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.
