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Gratuity and Severance Pay Calculator Kenya

📅 Last updated: 13 November 2026 • 🛡️ Rates checked: 20 October 2026 (Subject to KRA confirmation) • 🏛️ Sources: KRA, NSSF, SHA

In Short: Kenya Severance & Gratuity (2026)

Under Section 40(1)(g) of the Employment Act 2007, statutory severance pay on redundancy is not less than 15 days’ basic wages for each completed year of service. Service gratuity is a contractual lump-sum benefit typically awarded to fixed-term employees or workers not enrolled in occupational pensions. The standard formula uses: (Monthly Basic Pay ÷ 26) × 15 × Completed Years.

When transitioning out of employment or assessing terminal dues, verifying your legal compensation requires a dependable PAYE calculator and terminal dues estimator that reflects Kenyan employment law precedents.

Gratuity and severance calculator

Select your calculation mode below, input your monthly basic salary and completed years of service, and select the daily divisor to compute your estimated terminal payout.

Terminal Payout Calculator

Exclude house and commuter allowances for statutory severance.
Statutory minimum redundancy rate is 15 days per year.
Estimated Gross Payout
KES 230,769.23
Daily rate: KES 3,076.92 | Total days: 75 days
Applied Formula:
Severance Formula: (KES 80,000 ÷ 26) × (5 years × 15 days) = KES 230,769.23

Notice: Severance pay and gratuities are subject to income tax treatment under Section 8 of the Income Tax Act. For details on lump-sum taxation, consult our guide to tax on lump sums.

How severance pay is calculated in Kenya

Under Section 40 of the Employment Act 2007, an employer declaring redundancies must satisfy specific statutory obligations, including issuing one month's written notice to the employee and labor officer, and paying severance of not less than 15 days' basic wages for each completed year of continuous service. Industrial Court precedents establish that the daily wage is computed by dividing monthly basic pay by 26 working days.

How is gratuity taxed?

Terminal gratuity and severance benefits represent taxable income, but KRA allows spread-back provisions over the years of service (up to a maximum of 5 years) to prevent an unfair spike into top tax brackets. For current brackets, consult PAYE tax bands and explore our knowledge pillar on PAYE in Kenya.

Frequently Asked Questions

How is statutory severance pay calculated in Kenya?

Under Section 40(1)(g) of the Employment Act 2007, an employee terminated on redundancy is entitled to severance pay of not less than 15 days’ basic wages for each completed year of service. The standard formula uses: (Monthly Basic Pay ÷ 26) × 15 × Completed Years.

How is service gratuity calculated in Kenya?

Service gratuity is typically defined in an employment contract or Collective Bargaining Agreement (CBA). Common contractual standards award between 15 and 31 days’ basic pay per year worked.

Is gratuity or severance pay taxable in Kenya?

Yes. Severance pay and gratuity are taxable income in Kenya, but KRA allows statutory exemptions or spread-back provisions under the Income Tax Act for terminal dues, subject to statutory limits.

Can an employee claim both gratuity and NSSF pension?

Under Section 35 of the Employment Act, statutory service pay is generally payable to employees who are not registered members of the NSSF or a comparable employer retirement scheme.

Why does the severance formula divide basic salary by 26 days?

Under Kenyan labor arbitration standards and Industrial Court precedents, 26 days represents the standard number of working days in a month (excluding Sundays).