Employment contracts; what options are there?
3 years ago
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: –
- Probationary contracts;
- Fixed term contracts;
- Open ended contracts;
- Contracts to perform specific work;
- Casual contracts; and
- Foreign contracts of service.
A probationary contract is a contract for the duration of probation.
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.
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!
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 contracts
This is a contract for a specified period.
This type of contract is favoured by a number of employers because:-
- It works well for work that is project based or funding based or seasonal;
- 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;
- 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;
- 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.
- Benson Odhiambo Onyango v Instarect Company Limited  eKLR;
- William Omondi Nyahuru v Furniture International Limited  eKLR;
- Josephat Ambubi Musumba & Another v Vegro Kenya Limited  eKLR;
- Margaret A Ochieng v National Water Conservation & Pipeline Corporation  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…
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