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Whose choice?

It’s the employer’s prerogative to decide what type of contract to give. This decision is dependent on several factors, including, the nature of the business.

A few types of contracts envisaged under the Employment Act, 2007 are: –

  1. Probationary contracts;
  2. Fixed term contracts;
  3. Open ended contracts;
  4. Contracts to perform specific work;
  5. Casual contracts; and
  6. Foreign contracts of service.

probationary_employmentProbationary contracts

A probationary contract is a contract for the duration of probation.

Benefits

It’s useful where an employer wants a quick exit from a contract since it’s terminable without giving reasons and without having to follow the termination procedure, by giving seven (7) days’ notice or by payment of seven (7) days’ pay in lieu of notice.

Popularity

Despite this easy exit, probationary contracts are not popular (especially for mid and senior management positions) because they offer little comfort to a potential employee who may have to consider leaving his open ended or fixed term contract for a probationary contract!

Duration

A probationary contract should not be for more than a total of twelve (12) months; it starts with an initial period of not more than six (6) months and it may be extended, with the consent of the employee, for a further period of not more than six (6) months.

It’s important to note that only a probationary contract can be terminated by the employer giving seven (7) days’ notice or paying seven (7) days’ salary in lieu of notice and without assigning reasons. If an employee is given a fixed term or open ended contract with a probationary period at the start, that is not a probationary contract and therefore the employer (i) must have a valid reason for terminating the contract (ii) the termination procedure must be followed and (iii) the notice period should not be less than twenty eight (28) days.

fixed term contractFixed term contracts

This is a contract for a specified period.

Benefits

This type of contract is favoured by a number of employers because:-

  1. It works well for work that is project based or funding based or seasonal;
  2. If an employee is declared redundant before the end of the contract, the employer is only bound to pay severance for the years served under the current contract as opposed to an open ended contract where the severance is based on the years served since employment;
  3. It may reduce the amount of damages awarded to an employee who is found to have been unfairly terminated – the maximum damages will not exceed the duration that was left to the end of the contract;
  4. If an employee is not performing, the employer may decide to wait out the contract and not to renew it – this reduces the litigation risk created by carrying out a termination.

The contract ends on expiry of its term and, unless provided otherwise in the contract, the employer is under no obligation to renew the contract. There is also no limit to the number of times an employer can renew a fixed term contract.

No communication after lapse of contract

If the contract lapses with no communication from the employer as to its renewal or not, our courts have held that the contract converts to a ‘month to month’ contract which can only be terminated for valid reason and after following the termination procedure set out in the Act. Such contracts therefore call for a good HR management system.

See: –

  1. Benson Odhiambo Onyango v Instarect Company Limited [2013] eKLR;
  2. William Omondi Nyahuru v Furniture International Limited [2014] eKLR;
  3. Josephat Ambubi Musumba & Another v Vegro Kenya Limited [2012] eKLR;
  4. Margaret A Ochieng v National Water Conservation & Pipeline Corporation [2014] eKLR.

Open ended contracts

Open ended contracts are popularly referred to as employment on ‘permanent and pensionable’ terms. They are seen as offering greater job security than fixed term contracts but since all contracts are terminable by either party, no contract can be rightly referred to as ‘permanent’.

Que: A number of organizations are moving from open ended to fixed term contracts, is this something that can be imposed on an employee?

Ans: That is a fundamental change to the employment contract that should only happen with prior consultation and consent of the employee.

Next post shall be on foreign contracts of service and casual contracts…

About Anne Babu

Anne is an Advocate of the High Court of Kenya and the Founding Partner of Anne Babu & Co. Advocates. She has practiced employment law for over 10 years. She is a repository junkie and a lover of editing.

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Comments

  1. Rebecca Wanjiku says:

    Hi Anne,
    Am working for a private firm as an Administrator. Am on a fixed contract, 1 year which normally ends in May 31st for several years now. This month the boss called me while I was at the hospital and informed me that there is no much work in the office and asked me to work for only 2 days in a week for the month of March. She is out of the country for holiday. How am I supposed to be paid assuming that my contract is not yet expired? How about for these 9 days I shall have worked for the month of March, do I receive full salary or for the days worked? Earn gross 49,250.00. Kindly advise. Rebecca

    1. Anne Babu says:

      You need to seek urgent clarification from your boss on what her intention is. It appears that she has unilaterally amended the terms of your contract as relates to working days and that would normally have a bearing on the salary.

  2. Robert Mwita says:

    Good Morning Lucy. I was just doing some research and stumbled on this piece. Wanted to kindly ask for clarification on a matter. I’m employed in a company and my contract expired 4 months ago and was not renewed. If I wanted to resign can I resign without a months notice since I did not renew my contract? If I do so will the employer have grounds to hold my one month salary? Your feedback will be highly appreciated.

    1. Robert Mwita says:

      Sorry. *Ann.

    2. Anne Babu says:

      You have a contract only it’s not written. You should give a month’s notice of termination.

  3. chelangat luiza says:

    Ann, what happens when you are seconded for 6 months to a company then they give you a 3 month fixed contract after the end of the secondment and later offer you a six month fixed contract after the end of the three months? None of these are probationary and there is no obligation to extend. Please advise.

    1. Anne Babu says:

      What was the initial contract period?

      1. chelangat luiza says:

        Hallo Ann, the contract was for 3 months. When it expired, a new contract was issued for 6 months.

        1. Anne Babu says:

          There is no limit to the number of fixed term contracts that can be issued by an employer.

  4. ANGELINE says:

    Hi Ann, Thanks for your continuous assistance with the Labour law information. Kindly assist.
    what happens if you approach your employees to have their contracts change from open contracts to Fixed term and they refuse.

