How To Calculate Gratuity In Kenya

How To Calculate Gratuity In Kenya

Gratuity is money paid by an employer to an employee when he/she resigns or retires from the organization. It should be noted that this lump sum is not deducted from the employee’s salary during their active employment.

In this article Keweb. co tries to answer the question by publishing the ways one can calculate gratuity in Kenya

Below are the most helpful ways to calculate gratuity in Kenya

Gratuity in Kenya is calculated by multiplying the employee’s monthly basic salary by the total number of years worked. However, the gratuity amount can also be different based on a contractual agreement between the employer and the employee.

We have already seen that gratuity is generally calculated by multiplying the basic monthly salary by the number of years worked.

This means that if an employee used to earn Ksh. 30,000 basic salary and worked for six years, her gratuity amount would be as follows:

30,000 * 6 = Kes. 180,000.

However, it is worth noting that the amount can also be subject to change based on the agreement between the employer and the employee.

For example, they may agree (in writing) that if the employee served for five years continuously, the gratuity amount is Kes. 200,000. Then for each extra year served, the gratuity amount would be Kes. 2,500.

Is gratuity pay mandatory in Kenya?

No. The Gratuity fund is not payable in Kenya if the employee has been dismissed (fired). However, this does not prevent the employee from staking a claim in the Industrial Court for unfair dismissal (citing that the employer did so as to avoid paying the gratuity).

What is the difference between gratuity and severance pay in Kenya?

Severance pay, as discussed last week, is only paid when an employee is declared redundant. Gratuity is a lump sum amount that an employer pays an employee if he/she retires or resigns from employment.