Employee benefits in Kenya are crucial to retention / attrition rates in the country. And for global organisations looking to work with talent based in Kenya, paying a close attention to the employee compensation scheme can be critical to success.
Without a doubt, employees are the foundation for an organisation’s success when expanding into Kenya. Indeed, the growth of your business in Africa’s most populous nation is a direct indicator of your workforce’s productivity.
Business owners and leaders understand this and as a result, they make efforts to attract and retain the best people. For this to happen, you need effective ways to manage compensation and benefits for your employees.
Getting the right talents to work for your organisation is critical for business success. However, this is only the first step. After hiring the best talent, you must create and implement strategies that will ensure they remain with your organisation.
Irrespective of the industry to which your business belongs, there’s usually competition for the best hands. One of the strategies organisations develop to attract and retain their employees is to offer the best compensation and benefits packages. An attractive compensation and benefits package gives your organisation a competitive edge.
This article provides a guide on compensation and benefits in Kenya; what they are, their types and the best ways to manage them for your employees, among others.
Scope – Compensation and Benefits in Kenya
Before prospective hires in Kenya accept a job offer, one thing they look out for is the salary; it is usually the first thing that comes to mind when one talks about compensation.
However, this isn’t always the case because there are experienced workers and other professionals whose compensations cover far more than the regular salary.
Benefits are non-cash or other indirect rewards given to employees over salaries and wages. You can also refer to them as fringe benefits that are designed to show recognition and appreciation for employees’ hard work. Some of these benefits include health insurance, remote work options, free lunch, etc.
Some benefits are country specific. In Kenya, health insurance, for example, is a key component of employee benefits. In many cases, as an employer, you determine your employees’ healthcare options – sometimes, even down to which medications are covered.
Many employees consider job offers from organisations depending on the attractiveness of compensation and benefits packages proposed by the organisation. In addition, job satisfaction is closely tied to the type of benefits associated with a job.
Why are employee benefits important?
The right employees are the most valuable assets of any organisation. The more competent your employees are, the more efficient your organisation is and the better your business results.
An effective approach to ensuring your workers are satisfied is by investing in their welfare through attractive compensation and benefits packages.
Here are some of the reasons why employee benefits in Kenya are important:
- First, no one will work for you without pay – unless you’re a non-profit organisation. In Kenya, just like many – if not all – other countries, it is illegal to ask people to work for you for free. There is usually a contract between the employer and employee, where you reward your employee for the work that they put in. Compensation and benefits are a critical part of that agreement.
- Benefits make a critical part of employment costs in Kenya. It is an expense with a clear goal, and as a result, it is not something that businesses can overlook. This is why it is important to pay attention to a fair compensation and benefits structure.
- As mentioned earlier, there’s usually competition for the best talent across several industries. To ensure you ‘make the biggest catch’, you need to offer their value’s worth. You can do this by providing the best compensation and benefits package – matching or outdoing the competition wherever possible.
- In today’s business world, the paycheck is one vital factor that keeps employees motivated to work. When you adequately compensate your employees, they feel appreciated for their hard work. This keeps their morale high, thereby increasing job satisfaction. Satisfied employees will be excited to work every day and perform to the best of their abilities.
In addition, satisfied employees are less likely to seek opportunities elsewhere, instead, they remain with your organisation for the long run.
Types of Compensation and Benefits in Kenya
As mentioned earlier, compensation and benefits are often described in monetary terms. However, it is more robust than that – it includes all the remunerations you offer your employees, in all forms.
These forms can either be Direct or Indirect;
Direct compensation
Direct compensation covers monetary payment confined within an organisation. This includes all employee benefits including employee variable pay, short and long-term incentives.
Examples of direct compensation in Kenya include;
- Salary
- Commission
- Bonuses
Indirect compensation
Indirect compensation refers to the fringe or usually, non-cash benefits your organisation offers employees to indirectly motivate them.
They may include;
- Insurance
- Paid leave
- Promotion opportunities
- Retirement contributions
- Transportation allowances
- Work-life balance, etc.
