Professional Employer Organization (PEO) in Kenya

Professional Employer Organization (PEO) in Kenya

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Kenya has one of the most advanced economies in Africa, thanks to its favorable business environment, political stability, and diversified resources. And with 57.1% of the Kenyan population compromising people of working age according to the country's latest census, you could leverage the fresh talent there to grow your business.

That said, hiring employees in Kenya comes with its own set of challenges. You need to understand the labor laws, the taxation system, and the culture of the people before building a team in Kenya. To simplify the process, many businesses turn to professional employer organizations (PEOs), like Skuad, for assistance.

What is a professional employer organization (PEO)?

A PEO is a service provider that performs HR duties on behalf of businesses or organizations. Business owners and employers outsource PEO services when they need help with administrative tasks such as hiring, onboarding, managing payroll, providing competitive employee benefits packages, and ensuring 100% compliance with local laws.

It’s worth noting that the PEO and the employer operate on a partnership model. As the PEO manages various administrative tasks, the employer controls the employees' IP and day-to-day communication.

If you’d like to learn more about PEOs, contact our Skuad team today, and we will be happy to answer any questions you may have.

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What are the benefits of using a PEO in Kenya?

Partnering with a PEO in Kenya can benefit you and your business in many ways. Below are the top three benefits:

1. You'll save valuable time and money

Hiring employees in Kenya without a PEO would cost you serious time and money.

For starters, you would have to form your own subsidiary in Kenya. You would also have to hire an in-house HR team to handle administrative tasks and a legal team to handle any arising litigations. If your HR team is not conversant with the Kenyan payroll, employment laws, and tax responsibilities, you would have to put them through some training to enable them to catch up to speed.

Not to mention, you'd probably need to make several trips to Kenya to ensure everything flows smoothly.

Save valuable time and money by working with a PEO in Kenya. The PEO will take care of the HR administrative tasks, so you can focus on expanding your business.

2. Your organization will remain compliant

Different countries have different employment laws and tax requirements. Employers must abide by these regulations; otherwise, they risk facing heavy fines, a damaged reputation, and even a business ban.

For example, when hiring new employees in Kenya, you need to ensure they have a National Hospital Insurance Fund (NHIF) number, National Social Security Fund (NSSF) number, and a personal identification number (PIN). If an employee doesn't have any of these, you will first need to register them with the local authorities.

Learning about all of the employment laws in Kenya is no easy feat. Plus, the laws change rapidly and you have to keep updating your knowledge to remain compliant.

Save yourself from all the trouble by working with a PEO. Their experts know all that’s required of your business and will ensure your global operations are 100% compliant.

3. You'll have a competitive edge

Remote work is on the rise in Kenya and the world in general. To remain competitive amidst changing trends, you'll need to attract and hire top talent, wherever they may reside.

By hiring Kenyan professionals, your company’s name will reach a wider audience, thereby positioning your organization above your competitors who remain limited by their local talent pool.

However, since you may not be familiar with the Kenyan hiring landscape, you'll need a global PEO like Skuad. You can leverage their knowledge of Kenya to attract the most qualified workers and then provide competitive benefits packages to keep them.

What are the differences between an EOR and a PEO?

Some people think that a PEO and an employer of record (EOR) refer to the same entity. In reality, the two are different in their offers.


Think of a PEO as an outsourced HR department that provides administrative services to your business. The people you hire are your business's employees and should reside in a country where your business is registered. You're responsible for managing employees' day-to-day operations while the PEO handles critical administrative tasks like payroll, onboarding, making payments, ensuring compliance, terminating contracts, and other HR tasks.


EORs are the legal employers of anyone hired through them. This means the employees enter into employment contracts with the EOR, not your business. Of course, you'll still have the final say regarding employee wages and performance evaluations.

An EOR manages all of the HR work, so you don’t have to do anything on your part. What's more, you can hire employees from any country in which the EOR is registered.

Should you choose a PEO or an EOR?

Both PEOs and EORs can handle your global HR responsibilities. Ultimately, your choice between these two options will depend on your needs and preferences.

