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ELRCAllowedNot stated in the excerpt (ELRC Cause; judgment delivered by Wasilwa J on 27th February 2020, computation concluded by Onyango J)· [2021] KEELRC 1791 (KLR)

RNM & 12 others v Kenya Power and Lighting Company Limited [2021] KEELRC 1791 (KLR)

Employment and Labour Relations Court
30 April 2021
MOMaureen Onyango
1,292 words in judgment
View original judgmentRead on Kenya Law Watch case
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The bottom line

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Kenya's Employment Court awarded 11 former employees over KES 135 million in redundancy pay, ruling their employer cannot deduct the same tax twice from their settlement.

What this practically means

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Executive summary

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This is a first-instance ruling of the Employment and Labour Relations Court at Nairobi concluding the computation of a decretal sum in an employment cause. On 27th February 2020 Wasilwa J had held that the claimants, whose employment ended through redundancy, were paid only 15 months' salary for each year worked and were entitled to a constructive redundancy package of 2 months' salary for each year worked less the 15 days already paid, equating to an additional 45 days' salary for each year worked, with costs to the claimants. Subsequent directions of 11th November 2020 set the formula: 45 days for each year worked, less 8 months' advanced basic pay, less tax; the court also rejected the respondent's attempt to raise outstanding liabilities as unpleaded. After Wasilwa J's transfer, Onyango J took over the matter. The parties filed rival computations. The court adopted the respondent's tabulation as the gross baseline, since the parties agreed on gross salary and on 2 months' salary per year worked, and deducted 30% income tax and the VER and notice package already paid. The court held that deducting the VER tax again from the employee's net payable would amount to double taxation, since taxation was based on the total amount before tax. Judgment was entered for the claimants in the total sum of Kshs.135,298,934.11, apportioned among the eleven claimants, with costs in the cause. The judgment was delivered virtually under COVID-19 directions, with the court invoking Article 159(2)(d) and Article 48 of the Constitution and Section 1B of the Civil Procedure Act.

Key legal issues

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01

Computation of the constructive redundancy package

Holding

Each claimant is entitled to gross payment of 2 months' salary per year worked (i.e. 45 days' salary per year worked over and above the 15 days already paid), less 8 months' advanced basic pay, less 30% income tax, less the VER and notice package already paid earlier.

Reasoning

The court applied the formula directed by Wasilwa J in the ruling dated 11th November 2020: 45 days' salary for each year worked, less 8 months' advanced basic pay and less tax. The parties had agreed on gross salary inclusive of allowances and on 2 months' salary per year worked. Using the respondent's own tabulation as the gross baseline, the court deducted 30% income tax and the VER/notice amounts already paid, adjusting for tax on VER already borne by the respondent to avoid double taxation, arriving at Kshs.135,298,934.11.

p. 5
02

Treatment of outstanding liabilities/VER tax in the computation

Holding

The employer's VER tax obligation is subsumed within the 30% tax deduction from the gross award; a further recovery from the employee's net payable would amount to double taxation.

Reasoning

The court held that taxation is based on the total amount before tax. Since the tax on VER was already borne by the respondent, recovering that VER tax again from the net payable to the employee would constitute double taxation. The correct approach was to deduct the full 30% income tax from the gross total payable and then deduct the VER and notice package paid earlier.

p. 4

Legal principles established

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  • Tax on voluntary early retirement (VER) borne by the employer is recoverable from the 30% income tax deducted from the gross award; deducting VER tax again from the employee's net payable would constitute double taxation.

Court orders

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  1. 1.Judgment entered for the claimants in the total sum of Kshs.135,298,934.11, apportioned per claimant in the court's tabulation
  2. 2.Amount payable to each employee is total payable per the respondent's tabulation less 30% income tax, less VER and notice package paid earlier
Jurisdiction invoked
Employment and Labour Relations Court jurisdiction over the concluded cause; delivery of judgment facilitated by Article 159(2)(d) and Article 48 of the Constitution and Section 1B of the Civil Procedure Act

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, "RNM & 12 others v Kenya Power and Lighting Company Limited [2021] KEELRC 1791 (KLR)", Case Analysis (2021). Not stated in the excerpt (ELRC Cause; judgment delivered by Wasilwa J on 27th February 2020, computation concluded by Onyango J). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2021/1791/eng@2021-04-30

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