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ELRCPartially AllowedCause No. 100 of 2015· [2016] KEELRC 367 (KLR)

Andrew Abok Osiro v Chemelil Sugar Company Limited [2016] KEELRC 367 (KLR)

Employment and Labour Relations Court
6 October 2016
MOMaureen Onyango
1,272 words in judgment
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The bottom line

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The Employment Court ruled that Chemelil Sugar Company must calculate retirement gratuity using an employee's final salary, awarding him over Kshs 1.1 million.

What this practically means

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Executive summary

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The Claimant, Andrew Abok Osiro, worked for Chemelil Sugar Company Limited from 15th July 1976 to 25th December 2011, when he took voluntary early retirement. By letter dated 21st November 2011 the Respondent set out his terminal dues, including salary to 25th December 2011, 5.5 days accumulated leave, 28 days pay for each completed year of service on union terms, ex-gratia payment of Kshs.8,000 and pension benefits. The Claimant was paid a net sum of Shs.248,161.80 after deductions for advances of Shs.300,000 and tax. He then claimed Shs.1,204,283.60, comprising salary, accumulated leave, severance pay computed on his final salary, and the ex-gratia payment, plus interest, punitive and aggravated damages and costs. He relied on James Chege & 6 others v Aqua Plumbing Company Ltd for a service pay formula. The Respondent contended that gratuity should be computed on Kshs.35,615 per month and that only Shs.208,383.55 remained outstanding after deductions. The court found the point of divergence was the rate of pay for the gratuity. It held that gratuity must be based on the Claimant's last basic salary of Shs.55,512, since the November 2011 letter did not provide for any other basis and the Respondent had not explained its lower figure. Applying the Respondent's 21-day formula, gross gratuity of Shs.1,675,722.24 less advances and tax yielded Shs.1,127,560.44. Judgment was entered for the Claimant in that sum, with costs of the suit to the Claimant. Other remedies sought, including damages and interest, were not awarded.

Key legal issues

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01

Rate of pay for gratuity calculation

Holding

Gratuity of 28 days per year of service to be computed on the Claimant's last basic salary of Shs.55,512, not the lower figure used by the Respondent

Reasoning

The Respondent's letter of 21st November 2011 setting out terminal dues did not state that gratuity would be based on any pay other than what the Claimant earned at retirement. The Respondent also failed to explain why its gratuity calculation in submissions was lower than that in the cheque payment voucher, and why it did not use the salary at the time of retirement.

p. 4
02

Deductions from terminal dues

Holding

Advance payments of Shs.300,000 and tax withheld by the Respondent were properly deducted from the gratuity computation

Reasoning

The Claimant did not deny receiving advance payments of Shs.100,000 and Shs.200,000, which the Respondent proved with payment vouchers and cheques. The Claimant also did not acknowledge payment of December 2011 salary, accumulated leave and ex-gratia through his December 2011 payslip. The court therefore deducted the advances and tax from the gross gratuity.

p. 4
03

Quantum of service pay formula

Holding

The Respondent's formula of deriving the daily rate by dividing basic salary by 21 days was applied, rather than the Claimant's 26-day formula

Reasoning

The Claimant relied on James Chege & 6 others v Aqua Plumbing Company Ltd advocating division by 26 working days and multiplication by 28 days. The court instead adopted the Respondent's own formula of dividing the basic salary by 21 days, applying it to the corrected salary of Shs.55,512 over 633.92 days.

p. 4

Legal principles established

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  • Gratuity payable on early retirement must be calculated on the last basic salary earned at the time of retirement where the letter setting out terminal dues does not provide for any other basis

Court orders

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  1. 1.Judgment entered for the Claimant in the sum of Shs.1,127,560.44
  2. 2.The Respondent shall pay the Claimant's costs for this suit

Authorities

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Cases cited (1)

  • James Chege & 6 others v Aqua Plumbing Company Ltd
    [2013] eKLR
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction under the Employment and Labour Relations Court Act (Cause No. 100 of 2015)

Key timeline

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Practical implications

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Frequently asked questions

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Cite this brief

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Cite this brief

Caselaw, "Andrew Abok Osiro v Chemelil Sugar Company Limited [2016] KEELRC 367 (KLR)", Case Analysis (2016). Cause No. 100 of 2015. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2016/367/eng@2016-10-06

Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.