A PEO may be your best option if you want help with hiring and managing a global workforce while still retaining some control over your HR operations. If, on the other hand, you would prefer another party to take over all payroll matters for your global team, an EOR would work best.

Hiring in Kenya with a PEO

According to Statista, nearly 547,000 Kenyan students were enrolled in universities in the 2020/2021 academic year. The number of students in Kenyan universities is expected to grow as the government invests more in the education sector.

Despite the high number of graduates in Kenya, unemployment is still a big issue. Depending on the course one pursues in college, it can take a Kenyan graduate up to seven years to get formal employment. While this is unwelcome news for Kenyan graduates, it also means the hiring process can be a tedious task because you’re choosing from a vast group.

Using PEO services in Kenya is a no-brainer if you want to build a robust remote team. The PEO will help you choose the best talent and handle other essential aspects like onboarding and workers' compensation. Plus everything will be completed in adherence to Kenyan employment laws.

Payroll in Kenya is challenging, but a PEO can make it easier

Hiring skilled employees in Kenya is vital for your business expansion. However, there are various things you need to know before managing payroll in Kenya. Without this knowledge, chances are you would end up getting into trouble with the Kenyan government over compliance issues. Luckily, a PEO will help you navigate the process. Elements to consider include employment contracts, holidays, and tax requirements.

Employment Contracts

Depending on the kind of employees you want, Kenya allows you to offer either fixed or indefinite-term contracts. All contacts should include information about compensation, benefits, and termination requirement. The language used in the contract should be understandable to the employee, while all the monetary amounts should be in Kenyan shillings and not any other currency.

Public Holidays

According to the Public Holidays Act, employees are entitled to various public holidays. These include:

  • New Year’s Day
  • Good Friday
  • Easter Monday
  • Labor Day
  • Madaraka Day
  • Idd-ul-Fitr
  • Moi Day
  • Mashujaa Day
  • Diwali
  • Jamhuri Day
  • Christmas Day
  • Boxing Day

Keep in mind that some of these holidays are only meant for specific groups of people. For example, Idd-ul-Fitr is only observed by Muslims, while Diwali is only observed by Hindus.

Tax Requirements

Tax requirements can be divided into employer and individual taxes.

Employer Taxes

The Kenya corporate tax rate stands at 30%. This rate applies to the net income a company obtains while doing business in Kenya, usually during one business year.

As an employer, you’re also required to make social contributions totaling 6.5%. About 5% of the total social contributions go to the National Social Security Fund, while 1.5% goes to the National Housing Development Fund.

Individual Taxes

The Kenya income tax rate varies depending on what one earns. Here is a brief breakdown:

  • 288,000 Kenyan Shilling (KES) and below:  10%
  • 288,000 to 388,000 KES: 25%
  • Over 388,000 KES: 30%

Additionally, employees are obligated to pay social security tax, which includes NHIF and NSSF. The social security tax rate is around 5%.

Overall, accounting for all these components isn't easy, and so many things could go wrong to expose your business to compliance issues. Thankfully, you don't need to worry about compliance when you entrust your payroll to a PEO in Kenya. You'll have a team that knows all the compliance requirements and what your business needs to do.

What a PEO in Kenya can and cannot do

Allowing a professional employer organization in Kenya to handle your HR activities is a smart decision. But as a responsible business owner, you may be wondering what the PEO will be able to do and what it cannot do.

A PEO can:

  • Hire and onboard new employees to your company
  • Manage your payroll
  • Handle compliance under Kenyan employment laws

A PEO cannot:

  • Manage the day-to-day operations of your employees
  • Enter into employment contracts with employees as the sole legal employer
  • Assume full control of your business

Partner with a PEO in Kenya

Hiring a global remote team gives you access to some of the top talents worldwide. However, it also comes with various challenges, like the need to understand the employment and tax laws in the counties where the employees reside.

If you're thinking about hiring employees from Kenya, or any other country, working with a reputable PEO allows you to build a team without having to deal with the complexities of hiring and managing the payroll of a global team. Wondering how you can get started? Book a free demo with the Skuad team today.

Building a remote team?

Employ exceptional talent, anywhere, anytime!

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