    1. Anne Babu says:

      Such a change requires an employee’s consent because it is a change to a fundamental term of the contract. It cannot be forced on employees if they decline. You can apply to the future staff.

  5. ANGELINE says:

    HI Ann. Kindly assist. Why would an employer keep on filing disciplinary documents in the staff files if after one year those documents expire and cannot aide in deciding on disciplinary actions after one year.

    1. Anne Babu says:

      Employers are bound to keep all employment records for 5 years after termination.

  6. Andrew says:

    Hi Anne,
    The organisation that i currently work for has employed me through a different 3rd party. The issue is that my contract ended in June 2017 and has never been renewed but i still report to work as usual. My Old contract indicated that i need to give 1 months notice if i intend to resign but since i have no contract am i still mandated to follow that clause or i can give less than a months notice.

    1. Anne Babu says:

      The minimum notice period is dictated by the period after which you are paid; if you are paid monthly, you should give not less than one month’s notice.

  7. Steve Njuguna says:

    Hi Anne,
    Which salary should be legally used in calculating severance pay. Current or the one you started with?

    1. Anne Babu says:

      Salary as at the time of termination.

  8. brian says:

    Howdy Anne.
    After every contract there should be 7 days for what exactly?

    1. Anne Babu says:

      Hi Brian, not sure where you got that from. There is no such law as far as I know.
      Please take a minute to vote for the blog, we have been nominated in the Best Topical Blog category https://vote.bakeawards.co.ke/vote. Thank you.

  9. jane says:

    Dear Ann,I have worked for this particular company for 2 years now on fixed term contract.(1 year contract renewable) However this year,the company decided not to renew the contract when it ends (ending in may)due to economic reasons.My question is,do I qualify for severance pay.

    1. Anne Babu says:

      Severance pay is not payable if a contract ends by virtue of the end of its term.

  10. Joyce Maina says:

    Dear Ann,
    I am working for a Motor Spares Part Company doing Wholesaling and retailing of motor spare parts.
    recently we had a labor audit and the labor officers mentioned that we are doing an illegal thing to give our employees a fixed two years renewable contract. kindly advise.
    Is it the employer who chooses on the type of contract to give to his/her employees or where is it provided for in the statutes/EA about this?

    regards,
    Joyce.

    1. Anne Babu says:

      I see nothing illegal with that. The type of contract is at the employer’s discretion and there is no limit on the number of fixed-term contracts that an employer can issue. The contract should clearly state that renewal is at the employer’s discretion.

  11. Cheryl says:

    Hi.
    I’m an employer at a local software firm. Recently I had an issue with one of my employees with regards to the renewal of her contract. She was to renew her contract on 1st Jan 2018 but by the end of January she had not submitted the signed terms of service agreement to renew her contract. Upon enquiry she kept on giving excuses and ended up emailing a signed copy on 6th April 2018. This was however beyond the date for renewal contract. I served her with a notice of end of employment but she went ahead to report me to the employees court claiming that I had refused to pay her her salary and commission for a contract which was clearly not renewed. Please advise as I have been served with a demand order to pay her contrary to which I will face charges.

    1. Anne Babu says:

      Even if the contract was not officially renewed if you allowed her to continue working for you then the contract was extended by implication.

  12. Eunice says:

    Hi Anne,
    Is there any stipulated time period within which an employer should notify employees that their fixed term contract will not be renewed?

    Secondly, employees were given a one year fixed term contract. After the probation period they got confirmation letters stating that their probation period was successful. However the records state that the fixed term is counted a year from the date of the confirmation period. Now the employer does not intend to renew the contracts due to declining business. Will this affect the terms of an ended period considering it has been a year and 3 months after the contract was issued?

    1. Anne Babu says:

      If the contract period is over, the employer has no obligation to renew.

  13. Mike says:

    Hi Am Mike I have worked for a company for nearly one yr now, After the end of my probation which was stated in my offer Letter to be three months but maybe extended to six months; I have had no any other communication concerning my employment though I report to work as usual, my issue is am I illegally working with no binding contract and should I want to leave what notice period should I give

    1. Anne Babu says:

      Your confirmation is implied by the fact that the probation has ended and you have continued working. Your employer should issue you with a contract.

  14. Mike says:

    Anne Babu says:
    June 24, 2018 at 18:24
    Your confirmation is implied by the fact that the probation has ended and you have continued working. Your employer should issue you with a contract

    If I want to leave now considering the fact that I have not been given any contract what notice time should I give.

    1. Anne Babu says:

      30 days if you are paid monthly.

  15. Kathleen says:

    Hi Anne,

    Thank you for your insights. Is a fixed term contract supported by law? If so, which reference can I use? The union which covers our employees have challenged this and said it is not provided for by law.

    1. Anne Babu says:

      It is a recognized form of employment contract. The law provides for employment contracts in general and does not specify whether fixed term or open ended because that is the discretion of the employer.

  16. Mike says:

    Hi anne
    Do fixed term contracts for say 3 months require to have a probation period?

    1. Anne Babu says:

      It’s for the employer to decide whether or not probation is necessary.

  17. Mtaa Babji says:

    Hi Anne,

    I have been on an open ended/permanent and pensionable employment for 10 years which was converted to fixed term of 3 years. I’m I entitled to payment for the 10 years worked?

    1. Anne Babu says:

      What were the terms of the conversion? You either should have been paid before the conversion or an agreement reached to pay at the end of the 3-year contract.

  18. Hilda Amahundu says:

    Hi Anne

    I have a client who has hire employees without an explicit contract. Now they want to give them one. what does the employment law say about e.g. having an indemnity agreement?

    What are the risks if the company issues a contract with a new start date?

    1. Anne Babu says:

      They will have to get the employees to consent to the contracts and they should find a way of reassuring them that their previous years of service are carried forward into the new contract.

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