Labour Contracting Agreement (Kenya)

A Labour Contracting Agreement in Kenya is a legally binding contract between a principal employer and a labour contractor — also called a gangmaster or labour broker — under which the contractor supplies workers to perform specified tasks at the principal employer's premises or project site, governed primarily by Section 11 of the Employment Act No. 11 of 2007 and the Labour Relations Act No. 14 of 2007. The agreement defines the legal relationship, responsibilities, and liabilities of each party with respect to the workers supplied.

Section 11 of the Employment Act No. 11 of 2007 addresses the liability of labour contractors in Kenya. Where a labour contractor supplies workers to a principal employer and the contractor fails to pay wages or provide statutory benefits, the Act imposes joint and several liability on the principal employer. This joint liability provision is critical: it means a principal employer in Kenya cannot escape responsibility for workers supplied by a defaulting contractor — a feature that distinguishes Kenyan law from many other jurisdictions and makes a well-drafted Labour Contracting Agreement essential for risk allocation.

The Employment and Labour Relations Court (ELRC), established under Article 162 of the Constitution of Kenya 2010, has jurisdiction over disputes arising from labour contracting arrangements, including claims by supplied workers against either the contractor or the principal employer. The ELRC has issued several decisions clarifying that workers supplied through labour contractors are entitled to the same minimum standards under the Employment Act as directly employed workers.

In the construction sector, labour contractors operating in Kenya must be registered with the National Construction Authority (NCA) under the National Construction Authority Act No. 41 of 2011. The NCA registers contractors in categories NCA 1 (largest) to NCA 8 (smallest) based on technical capacity and financial resources. A Labour Contracting Agreement involving construction work should confirm the contractor's NCA registration number and category.

Statutory obligations that apply to workers supplied through a Labour Contracting Agreement include: PAYE deductions remitted to the Kenya Revenue Authority (KRA) under the Income Tax Act (Cap. 470); National Social Security Fund (NSSF) contributions under the NSSF Act No. 45 of 2013; Social Health Insurance Fund (SHIF) contributions at 2.75% of gross salary under the Social Health Insurance Act No. 16 of 2024; and Housing Levy contributions at 1.5% of gross salary under the Affordable Housing Act. The Labour Contracting Agreement must clearly specify which party — contractor or principal employer — bears primary responsibility for each statutory obligation.

Labour contracting in Kenya must be distinguished from genuine independent contractor arrangements documented in an Independent Contractor Agreement: where workers are under the day-to-day supervision and control of the principal employer, follow the principal employer's work schedules, and use the principal employer's tools and equipment, the ELRC will typically treat them as employees of either the contractor or the principal employer, triggering full Employment Act protections.

The legal framework governing the Labour Contracting Agreement (Kenya) in Kenya draws on several key statutes and regulatory bodies. Under the Employment Act No. 11 of 2007, the Employment and Labour Relations Court (ELRC) adjudicates workplace disputes in Kenya. Section 35 of the Employment Act 2007 governs termination of employment. The National Social Security Fund Act No. 45 of 2013 mandates employer contributions to NSSF. The Social Health Insurance Fund (SHIF) replaced NHIF in 2024. The Kenya Revenue Authority (KRA) administers PAYE under the Income Tax Act (Cap. 470). Parties executing a Labour Contracting Agreement (Kenya) in Kenya should confirm the document reflects current law, including any amendments enacted since the original drafting date. The Employment Act No. 11 of 2007 sets the foundational requirements.

A Labour Contracting Agreement is required whenever a business in Kenya engages a third-party contractor to supply workers for specific tasks, projects, or seasonal activities, rather than directly hiring workers through employment contracts.

The agreement is essential for construction projects where the main contractor engages labour-only sub-contractors to supply artisans, fundis, casual workers, or specialised tradespeople. Under the National Construction Authority Act No. 41 of 2011, all parties in the construction supply chain must be identifiable, and the NCA requires principal contractors to maintain records of all labour contractors supplying workers to their sites. A Labour Contracting Agreement formalises this supply relationship and allocates liability for worker welfare.

A Labour Contracting Agreement is needed in agriculture and horticulture, where farms and flower exporters registered with the Fresh Produce Exporters Association of Kenya (FPEAK) or Kenya Flower Council (KFC) engage seasonal labour contractors to supply pickers, packers, and graders during peak seasons. Without a formal agreement, the principal employer bears full joint and several liability under Section 11 of the Employment Act No. 11 of 2007 for any wages or benefits the contractor fails to pay.

