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deduction

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: –

  1. Union dues;
  2. Loans granted by the employer;
  3. Amounts permitted by the employee to be deducted;
  4. Amounts paid in error;
  5. Salary for days when the employee absents himself from work without leave or consent;
  6. Provident fund contributions;
  7. A reasonable amount for damage or loss of property caused by the wilful default of the employee;
  8. Shortage of money arising from the employee’s negligence or dishonesty where the employee is entrusted with receipt, custody and payment of money.

surcharge-clipart-electricity

Surcharge

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 .

circle_doublejeopardy

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.

See: –

  1. Benson Mwania v Bestfast Cargo (K) Limited [2015] eKLR;
  2. Banking Insurance and Finance Union (Kenya) vs Kenya Commercial Bank Limited [2015] eKLR. 

Salary advances

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.

Follow us on Twitter for a daily dose of the Employment Laws. All cases can be found at – http://kenyalaw.org/caselaw/.

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 10 years. She is a repository junkie and a lover of editing.

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Comments

  1. sammy says:

    hi Anne,my bank put funds in my bank account without my knowledge and i withdrew the funds then now they say i have an overdrawn account to clear off.i have called them noting that the amount is my full months salary to negotiate on payment but with no luck,they insist they will deduct my full salary.is that legal in the first place.

    1. Anne Babu says:

      The facts as you have presented them are not clear.

      1. sammy says:

        Hi Anne sorry for the confusion,i mean i withdrew extra funds from my salary account which was beyond the balance i had in my account.they gave me the money without any agreement in place.so the bank wants me to pay for the extra funds but the said extra funds are equivalent to a months salary.so if they decide i pay for the extra funds in one installment,i will be left with no money at all for this month.i have tried calling them to tell them that im willing to pay interest but the money be spread in three installments i pay but they refused.

        1. Anne Babu says:

          Under the Employment Act, the employer is not permitted to withhold/deduct more than two thirds of your salary, i.e, every month, you should take home at least one thirds of your salary.

  2. Christine says:

    One third of the salary.. ‘salary’ being the basic salary only or the gross salary which includes all other allowances?

    1. Anne Babu says:

      One third of the basic.

      1. Hillary says:

        Hi Anne, What happens if ones salary is consolidated. What is taken to be basic and gross to calculate the one third.

        1. Anne Babu says:

          The consolidated amount will be taken as the one third.

  3. Rose says:

    Does one third include statutory deductions or it excludes?

    1. Anne Babu says:

      Any payment made to an employee should be subject to statutory deductions.

  4. Nerrie says:

    Hi Anne
    This is a very enlightening piece, thank you for it. With reference to the a third rule, where an employee has authorized deductions in writing for instance to SACCO’s or a bank, which in this instance translates to a net pay of less than a third of his pay, is the employer liable? Should the employer deny him his request?

    1. Anne Babu says:

      The request should be denied and should be brought within the one third limit.

  5. Caroline says:

    Hi Anne,

    Thank you for enlightening us on this issue. We appreciate the fact that we can advance the employee an amount not exceeding their 2 months’ salary. However, is the law clear on what the maximum duration is within which an employer can recover the advanced amount from the employee’s salary?

    Thank you once again.

    1. Anne Babu says:

      No, the period is for the employer to decide.

  6. Baswetty says:

    Hi Anne,
    My employer provides me with housing with running water an electricity.
    In July 2015 I received a memo from my manager asking me to show cause as to why I should not be deducted a certain amount of money from my salary as electricity charges because the management felt consumption at they house i occupy was high.
    I wrote back stating several facts : 1. That I was also shocked of such and invited them to investigate if there could be a technical problem. 2. I also reminded them that I was not aware as to how many units of power am allowed to utilize per month since the same is not mentioned anywhere in my contract letter. The letter only mentions that the company will provide reasonable housing. 3. I informed mgt that I have never received any monthly bills or any notifications for the last 15 yrs i have worked for the company that i need to pay for electricity. 4. Finally i promised to review power loading / usage in the house including doing away with appliances.
    So today again i was called to a meeting by the HR manager an show a bill purpotedly belonging to the house I occupy which amounts to ksh.50,000. The HR manager informed me that the bill is from jan 2016 to april 2015 which am supposed to pay. That the deductions are supposed to be done from my salary before the end of this year 2017.
    I was given a paper to sign to allow the deductions but i refused because i felt my rights are being violated and was a form of intimidation.
    Anne, please advise, are my rights being violated? I have never been asked to pay for power for the 15 yrs I have worked with the company. And the company has never communicated to me the I ever needed to pay for power at the house they allocated me.

  7. Baswetty says:

    Hi anne..
    I realized I had a typing error in my earlier Question to you.
    I meant to say that the power bill of Ksh.50,000 I was shown an asked to pay before end of 2017 is accumulated from the period jan 2016 to april 2017 (NOT 2015 as mistyped).

    Thank you..!

    1. Anne Babu says:

      If your contract provides that you will receive housing and that your employer will settle the electricity bills, you should not be asked to settle the bills unless there has been a mutual amendment to the terms of your contract to provide that you will settle the bills. I suggest that you appeal against the unilateral determination or raise a grievance.

      1. Baswetty says:

        Thank you Anne for your time to reply.
        I will definately appeal because there has never been such am amendment or any evidence of communication of the same.

