At a glance
- An employer of record (EOR) is a Kenyan company that employs your staff and runs their payroll while you direct their work.
- The EOR carries the employer's duties under the Employment Act, 2007 and remits PAYE, NSSF, SHIF and the Housing Levy.
- It lets you hire in weeks and test the market before committing to an entity.
- It does not remove every tax risk: core business activity carried on in Kenya can still create a permanent establishment.
- Most companies move to their own entity as the team grows, revenue builds or a licence becomes necessary.
How the arrangement works
Three parties are involved. Your company signs a service agreement with the employer of record. The employer of record signs a Kenyan employment contract with each employee. The employee works for you day to day, and the employer of record invoices you for salary, statutory costs and its fee.
Kenyan law has no separate statute for this model. The employer of record is simply the legal employer, with every duty the Employment Act, 2007 and the payroll laws place on an employer. That is the point: those duties sit with a Kenyan company that is registered to carry them.
What the employer of record handles
- Employment contracts that meet Kenyan law on terms, leave, notice and termination.
- Monthly payroll, with PAYE, NSSF, SHIF and the Affordable Housing Levy deducted and remitted by the 9th of the following month, and the NITA levy paid.
- Work injury insurance, which every employer must carry.
- Benefits such as medical cover and pension arrangements, where you choose to offer them.
- Work permit applications for foreign nationals, made by the employer of record as the employer.
What it means for cost
The statutory cost of a Kenyan employee is the same whoever employs them. On top of gross pay, the employer pays a matching NSSF contribution of 6% of pensionable pay up to KES 108,000 (a maximum of KES 6,480 a month since February 2026), a 1.5% Affordable Housing Levy on gross pay, a NITA levy of KES 50 per employee per month and a work injury insurance premium. The employee's own deductions, including PAYE and SHIF at 2.75% of gross pay, come out of their salary. Our payroll guide works through a full example.
The employer of record's fee comes on top. Compare it with the cost of forming and running your own entity: registration, accounting, audit, company secretarial work and the time of your own people.
The risks to manage
Permanent establishment
An employer of record solves employment. It does not decide your tax position. If people in Kenya negotiate and conclude contracts for your company, or carry out its core business, the Kenya Revenue Authority may treat your company as having a taxable presence, a permanent establishment, even though the employer of record employs them. Take tax advice before giving Kenyan staff authority to sign contracts or close sales.
Licensed activities
An employer of record employs people; it does not license your activity. Finance, telecoms, health and other regulated activities still need the right licence, which usually means a Kenyan entity.
Intellectual property and confidentiality
Make sure the employment contract assigns work product to the employer of record and that the service agreement passes it on to you, with confidentiality obligations that run in both documents.
Contractors who work like employees
Engaging people as independent contractors when they work under your direction, on your schedule and for you alone, risks reclassification as employment, with back payroll obligations. An employer of record avoids this by employing them properly.
Employer of record or your own entity?
| Employer of record | Your own Kenyan entity | |
|---|---|---|
| Time to first hire | Weeks | After incorporation, tax registration and a bank account |
| Set-up effort | Low | Registration, tax, employer and county registrations |
| Employment contracts | Held by the employer of record | Held by your company |
| Selling in Kenya | Your foreign company sells from abroad | Your Kenyan company can invoice locally |
| Regulated activities | Not covered | Possible with the right licence |
| Best for | Testing the market, small teams, project roles | Established operations, larger teams, licensed activities |
When to make the move
The signals are practical: a team that has grown beyond a few people, customers who want a Kenyan contracting party, a licence your activity needs, incentives that require a local company, or tax advice that your activity in Kenya now amounts to a permanent establishment. When the time comes, incorporate, register as an employer and move staff across with their terms and accrued service recognised by agreement, so nobody's rights are lost in the transfer.
Checked against the sources below on 12 October 2026. This guide is general information, not legal or tax advice. Rules change with each Finance Act and gazette notice, so confirm the current position before you act, or ask us.