The agreement is required in manufacturing and warehousing when a company registered with the Kenya Association of Manufacturers (KAM) or operating in the Export Processing Zones (EPZ) administered by the Export Processing Zones Authority (EPZA) uses a staffing agency or labour broker to supply production line workers, packers, or material handlers.

A Labour Contracting Agreement is needed for hospitality and events businesses — hotels, safari lodges, and event management companies — that engage labour contractors to supply temporary kitchen staff, waiters, security personnel, or setup crews for specific events or peak seasons.

The agreement should be signed before the contractor deploys any workers to the principal employer's premises. Once workers commence work, the legal relationship crystallises and both parties become exposed to joint liability under the Employment Act — a Labour Contracting Agreement before deployment is the only mechanism for clearly defining each party's obligations and limiting the principal employer's exposure.

Parties in Kenya should prepare a Labour Contracting Agreement (Kenya) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under the Employment Act No. 11 of 2007, the Employment and Labour Relations Court (ELRC) adjudicates workplace disputes in Kenya. Section 35 of the Employment Act 2007 governs termination of employment. The National Social Security Fund Act No. 45 of 2013 mandates employer contributions to NSSF. The Social Health Insurance Fund (SHIF) replaced NHIF in 2024. The Kenya Revenue Authority (KRA) administers PAYE under the Income Tax Act (Cap. 470). Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.

A valid Labour Contracting Agreement in Kenya must contain the following essential elements to protect both parties and comply with the Employment Act No. 11 of 2007 and related labour statutes.

Parties and Registration Details: Full legal names and addresses of the principal employer and the labour contractor. The contractor's Business Registration Service (BRS) registration number issued via eCitizen, and where applicable, the contractor's NCA registration number and category under the National Construction Authority Act No. 41 of 2011. The principal employer's KRA PIN and the contractor's KRA PIN, as statutory obligations are linked to these identifiers.

Scope of Work and Worker Categories: A precise description of the tasks for which workers are supplied — including the type of work, skill level (artisan, general labourer, technical specialist), the number of workers, and the project site or premises. The agreement should specify whether workers are supplied on a daily, weekly, or monthly basis and the minimum and maximum number of workers the contractor is obligated to supply.

Wages and Statutory Deductions: The minimum wage rates applicable to each category of worker under the Regulation of Wages (General) Order issued by the Labour Cabinet Secretary under Section 9 of the Employment Act No. 11 of 2007. The agreement must allocate responsibility for PAYE remittance to KRA, NSSF contributions, SHIF deductions at 2.75% of gross salary, and Housing Levy at 1.5% — specifying whether the contractor or the principal employer is the employer of record for each statutory purpose.

Joint Liability Provision: A clause acknowledging that under Section 11 of the Employment Act, the principal employer bears joint and several liability for wages and statutory benefits if the contractor defaults. The agreement may include indemnity provisions under which the contractor indemnifies the principal employer against any claim arising from the contractor's failure to pay workers or remit statutory contributions.

Health, Safety, and WIBA Compliance: A clause confirming that the contractor shall comply with the Occupational Safety and Health Act No. 15 of 2007 (OSHA) and shall maintain valid insurance under the Work Injury Benefits Act No. 13 of 2007 (WIBA) covering all workers supplied. The principal employer shall provide a safe working environment consistent with their OSHA duties as occupier of the premises.

Duration and Termination: The start date, end date or project milestone, and termination provisions. Either party should be able to terminate for cause — including contractor non-payment of wages, ELRC orders against the contractor, or NCA deregistration — on specified notice.

Dispute Resolution: Disputes between the principal employer and the labour contractor to be referred first to conciliation before the Director of Employment under the Labour Relations Act No. 14 of 2007, then to the Employment and Labour Relations Court (ELRC) if conciliation fails.

Forms-legal.com provides this Kenya Labour Contracting Agreement template as a practical starting point for principal employers and labour contractors to formalise their arrangement in compliance with Kenyan labour law. Both parties should retain a signed copy, and the agreement should be reviewed each time a new project or supply arrangement commences.

Additional compliance elements for a Labour Contracting Agreement (Kenya) used in Kenya include: Under the Employment Act No. 11 of 2007, the Employment and Labour Relations Court (ELRC) adjudicates workplace disputes in Kenya. Section 35 of the Employment Act 2007 governs termination of employment. The National Social Security Fund Act No. 45 of 2013 mandates employer contributions to NSSF. The Social Health Insurance Fund (SHIF) replaced NHIF in 2024. The Kenya Revenue Authority (KRA) administers PAYE under the Income Tax Act (Cap. 470). Forms-legal.com provides this template as a starting point for Kenya-compliant documentation.