Employer of Record Arrangements – Managing Employment Risk Beyond the Contract
Employer of Record (EOR) arrangements continue to gain traction as multinational
businesses expand into Kenya without establishing a local employing entity. While these
structures can simplify market entry and workforce administration, they do not, in
themselves, insulate businesses from employment liability under Kenyan law.
Our recent analysis examines the legal framework governing EOR arrangements in Kenya
and highlights a key principle emerging from the Employment Act, 2007 and employment
jurisprudence: courts will look beyond contractual labels and assess the substance of the
working relationship. In determining the true employer, factors such as day-to-day
supervision, performance management, disciplinary authority, integration into the business,
and economic reality are likely to carry greater weight than the contractual designation
of an employer.
Businesses engaging EOR providers should therefore carefully assess the level of operational
control they retain. The risk of a court finding deemed or joint employment increases where
the worker performs core business functions, reports directly into the client’s management
structure, or is subject to the client’s performance and disciplinary processes. In such
circumstances, the client may face direct exposure to claims for unfair termination,
statutory non-compliance and other employment liabilities.
From our analysis, there are two common operating models which third parties operate
under. The Legal Employer Model, the EOR formally employs the individual and assumes
responsibility for payroll administration, statutory remittances and employment
administration, although the client may still incur liability where it effectively functions as the
employer in practice. By contrast, under the Agent Model, the client remains the legal
employer while the EOR provides payroll and administrative support, resulting in a simpler
structure but without transferring employment risk.
To mitigate exposure, organisations should ensure that contractual arrangements
accurately reflect the intended allocation of responsibilities, clearly define the respective
roles of the client and the EOR, establish robust governance and indemnity provisions, and
carefully manage operational control, disciplinary processes and data protection
obligations. These considerations are particularly important where the individual performs
a strategic or operationally integrated role within the client’s business.
Our Employment, Employee Benefits and Dispute Resolution teams regularly advise
multinational employers, EOR providers and global businesses on workforce structuring,
cross-border employment, regulatory compliance, executive exits, employment litigation
and complex workplace investigations. If your organisation is considering an EOR
arrangement in Kenya, our team would be pleased to discuss the legal and practical
implications for your business.
This publication is intended for general information purposes only and does not constitute legal advice. It should not be relied upon as a substitute for specific legal advice on any particular matter. Multinationals should seek independent legal counsel on the application of the frameworks described herein to their specific circumstances.
