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ELRCAllowedEldoret MCELRC No. E134 of 2020 (Appeal)· [2025] KEELRC 2917 (KLR)

Sakam Enterprises Limited v Wando (Employment and Labour Relations Appeal E026 of 2025) [2025] KEELRC 2917 (KLR)

Employment and Labour Relations Court
23 October 2025
MOM. Onyango
3,106 words in judgment
View original judgmentRead on Kenya Law Watch case
AI-assisted case brief
·~12 min to read original · ~4 min brief

The bottom line

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Kenya's Employment Court confirmed employers must deduct PAYE from unfair termination awards, even after employment ends.

What this practically means

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Executive summary

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The Respondent, a former employee of the Appellant, obtained a consent judgment of Kshs. 2,600,000 for unfair termination, with consents recorded on 16th December 2022 and 29th January 2024 for payment by instalments. The Appellant paid the decretal sum in instalments, with a final cheque of Kshs. 374,059.85 on 4th March 2024 after deducting PAYE, withholding tax on interest and a Kshs. 175,000 staff loan. The Respondent issued a notice to execute; the Appellant applied at the trial court for stay of execution and declaration that the decree was satisfied. The trial court dismissed the application on 18th March 2025, holding that the Income Tax Act provisions did not apply to payments to a former employee. The Appellant appealed, arguing that section 49(2) of the Employment Act subjects payments under section 49 to statutory deductions, supported by section 37 of the Income Tax Act and the P.A.Y.E Rules' definition of 'employee' as including past employment. The Respondent contended that the consent was binding, that no tax computation or KRA remittance proof was produced, and that the loan deduction was a new matter never pleaded as a set-off. Allowing the appeal, the court held that all payments under section 49 are made to former employees, so the trial court's employee/former employee distinction was irrelevant, and employment-related awards are lawfully subject to PAYE. The court set aside the trial ruling, substituted an order allowing the application, declared the decree and consent fully complied with, and ordered each party to bear its own costs.

Key legal issues

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01

Whether the decretal sum arising from a consent judgment for unfair termination is subject to statutory deductions (PAYE)

Holding

Yes. Section 49(2) of the Employment Act subjects all payments under that section to statutory deductions, and section 37 of the Income Tax Act obliges an employer paying emoluments to deduct and account for tax. The distinction between a current and former employee is irrelevant.

Reasoning

The court read section 49(2) of the Employment Act with section 37 of the Income Tax Act and the Income Tax (P.A.Y.E) Rules, which define 'employee' to include a person receiving emoluments in respect of past employment. Since payments under section 49 are always made to former employees, the trial court's distinction between an employee and former employee was erroneous, and the award was lawfully subject to PAYE deductions.

p. 5
02

Whether the trial court erred in dismissing the Appellant's application for stay of execution and marking the matter settled

Holding

Yes. The trial court erred, and its ruling was set aside and substituted with an order allowing the application; the Appellant was held to have complied with the decree and consent.

Reasoning

Having found that the decretal sum was lawfully subject to statutory deductions and loan recovery under section 19(1)(f) and (h) of the Employment Act, the court concluded that the Appellant's deductions did not constitute non-compliance with the consent, and that the trial court erred in dismissing the application dated 7th March 2024.

p. 7

Legal principles established

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  • Payments made under section 49 of the Employment Act, including lump sum terminal dues and awards to former employees, are subject to statutory deductions including PAYE under section 37 of the Income Tax Act.
  • The duty to deduct and remit income tax applies to payments made after the employment relationship has ended, since all section 49 payments are made to former employees.

Court orders

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  1. 1.The ruling of the trial court delivered on 18th March 2025 is set aside and substituted with an order allowing the Appellant's application dated 7th March 2024
  2. 2.A declaration that the Appellant has complied with the court's decree and consent dated 29th January 2024 in Eldoret MCELRC No. E134 of 2020
  3. 3.Each party shall bear its costs of this appeal and the application dated 7th March 2024

Authorities

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Legislation

  • Employment ActSection 49(1), 49(2)
  • Employment ActSection 19(1), 19(1)(f), 19(1)(h), 19(4)
  • Income Tax Act, Cap 470Section 3(1), 5(2)(a), 35(3A), 37
  • Income Tax (P.A.Y.E) RulesDefinition of 'employee'
  • Tax Procedures ActSection 95

Cases cited (7)

  • Directline Assurance Co. Ltd v Jeremiah Wachira Ichaura
    [2016] eKLR
  • Co-Operative Bank of Kenya Ltd v Erastus Kuhara Mureithi
    [2013] eKLR
  • Joseph Ogonda Omondi v SBI International Holding AG Kenya
    [2015] eKLR
  • China Road & Bridge Corporation v Commissioner of Domestic Taxes
  • A.M. Bahaji & Company Limited v Kenya Ports Authority
    (2020) eKLR
  • Ocean Freight (E.A.) Limited v Commissioner of Domestic Taxes
    (2020) eKLR
  • Ibrahim Manyara v Registered Trustees of Agricultural Society of Kenya (A.S.K.)
    (2014) eKLR
On appeal from
Employment and Labour Relations Court (trial), Eldoret
Eldoret MCELRC No. E134 of 2020: Tecla Mercy Wando v Sakam Enterprises Limited
Jurisdiction invoked
Appellate jurisdiction over the ruling of the trial court dismissing the Appellant's application dated 7th March 2024

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, "Sakam Enterprises Limited v Wando (Employment and Labour Relations Appeal E026 of 2025) [2025] KEELRC 2917 (KLR)", Case Analysis (2025). Eldoret MCELRC No. E134 of 2020 (Appeal). Source: https://new.kenyalaw.org/akn/ke/judgment/keelrc/2025/2917/eng@2025-10-23

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