Statutory Regulations for Employee Benefits in Kenya
Statutory employee benefits in Kenya are primarily guided by the Kenyan Employment Act
Under this act, employees in Kenya are entitled to the following benefits:
- Employees accrue at least 21 consecutive days of paid annual leave after every 12 months of continuous service. Leave accrues at a rate of 1.75 days per month worked.
- Time off for public holidays – There are 11 national holidays in Kenya for which you should give employees the day off.
- Maternity leave is not explicitly mandated by law, but some employers may offer it as part of their benefits package Pension fund contributions.
- Life insurance.
- Compensation in the event of injury, illness or death.
Kenya’s employee compensation Act 2007
The 2007 Act applies to all employees in both public and private sectors and serves as protection from financial hardship in cases of work-related injury, illness or death.
The Act doesn’t specify a fixed deduction rate from employee salaries. Instead, employers are liable to pay compensation directly to the employee or their dependents in accordance with the Act’s guidelines.
The Act directs that compensation be provided to the dependents of an employee who suffers work-related death. The amount of compensation is determined based on factors like the employee’s earnings and the number of dependents.
Accepting compensation under the Employment Act doesn’t necessarily bar dependents from taking legal action against the employer. However, the Act might influence the outcome of any legal proceedings.
How to manage employee benefits in Kenya
In Kenya, just like many other countries, the government establishes the minimum wage as the baseline for wages – which currently stands at KES 13,572,909 per month. However, organisations may choose to set their wage structure within the prescribed law.
To determine your employee compensation, it is important to think about creating a compensation strategy.
How to develop a Compensation and Benefit Strategy for Kenya
An effective compensation strategy will help you determine the structure of your employee pay and benefits. This plan usually includes details on your organisation’s goals for compensation ranges across different roles within the organisation.
It also explains how your organisation evaluates employees when determining compensation. Implementing an effective compensation strategy can give your organisation a competitive advantage and encourage employee loyalty.
Follow these steps to help you create a compensation strategy suited specifically to your employees:
1. Assess your organisation’s goals
Start by evaluating your organisation’s goals and what you want to achieve using a compensation strategy.
An organisation may require a compensation strategy to reduce its employee turnover, while you may need one to attract quality candidates. It is critical to align your compensation strategy with your organisational goals.
2. Identify your competitive advantage and current strategy
Recognise what makes your organisation unique. By determining your current advantage over the competition, you can choose whether to use it to plan for compensation. Identifying this advantage can help you plan to update your strategy by including incentives or other employee benefits.
3. Seek employee input
When developing a compensation strategy, consider your employees’ satisfaction. If you choose, you can inform your employees of the plan to create an effective compensation strategy, because it directly affects them.
By discussing your current compensation packages and requesting employee feedback, you can also determine how to make compensation more attractive.
4. Seek compensation packages
The fourth step involves identifying the rewards to offer employees. For example, while you may offer vacation packages for entry-level, you may choose to offer retirement packages to senior employees.
Depending on your organisation’s budget, you may offer different rewards for different departments or choose the same compensation packages across departments.
5. Create compensation ranges
After determining employees’ packages, consider creating compensation ranges. For example, you may provide a certain range of some weeks of paid vacation (two to four) to employees who meet specific performance targets.
By doing this, you can adjust your offers based on your employees’ performance, experience, qualifications, etc.
6. Implement and review the competition strategy
Finally, implement your strategy and track the results relating to organisational goals. Regardless of the goals reached by implementing a compensation strategy, regularly review and update it. Reviews may be done on an annual or biannual basis.
Summary
When expanding to Kenya, either by creating a legal entity, hiring an independent contractor or partnering with an EOR like Workforce Africa, getting your compensation and benefits right is key to attracting and retaining the best talent.
To do this effectively, you need to have a robust strategy to manage your compensation and benefits, as it is vital to the success of your business.
Workforce Africa offers competitive compensation and benefits packages to attract and retain the best talent for your business when expanding to Kenya. With our benefits packages, your talent feels valued and you gain time to focus on your business growth.
Our compensation and benefits packages include health insurance, pension, performance-based bonus, sick leave, annual leave, workers’ compensation etc.
To partner with us, please schedule a consultation today.