Ouko v Kenya Chemical Workers Union (Cause E014 of 2022) [2025] KEELRC 1750 (KLR)
The bottom line
#A Kenyan court ruled that gratuity is taxable income subject to statutory deductions, and dismissed a garnishee claim that ignored those deductions.
What this practically means
#Executive summary
#Key legal issues
#Whether gratuity earned by an employee is taxable
Yes. Under Section 5 of the Income Tax Act, gains or profits from employment include gratuity, and under Section 49(2) of the Employment Act payments are subject to statutory deductions
The court read Section 3(2)(a)(ii) and Section 5 of the Income Tax Act together with Section 49(2) of the Employment Act. It relied on Court of Appeal authorities (Kioko Joseph v Bamburi Cement; Directline Assurance v Jeremiah Wachira Ichaura; Andrew Mukite Saisi v Tracker Group) and the KRA Employers' Guide to conclude that gratuity forms part of employment income chargeable to tax and must be subjected to statutory deductions.
Whether the applicant's claimed outstanding decretal balance of Kshs.1,459,143 was substantiated
No. The applicant tendered no computation and failed to account for statutory deductions and payments made, so the Order Nisi was not made absolute
The court noted the applicant did not provide a computation of the alleged outstanding sum or contradict the respondent's computation, and did not factor in statutory deductions. The respondent's counsel admitted the balance of Kshs.583,220 had been paid, though no particulars of payment were furnished and submissions are not pleadings. The court nonetheless ordered the respondent to pay its computed balance within 7 days and discharged the Order Nisi.
Legal principles established
#- Gratuity paid to an employee in respect of employment or services rendered is income subject to income tax and statutory deductions
- Any lumpsum/terminal payment to an employee is subject to statutory deductions
Court orders
#- 1.The respondent shall pay the outstanding amount as per its computation Kshs.583,220.00 in a single instalment within 7 days
- 2.The respondent shall bear the costs of the Garnishee, Kshs.20,000.00
- 3.The Garnishee Order nisi granted on 22nd May, 2025 is hereby discharged
- 4.Parties shall bear own costs of this application
- Jurisdiction invoked
- Sections 1A, 1B, 3A, 38(c) and 63(e) of the Civil Procedure Act and Order 23 Rules 1, 4 and 10 of the Civil Procedure Rules (enforcement of decree by garnishee proceedings)
Key timeline
#Practical implications
#Frequently asked questions
#Cite this brief
#Cite this brief
Caselaw, "Ouko v Kenya Chemical Workers Union (Cause E014 of 2022) [2025] KEELRC 1750 (KLR)", Case Analysis (2025). Not stated in the judgment (Notice of Motion dated 21st May, 2025). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2025/1750/eng@2025-06-17
Suggested citation format for research notes or client memos. Always verify the original judgment before relying on any point.