affordable housing initiatives.

What the EOR Manages vs. What the Client Controls

A common concern is loss of control. In reality, the division of responsibilities is clear:

EOR Responsibilities:

• Drafting and executing employment contracts compliant with Kenyan law
• Processing monthly payroll and payslips
• Calculating and remitting all statutory deductions (PAYE, NSSF, SHIF, Housing Levy)
• Maintaining employment records
• Handling employee queries on benefits and payroll
• Managing termination processes and severance calculations
• Ensuring compliance with Employment Act requirements

Client Responsibilities:

• Day-to-day management and supervision of employees
• Setting work schedules and deadlines
• Performance management and evaluations
• Training and professional development
• Deciding on promotions, disciplinary actions, and terminations (EOR executes)
• Defining job roles and responsibilities

How to Choose an EOR Provider

Not all EOR providers are equal. When evaluating options in Kenya, consider:

• Local expertise: Do they understand Kenyan employment law nuances?
• Transparent pricing: Are all costs published upfront?
• Technology: Do they provide payroll reports and employee self-service?
• Support: Will you have a dedicated account manager?
• Compliance track record: Can they demonstrate clean compliance history?

BaseKenya EOR Pricing

BaseKenya offers transparent, fixed pricing for our EOR service:

$199 per employee, per month

This includes all employment compliance management, payroll processing, statutory deductions, employment contracts, and dedicated support. No setup fees, no hidden costs, no minimum commitment.

Frequently Asked Questions

How quickly can I hire through an EOR?

With BaseKenya, onboarding typically takes 5-10 business days from receiving the employee's documentation. This includes contract preparation, KRA PIN verification, and payroll setup.

Can I convert from EOR to my own entity later?

Yes. We design our agreements to allow smooth transition when you are ready to establish your own Kenyan entity. Employee contracts can be transferred with their consent and continuity of employment preserved.

What happens if there is an employment dispute?

BaseKenya manages the legal aspects of any employment disputes as the legal employer. We work with you to resolve issues in compliance with Kenyan labour laws, minimising your exposure.

Do employees know they are employed through an EOR?

Yes, employees are aware that BaseKenya is their legal employer. However, they work exclusively for your company under your direction, and their payslips and contracts clearly reflect this arrangement.

Is there a minimum number of employees required?

No. BaseKenya works with companies hiring just one employee in Kenya, as well as those with larger teams. Our pricing remains consistent regardless of team size.

Ready to hire in Kenya? Book a free consultation to discuss your specific requirements and receive a written cost summary within 24 hours.