The contract of service

  • The difference between an employee & an independent contractor

There is a difference between a ‘contract of service’ and a ‘contract for service’. The latter applies where one seeks to engage an independent contractor, otherwise known as a consultant.

A contract of service, as per the definition in the Act, captures the employer/employee relationship, where the person employed agrees to serve the other for a period of time in return for a wage or salary.

The test as to whether one is an employee or a consultant is a long established one.

An employer controls not only the work to be done but also the manner in which the work is done. The employer will e.g. define the working hours, pay a salary, give leave, define the job description etc. whereas a consultant is deemed an expert whose manner of working is not defined or dictated by anyone – the task or scope of work is clearly outlined and the consultant/independent contractor is left to determine the ‘how’ and he is paid a fee at such times and in such manner as may be agreed.

An employer cannot run away from the obligations placed on him by calling a person, who in essence is an employee, a consultant.

Whenever an issue arises as to whether a person is an employee or an independent contractor, the courts or the Kenya Revenue Authority will look at the substance of the agreement and not the form, simply put, you cannot make a person a consultant by giving him a consultancy agreement, the essence of the agreement must embody such an arrangement.

See: –

EVERRET AVIATION LIMITED v KENYA REVENUE AUTHORITY (THROUGH THE COMMISSIONER OF DOMESTIC TAXES) [2013] eKLR, http://kenyalaw.org/caselaw/cases/view/88693

STANLEY MUNGAI MUCHAI V NATIONAL OIL CORPORATION OF KENYA[2012]eKLR, http://kenyalaw.org/caselaw/cases/view/86630

Oral or written?

An employment contract may be oral or written.

A contract that is for three (3) months or more should be written and it is the employer’s responsibility to: –

  1. reduce the terms of the contract into writing;
  2. to ensure that the contract is written in a language which the employee understands; and
  3. to obtain the employee’s consent to the contract which is by way of a signature or thumbprint (Section 9).

Consequences of not issuing a contract?

It is an offence to fail to issue an employment contract (Section 16(4)). The employer is liable to a fine not exceeding Kshs. 100,000/= or to imprisonment for a term not exceeding two (2) years or both.

An employee can complain to the labour officer if his employer fails to issue an employment contract that complies with the Act.

In the event of a complaint, the Employment & Labour Relations Court has the power to either: –

  1. Confirm the terms given by the employer; or
  2. Amend the terms; or
  3. Substitute the terms as the Court may consider appropriate.

If an employer seeks to rely on any term which the employer alleges forms part of the contract and yet he failed to issue a written contract, the burden falls on the employer to prove that the alleged term formed part of the contract.

Next post on…the terms and employment particulars that must be included in every employment contract

About Anne Babu

Anne is an Advocate of the High Court of Kenya and the Founding Partner of Anne Babu & Co. She has practised employment law for over 12 years and her employment law practice has been recognized by the prestigious Chambers & Partners. Anne cares about employers and their labour issues.


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Comments

  1. Anonymous says:

    i thought a contract could even be verbal according to the Employment Act?

  2. Anne Babu says:

    Yes, I have indicated that the contract can be oral or written. A contract for 3 months or more is however required to be written.

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