Kaniu v Family Bank Limited (Cause E534 of 2022) [2023] KEELRC 3060 (KLR)
The bottom line
#Kenya's Employment Court confirmed employers can deduct P.A.Y.E tax from termination payouts, even when a court-approved settlement states one gross figure.
What this practically means
#Executive summary
#Key legal issues
#Whether P.A.Y.E tax is deductible from an award of compensation under Section 49[2] of the Employment Act, including a consent judgment award
Yes - the award is subject to statutory deductions notwithstanding that the parties consented to a gross figure
The Court found two binding Court of Appeal decisions on point: Kioko Joseph v. Bamburi Cement, holding that an employer must recover appropriate tax from lump-sum termination payments whether voluntary or obligatory; and Andrew Mukite Saisi v. Tracker Group, holding that absence of express tax provision in a consent does not exempt payment from taxation and that deduction is not a variation of the consent. The Claimant's contractual-framing submissions could not displace this binding precedent, so the Respondent's deduction of Kshs. 3,054,783 was upheld.
Whether upholding the tax deduction varies the consent judgment as a binding contract
No - the deduction does not vary the consent judgment
The Claimant argued the consent was a binding contract, variable only on grounds such as fraud, collusion, illegality or mistake. The Court of Appeal in Andrew Mukite Saisi had expressly rejected the identical argument, stating the complaint that taxation amounted to variation of a consent judgment was baseless. Being bound, this Court held the consent remained intact; the gross sum of Kshs. 10,200,000 was deemed paid, with the net of Kshs. 7,145,216 received by the Claimant after statutory deduction.
Legal principles established
#- An employer has an obligation to recover the appropriate tax from any lump sum amount payable to an employee on termination, whether the payment is voluntary or obligatory
- Payments under a judgment or consent that do not expressly provide for tax remain subject to taxation, and such deduction does not amount to variation of the consent
Court orders
#- 1.It is recorded that the Respondent has paid to the Claimant 6 months' salary as compensation for unlawful termination amounting to Kshs. 10,200,000
- 2.The said amount has been subjected to P.A.Y.E tax deduction in the amount of Kshs. 3,054.783, with the net amount paid to the Claimant at Kshs. 7,145,216
- 3.The Claim is marked as fully settled, with each Party to bear its own costs
- 4.The file is closed
- Jurisdiction invoked
- Original employment and labour relations jurisdiction; consent judgment recorded in the Court under the Employment Act (Section 49[2])
Key timeline
#Practical implications
#Frequently asked questions
#Later judgments citing this (3)
#Judgments in the corpus that rely on this one. Where the Court said how it treated the authority, that is shown.
- Kassim Abdulatiff Mohamed v Barclays Bank of Kenya Limited[2026] KECA 75 (KLR)30 Jan 2026followed
- Devyan Food Industries Kenya Limited v Kanga (Appeal E053 of 2024) [2025] KEELRC 1872 (KLR)[2025] KEELRC 1872 (KLR)27 Jun 2025
- Devyan Food Industries Kenya Limited v Kanga (Appeal E053 of 2024) [2025] KEELRC 1872 (KLR)[2025] KEELRC 1872 (KLR)27 Jun 2025applied
Cite this brief
#Cite this brief
Caselaw, "Kaniu v Family Bank Limited (Cause E534 of 2022) [2023] KEELRC 3060 (KLR)", Case Analysis (2023). Cause No E534 of 2022. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2023/3060/eng@2023-11-30
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.