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ELRCDismissedNot stated in the judgment excerpt· [2016] KEELRC 911 (KLR)

Louise W. Muiruri v Paramount Universal Bank Limited [2016] KEELRC 911 (KLR)

Industrial Court (Employment and Labour Relations Court)
25 July 2016
NMNzioki wa Makau
1,292 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~5 min to read original · ~4 min brief

The bottom line

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Kenya's Employment Court confirmed that compensation for unfair termination is taxable, so the employee received only the net amount after statutory deductions.

What this practically means

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Executive summary

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Two applications arose from a judgment delivered on 10th November 2015 in which the Court awarded the Claimant Kshs. 40,000/- as notice pay, Kshs. 16,000/- for days worked, Kshs. 29,333.33/- as leave dues and Kshs. 120,000/- as compensation for unfair termination, subject to statutory deductions, and entered judgment for the Respondent of Kshs. 100,000/- to be netted off. The Claimant sought a review, contending that only the notice, leave dues and pay for days worked were subject to PAYE, and that subjecting the compensation of Kshs. 120,000/- to tax deprived her of Kshs. 70,659/-. The Respondent sought an order that it deposit the net sum of Kshs. 49,341/- and stand discharged of the decretal sum, having annexed computations of tax and statutory deductions. The Court determined both applications together on the single question whether an award of compensation is subject to statutory deduction and PAYE. Relying on Section 49(2) of the Employment Act, which makes payments under Section 49 subject to statutory deductions, and Section 50, which directs the Court to be guided by Section 49 in unfair termination suits, and on Section 19(1)(f), the Court held that compensation under Section 49(1)(c) is expressly subject to statutory deductions. The review application was dismissed as misplaced. The Respondent was to pay Kshs. 49,341/- and stand discharged of the decretal sum, with each party bearing its own costs.

Key legal issues

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01

Whether compensation for unfair termination under Section 49(1)(c) of the Employment Act is subject to PAYE and statutory deductions

Holding

Yes - compensation under Section 49(1)(c) is expressly subject to statutory deductions; the review application seeking to exempt it was dismissed

Reasoning

Section 49(2) of the Employment Act provides that payments made under that section are subject to statutory deductions. Section 50 directs that the Court be guided by Section 49 in unfair termination suits, and the Court applied Section 49 in the cause. Section 19(1)(f) authorises deductions from salary where authorised by written law or court order. Therefore the compensation award, distinct from other heads, was correctly subjected to tax, leaving Kshs. 49,341/- payable.

p. 3

Legal principles established

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  • Compensation awarded under Section 49(1)(c) of the Employment Act for unfair termination is subject to statutory deductions including PAYE
  • An employer may deduct from an employee's salary amounts authorised by written law, collective agreement, wage determination, court order or arbitration award

Court orders

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  1. 1.The Claimant's application for review dated 26th January 2016 is dismissed as misplaced
  2. 2.The sums due to the Claimant are to be subjected to statutory deductions
  3. 3.The Respondent to pay the Claimant Kshs. 49,341/- being the net sum due under the judgment
  4. 4.On payment of Kshs. 49,341/-, the Respondent stands discharged of the decretal sum due to the Claimant
  5. 5.Each party to bear their own costs of the applications

Authorities

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Legislation

  • Employment ActSection 49
  • Employment ActSection 49(1)(c)
  • Employment ActSection 49(2)
  • Employment ActSection 50
  • Employment ActSection 19(1)(f)
Jurisdiction invoked
Original employment jurisdiction under the Employment Act, Sections 49 and 50 as read with Section 19(1)(f)

Key timeline

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Practical implications

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Frequently asked questions

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Later judgments citing this (1)

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Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.

Cite this brief

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Cite this brief

Caselaw, "Louise W. Muiruri v Paramount Universal Bank Limited [2016] KEELRC 911 (KLR)", Case Analysis (2016). Not stated in the judgment excerpt. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2016/911/eng@2016-07-25

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