  8. Angela says:

    Hi Anne……I have had an unfortunate incident at work.I help a friend some money for the office but he didn’t return n now the office gave me a transfer to Ksm with no salary nor transfer allowance….. I now borrow people money just to eat or get fare.I wanted to ask is it okay the office not giving me any salary plus the transfer?I leave as a refugee at my aunts place.please advice?

    1. Anne Babu says:

      Your employer should cater for your relocation and provide an allowance to facilitate. Failure to do this amounts to a constructive dismissal i.e, your employer is frustrating you hoping that you’ll resign.

      1. Angela says:

        Hi Anne,
        That is true…..but they are saying since it was a money issue and i am paying for the lost money.its why they are deducting the money from my salary…….but on the transfer allowance i dont know why they havent given me……maybe its punishment too. what do you advice i do…….because i cant stay in a new place without money

        1. Anne Babu says:

          I would advice you to raise an official grievance/ complaint to management regarding the treatment. You should not be penalized unless you have been taken through a formal process and even then, you have to receive one thirds of your salary.

          1. Angela says:

            Hi Anne,
            I 1st thank you for your advice. now the challenge is i went through the formal process and i was not given any reply on their decision or judgement. I just received the sudden transfer and was immediately put in zero salary and no transfer allowance and whom i called is my boss at headquarters and he is management…..so will the complaint to management work????am just stuck here and i dont know where to start………

          2. Anne Babu says:

            You should follow the company procedures in lodging the complaint. If there are no procedures and if you feel you cannot report to your immediate boss, how about the person above them or the board?

  9. Naomi says:

    Hi Anne, what should one do if they notice an underpayment on their bank statement past 5 months and it hasn’t been communicated by the employer/accountant and on the payslip it reads a higher figure than what was actually received. Is the employee entitled to interest of the withheld amount? as compensation for inconvenience and fraud. What % should the interest be ?

    1. Anne Babu says:

      In 5 months you should have made official inquiries about the deduction. No interest is provided unless you go to court in which case interest will only be from the date of judgment.

  10. Michael Gatimu says:

    Hi, Anne

    During the last financial year our supervisor collude with warehouse personnel and the was process loss in our department the HR at the time threatened us with termination or we commit to pay for the loss as a department. In January the management terminated so employees and paid all their dues. Last month they started deductions which I feel is not fair to pay while others didn’t pay for the same. Is there a way I can stop deductions from my salary.

    Michael

    1. Anne Babu says:

      You should raise a grievance/complaint through the company’s procedures and if the matter is not resolved, you should seek legal assistance for the purpose of getting an injunction to stop the deductions.

  11. Angela says:

    Let me try the board…….that can be better coz the md could be together with my boss.thanxs alot Anne

  12. John Kimani says:

    Hi Anne, I was advanced Kes 5,500.00 for a field visit on 06/06/2017 which never materialized. I had used Kes 10,000.00 by then of my own funds and we were yet to be paid our May salaries. I was requested to reimburse the company the Kes 5,500.00 but brought to their attention that they owed me Kes 10,000.00 which they should reimburse as well. This led to some exchange of words with management and finance and it ended there. I was paid my May salary on 19/06/2017 with the deduction of Kes 5,500.00 being deducted from my May pay. Are they within their powers as employers to make such deductions.

    1. Anne Babu says:

      The employer can deduct funds that are not accounted for. You should raise the issue of the refund of the Kes 10,000 through the company’s official procedures.

  13. chege says:

    great wakili.
    chege advocate

  14. John Mbulavo says:

    Hi,
    A friend of mine works in sales for a company and recently they updated the employment contract. Each salesperson is given a monthly target and if they don’t attain the target, the company deducts the per-sales amount from the basic salary. If target is 30 leads, and you only bring 10 they will deduct the commission amount for 20 leads. This leads to zero payslips and maybe even negative ones(You owe the company to be deducted from future salary ). Is that legal? How can they fight this? Some have not signed the new contract.

    1. Anne Babu says:

      Such a significant negative change to the employment contract can only be lawfully done with the employees’ consent failing which the employee should seek to redress the situation through the company’s internal grievances systems and if that is not successful, through the courts.

  15. Bernard says:

    Hi Anne. I had an issue with my employer. He terminated my services at his place on grounds of insubordination and incitement today. However, he failed to pay my September salary and did not serve me a notice for termination but also failed to pay my payment in lieu of notice. Briefly i mean that i have not been paid for working the previous month and because he didn’t serve me a notice i was entitled to a payment in lieu of notice which he didn’t pay (= amounts to unlawful dismissal i guess). The reason for withholding the pay is because I owed him other money as a result of costs he incurred for repairing his vehicle after I was involved in a minor accident in it. I had paid him some part of the money and we had not agreed that the rest be deducted from my pay. Can my former employer be compelled to pay my salary (full or partly) on the grounds of the 1/3 rule and be compelled to pay me my salary in lieu of notice in full?

    1. Anne Babu says:

      Apologies for the delayed response, I have just realized that your question was not answered. You are entitled to your salary and notice pay less any sums due from you as a result of damage that you are held responsible for, subject to the one-thirds rule.

  16. MOURINE MAPESA says:

    Hi ANN,
    I want to make an enquiry on internal employee deductions,we in the hospitality industry and often have shortages from either the bar or kitchen.What does the law say about such deductions which are in house how come we are asked by labour officers to refund these monies?
    Help

    1. Anne Babu says:

      I’m afraid your question is not clear. What are the deductions in respect of?