Limits of Salary Deductions, Surcharges & Advances
2 years ago
An employer is permitted to make deductions from an employee’s salary provided the employee takes home not less than one-thirds of his salary (Section 19(3) of the Employment Act, 2007).
Whatever is not recovered from the employee’s pay as a result of the one-thirds rule, may be recovered from the employee’s future salary, or, if the employee is leaving employment, through court proceedings. It should never happen that an employee takes home nothing.
The penalty for non-compliance with these provisions is a fine not exceeding Kshs. 100,000/= or imprisonment for a term not exceeding two (2) years or both and the employer shall, of course, be liable to refund any amount that’s wrongfully withheld or deducted (Section 25).
Other than mandatory statutory deductions (P.A.Y.E, N.S.S.F & N.H.I.F), the permitted deductions are: –
- Union dues;
- Loans granted by the employer;
- Amounts permitted by the employee to be deducted;
- Amounts paid in error;
- Salary for days when the employee absents himself from work without leave or consent;
- Provident fund contributions;
- A reasonable amount for damage or loss of property caused by the wilful default of the employee;
- Shortage of money arising from the employee’s negligence or dishonesty where the employee is entrusted with receipt, custody and payment of money.
I recently came across a case of a driver who was surcharged for losses allegedly incurred by his employer as a result of his delay in reporting to work.
A surcharge is only permitted in the instances mentioned in items 7 and 8 above. Since the driver did not damage or lose any property neither was he entrusted with the receipt, custody or payment of money, the surcharge was unlawful.
A frequently asked question is whether an employer can simultaneously surcharge and terminate an employee, some argue that that’s a double punishment or double jeopardy. Put differently, should an employer retain an employee simply because the employee has been surcharged? Certainly not, the employer is entitled to recover the loss and terminate the employee .
The rule against double jeopardy is that an employer cannot use the same set of facts to punish an employee on two (2) separate occasions. Therefore, it has been held that: –
Once some form of disciplinary action is taken against an employee, the allegations forming the subject matter of the disciplinary process cannot be made the subject of future disciplinary action.
- Benson Mwania v Bestfast Cargo (K) Limited  eKLR;
- Banking Insurance and Finance Union (Kenya) vs Kenya Commercial Bank Limited  eKLR.
A salary advance is not a right, it’s at the employer’s discretion and is, more often than not, regulated by provisions in the employment contract.
According to Section 17(9) of the Employment Act, in the case of an employee employed under a written contract of service, if the employer advances a sum in excess of the employee’s two months’ salary , the excess shall not be recoverable in a court of law. Meaning, the amount must be recovered through salary deductions otherwise, the employer may go at a loss.
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