Do I Need a Local Entity to Hire in Kenya?

In Kenya, a "local entity" generally refers to a registered business presence that can act as an employer, such as a subsidiary or branch office. This setup allows your company to be recognized locally, enabling compliance with payroll and employment obligations.

Without a local entity, you typically cannot manage local payroll, fulfill tax obligations, or issue compliant employment contracts. An alternative is to use an Employer of Record (EOR), which can handle these responsibilities on your behalf.

What is Required to Employ Someone in Kenya?

• Local employing entity required to directly employ? Yes (required for direct employment and compliance with local laws)
• Payroll registration required? Yes (you must register with the Kenya Revenue Authority)
• Withholding/tax remittance required? Yes (mandatory PAYE tax must be withheld and remitted)
• Social contributions required? Yes (employers must contribute to NSSF and NHIF)
• Local employment agreement required? Yes (written contracts are mandatory under Kenyan law)
• Mandatory benefits to budget? Yes (includes annual leave, sick leave, and maternity leave)
• Works council/collective agreements considerations? Usually (certain sectors may have collective agreements)

Best Options If You're Hiring in Kenya

Can I Hire Contractors Instead of Setting Up an Entity?

Yes, but it’s essential to ensure that the contractor relationship is genuinely independent.

While hiring contractors allows you to bypass setting up a local entity, Kenyan law has strict criteria for distinguishing between employees and contractors. Misclassification can lead to significant legal risks and penalties. Here are some key points to consider:

• Ensure contractors have autonomy over their work and are not integrated into your business operations.
• Be cautious if the contractor works exclusively for you or if you control their work hours and methods.

How Long Does Entity Setup Take And What Does It Cost?

Typical entity setup timeline: It often takes 4–8 weeks to set up an entity in Kenya, depending on the type of entity and registration requirements.

Ongoing cost categories (entity route):

• Accounting, bookkeeping, and statutory filings: Estimated KES 15,000–30,000 per month ($100–$200)
• Payroll provider: Estimated KES 5,000–15,000 per employee per month ($35–$100)
• Employer registrations and recurring compliance: Estimated KES 10,000–20,000 per year ($70–$140)
• Corporate tax filings and annual reporting: Estimated KES 20,000–50,000 per year ($140–$350)

EOR cost components (no-entity route):

• A per-employee EOR service fee (from $399 per month with Playroll)
• Pass-through statutory costs (e.g., employer social security contributions)
• Any optional benefits you choose to provide beyond statutory minimums

How an Employer of Record Can Help You Hire in Kenya

Hiring in Kenya can be complex, but it doesn’t have to require setting up a local entity or taking on long-term overhead. With an Employer of Record like Playroll, you get a simple, predictable way to hire compliantly while keeping costs transparent and under control. We help you:

• Hire employees in Kenya quickly without establishing a local entity, eliminating incorporation costs, ongoing administration, and exit complexity.
• Stay fully compliant with local payroll, tax, and employment regulations with Playroll’s managed payroll services.
• Control your total employment costs, with a clear monthly EOR service fee (from $399 per employee).
• Focus on growing your business, while we manage contracts, payroll, compliance, and labor law obligations end to end.
• Scale up or exit the market easily, without the financial or legal burden of closing a local entity.