Section 74 (1) of the Employment Act requires an employer to keep a written record of all its employees. Such records should indicate statutory deductions,[i] house allowance,[ii] salary or wages paid out to the employees.
The record is what employers commonly refer to as the payslip. A payslip is a document given to employees upon salary payment, detailing their gross salary and the deductions made. So, why is a payslip important to an employer?
- It is proof that employees have been paid. Consequently, it can be used as evidence in employment disputes.
- It shows the employer’s compliance with the law and fulfilment of contractual obligations.
- It serves as a tool for transparency in the employment relationship.
Many employers pay their employees without issuing a pay slip, contrary to section 21 (1) of the Act. The danger of the foregoing is: the employer lacks evidence to prove its case in claims for underpayment and/or non-payment. Courts have held that keeping a written record is mandatory. A good example is the case of Godfrey Kitoto Ochieng & 6 others Vs. Hydrobuild Construction Company Limited & Another [2014] eKLR where the Court observed as follows:
Section 74 of the Employment Act makes it mandatory for an employer to keep all employment records of each employee. Where there is a suit filed contesting matters that the employer is as of law supposed to keep, such records are to be made available to Court. Where such an employer fails, refuses and or neglects to make such records accessible, this must be construed to the benefit of the employee. This is the law.
To be safe, employers should keep proper records to avoid the risk of losing an employment claim for lack of records.[iii] You might be wondering what a pay slip should entail. Wonder not, as the particulars of what a pay slip should contain are outlined below:
- The employee’s gross salary.
- The allowances an employee is entitled to as per their employment contract.
- Bonuses paid out to the employee, if any.
- Statutory deductions made from the gross salary and why they have been made.
- Such deductions include PAYE (Pay as you earn), NSSF (National Social Security Fund) and NHIF (National Health Insurance Fund).
- The employee’s net salary.
- Where the net amount has been paid in different ways, the amount and method of payment of each part-payment.
- The employee’s house allowance, where housing has not been provided.
- Overtime allowance, where an employee worked overtime.
- The employee’s contribution to any provident fund or superannuation scheme.
- A reasonable amount for any damage done to or loss of property lawfully in the employer’s possession or custody, as a result of the employee’s wilful default.
- An amount not exceeding one day’s wages for each working day the employee absents themselves from work without leave or lawful cause.
- An amount equivalent to any shortage of money arising as a result of the employee’s negligence or dishonesty; where they have been entrusted with the receipt, custody and payment of money or where the employment contract specifically grants them these responsibilities.
- Excess money paid to the employee in error, as their salary.
- A deduction authorised by any written law, collective bargaining agreement, wage order, court order or arbitration award. Examples include: union dues and agency fees.
- An amount in which the employer has no direct or indirect beneficial interest but which the employee has made a written request to have the same deducted from their salary. Examples include Sacco and insurance contributions.
- Repayment due and payable by the employee from a loan given to them by the employer, not exceeding fifty per cent of the salary payable to that employee after all the above deductions have been made.
It is not enough for employers to know what needs to be itemized in the pay slip. They must also be aware that:
- A pay slip is not issued to a casual worker, an employee engaged on piece/task rate terms or for any period not exceeding six months.
- They should not deduct any amount from the salary payable to an employee; to reward themselves for employing or retaining the employee.
- The deductions made from an employee’s salary should not exceed two thirds of the salary.
- Where they deduct an amount which will be utilized for the employee’s benefit, the deducted amount should be paid within the required time period and other requirements specified in law. An employer who fails to do so, commits an offence and where they are convicted, they shall be liable to a fine that does not exceed one hundred thousand shillings, imprisonment of not more than two years or to both.
Employment claims are costly in terms of legal fees and time consumed. The safest way to protect oneself from the foregoing, is to keep a proper written record as envisaged in Section 74 of the Act. As the old saying goes: “It is better to be safe and sorry”.
[i] Section 21 (1) of the Employment Act 2007
[ii] Section 74 (1) (i) of the Employment Act 2007
[iii] Section 20 (3) of the Employment Act 2007.
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