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ELRCPartially AllowedNot stated in judgment· [2025] KEELRC 2707 (KLR)

Mathuku v African Mission Health (K); Icon Auctioneers Ltd (Interested Party) (Cause E859 of 2021) [2025] KEELRC 2707 (KLR)

Employment and Labour Relations Court
3 October 2025
ANAGNES KITIKU NZEI
1,583 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~6 min to read original · ~4 min brief

The bottom line

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A Nairobi court confirmed employers must deduct only taxes that existed when an employee was fired — and cannot deduct from awarded court costs.

What this practically means

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Executive summary

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This ruling by the Employment and Labour Relations Court at Nairobi (Agnes Kitiku Nzei, J) determined the Respondent's Notice of Motion dated 10th April 2025, seeking to set aside warrants of attachment and a proclamation notice issued in execution of a decree of 17th March 2025, and a declaration that the decree had been settled in full. Judgment had been entered for the Claimant on 18th February 2025 for Kshs.452,336.40 (three months' gross salary as compensation for unfair termination) plus 50% of costs. The Respondent paid Kshs.380,042.50 after deducting purported statutory sums of Kshs.144,556.40, prompting the Claimant to instruct an auctioneer to recover the balance. The Claimant opposed, arguing that no employment relationship subsisted at the time of the award, that compensation under a court award is not income chargeable to PAYE, that the Respondent had not proved remittance to the Kenya Revenue Authority, and that the applicable tax regime was that prevailing at termination in October 2020. The court held that compensation under Section 49(1) of the Employment Act attracts statutory deductions under Section 49(2), but only those applicable at the time of termination; costs are not deductible; and Housing Levy and SHIF, not being in existence in October 2020, could not be applied, the law not operating retrospectively. Relying on Directline Assurance and Rift Valley Railways, the court granted a stay of execution, recalled the warrants, ordered re-computation of deductions within 14 days with payment of any wrongly deducted sums, and directed each party to bear its own costs.

Key legal issues

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01

Whether the decretal sum was subject to statutory deductions and which regime applies

Holding

The compensation of Kshs.452,336.40 was subject to statutory deductions as applicable at the time of termination (October 2020), pursuant to Section 49(2) of the Employment Act; costs were not deductible; Housing Levy and SHIF could not be deducted as those statutes did not exist in 2020

Reasoning

The court held that the compensation award under Section 49(1) attracts statutory deductions under Section 49(2), but the deductions must reflect the tax regime at termination. Costs merely refund a litigant's expenses and fall outside Section 49(1). The Respondent erred by deducting from the entire decretal sum including costs, and by applying Housing Levy and SHIF, which were not in existence in October 2020. PAYE and NSSF were to be computed on the rates applicable at termination. The court relied on Court of Appeal authorities supporting deduction of statutory sums from lump-sum awards.

p. 3
02

Whether execution should be stayed and warrants set aside

Holding

The motion partly succeeded; execution was stayed and the warrants of attachment and sale were lifted and re-called, with liberty for execution to issue only for any wrongly deducted sums not repaid within 14 days

Reasoning

Having found the deductions erroneous in part but that some statutory deductions were proper, the court balanced the parties' positions: the decree was not settled in full (so no declaration of full settlement), but the attachment was premature insofar as it targeted sums properly deductible. The court stayed execution, recalled the warrants, and directed re-computation of deductions within 14 days, with execution available only for wrongly deducted amounts not paid back.

p. 4

Legal principles established

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  • Costs of a suit are not subject to statutory deductions under Section 49(2) of the Employment Act; only payments under Section 49(1) are
  • Monetary relief under Section 49(1) must be subjected to statutory deductions applicable at the time of termination or accrual of the cause of action
  • Statutory law does not operate retrospectively; deductions not in existence at termination (Housing Levy, SHIF) cannot be applied

Court orders

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  1. 1.Stay of execution of the Court's decree; the warrant of attachment and warrant of sale are lifted and re-called
  2. 2.The Respondent/Applicant to re-compute the statutory deductions from the compensation award within 14 days, based on the deductions applicable at the time of termination, and pay the Claimant any amount wrongly deducted, failing which execution shall issue for recovery of such money
  3. 3.Each party to bear its own costs of the application
Jurisdiction invoked
Original employment and labour relations jurisdiction; ruling on a Notice of Motion in a suit decided under Section 49 of the Employment 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, "Mathuku v African Mission Health (K); Icon Auctioneers Ltd (Interested Party) (Cause E859 of 2021) [2025] KEELRC 2707 (KLR)", Case Analysis (2025). Not stated in judgment. Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2025/2707/eng@2025-10-03

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