Hayer Bishan Singh & Sons Ltd v Odemba (Appeal E047 of 2023) [2024] KEELRC 498 (KLR)
The bottom line
#NSSF membership does not shield employers from paying redundancy severance — Kenyan employers must pay it from their own resources and itemise every terminal due clearly.
What this practically means
#Executive summary
#Questions the Court framed
#The issues the Court set itself to decide, in its own words.
- 1.Whether the Senior Principal Magistrate erred in awarding Kshs 371,800 as 'gratuity' where the Respondent was a member of the National Social Security Fund
- 2.Whether the award of gratuity falls under section 49 of the Employment Act (Cap 226)
- 3.Whether the trial magistrate disregarded precedent and failed to consider the totality of the material placed before him
Key legal issues
#Distinction between severance pay and service pay/gratuity
Severance pay under section 40(1)(g) on redundancy is not the same as contributory service pay under section 35(5) and (6); NSSF membership does not defeat a severance award
Service pay is a contributory social protection benefit to which employer and employee both contribute through the Fund. Severance pay on redundancy comes from the employer's own resources as compensation for involuntary loss of employment, at not less than fifteen days' pay per completed year of service. The trial magistrate's award, though labeled gratuity, rested on section 40 and was properly severance pay.
Employer's duty to itemise terminal dues
An employer terminating on redundancy must clearly itemise the dues it pays; an unexplained lump sum of Kshs 284,825 without breakdown or categorisation could not be credited against the severance award
The appellant computed the respondent's dues as Kshs 284,825 but the schedule gave no breakdown or indication of which terminal benefit it covered; neither the witness statement nor oral testimony disclosed whether it was gratuity or service pay. Section 40(1) contemplates various categories of dues on redundancy, requiring clear itemisation by the employer.
Effect of the trial magistrate's mislabeling of severance pay as gratuity
The mislabeling was not an error warranting disturbance of the judgment because the magistrate cited the statutory provision underpinning the award
The trial magistrate expressly referred to section 40(g) of the Employment Act, which provides for severance pay, and applied the rate of 15 days' pay per completed year of service over 26 years. The appellate court held the award was substantively severance pay, correctly grounded in statute, and only the label was wrong, so there was no reason to disturb the judgment.
Legal principles established
#- Severance pay under section 40(1)(g) of the Employment Act, 2007 is distinct from service pay under section 35(5) and (6)
- Severance pay is payable from the employer's own resources, unlike contributory service pay
- An employer must itemise terminal dues paid upon redundancy
- A mislabeling of severance pay as gratuity is not fatal where the statutory provision underpinning the award is indicated
Court orders
#- 1.The Appeal is dismissed with no order on costs
The bench
#One judgment of the whole court — no separate or dissenting opinions.
Wrote the judgment
- On appeal from
- Senior Principal Magistrates Court at Winam
- Jurisdiction invoked
- Appeal from the Senior Principal Magistrates Court under the Employment and Labour Relations Court's statutory appellate jurisdiction
Relief refused
#The Appellant's appeal against the award of Kshs 371,800
The Court found the trial magistrate had indicated the statutory provision underpinning the award and only mislabeled severance pay as gratuity
Costs
The Appeal is dismissed with no order on costs.
Quotable passages
#Verbatim from the judgment, each located to the page it appears on in the official PDF — so these can be cited and checked directly.
In consideration of the above, the Court finds no reason to disturb the judgment of the Senior Principal Magistrate. The Appeal is dismissed with no order on costs.
the severance pay contemplated by section 40(1)(g) of the Act is from the employer’s own resources, and is more or less compensation for involuntary loss of employment on the part of the employee
Section 40(1) of the Employment Act, 2007 contemplates various categories of dues upon redundancy and an employer should clearly itemise what dues it is paying.
The Court cannot fault the Senior Principal Magistrate for mislabeling the severance pay as gratuity when he indicated the statutory provision underpinning the award.
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Hayer Bishan Singh & Sons Ltd v Odemba (Appeal E047 of 2023) [2024] KEELRC 498 (KLR)", Case Analysis (2024). Memorandum of Appeal lodged 15 August 2023. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2024/498/eng@2024-03-06
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.