Introduction
Termination of employment on account of poor performance remains one of the most scrutinized areas under Kenyan employment law. For large organisations, the risk exposure is particularly significant due to the scale of operations, internal HR structures, and the financial implications of adverse court awards. While the Employment Act, 2007 permits termination based on an employee’s incapacity to perform, such termination must meet two strict legal thresholds: substantive justification and procedural fairness. Kenyan courts, particularly the Employment and Labour Relations Court (ELRC) and the Court of Appeal, have consistently reinforced that failure to meet either threshold renders termination unfair.
This article provides a detailed, legally grounded, and practical guide on how to terminate an employee for poor performance in Kenya, supported by statutory provisions and current jurisprudence.
Statutory Framework Governing Termination for Poor Performance
Substantive Justification: Sections 43 and 45 of the Employment Act
Section 43 of the Employment Act places a mandatory obligation on the employer to prove the reason for termination. If the employer fails to do so, the termination is automatically deemed unfair. Section 45 further provides that termination is unfair unless the employer demonstrates that:
- The reason for termination is valid;
- The reason is fair and related to the employee’s capacity, conduct, or compatibility; and
- The termination was carried out in accordance with fair procedure.
Poor performance falls under “capacity,” but it must be proven through objective and verifiable evidence. Courts have consistently rejected vague or unsubstantiated allegations of poor performance.
Procedural Fairness: Section 41 of the Employment Act
Section 41 requires that before termination, the employer must:
- Explain the reasons for the contemplated termination;
- Allow the employee to be accompanied by a colleague or union representative; and
- Hear and consider the employee’s response.
The Court of Appeal in Postal Corporation of Kenya v Andrew K. Tanui [2019] eKLR held that failure to comply with Sections 41, 43, and 45 renders termination both procedurally and substantively unfair.
Burden of Proof: Section 47(5) of the Employment Act
The burden of proof in employment disputes is shared. The employee must demonstrate that termination occurred, after which the employer must justify both the reason and the process. In Omondi & 9 Others v Brava Food Industries Ltd [2025] eKLR, the court reaffirmed that once termination is established, the burden shifts to the employer to justify the dismissal, including where poor performance is alleged.
The Legally Compliant Process for Termination on Grounds of Poor Performance
Performance Evaluation and Documentation
The process begins with a structured and documented assessment of the employee’s performance. Employers must rely on objective indicators such as key performance indicators (KPIs), targets, and appraisal reports. Courts have consistently emphasised that poor performance must be demonstrated through measurable standards, not subjective opinion. In several ELRC decisions, termination has been invalidated where employers failed to produce appraisal records or evidence of structured evaluation.
Performance Improvement Plan (PIP)
Once performance deficiencies are identified, the employer must give the employee a genuine opportunity to improve. This is typically done through a Performance Improvement Plan. The PIP should outline specific shortcomings, set measurable targets, define timelines, and provide support mechanisms such as training or supervision. Courts now treat the absence of a PIP or equivalent intervention as evidence of procedural unfairness, particularly in large organisations where structured HR systems are expected.
Notice to Show Cause
If performance does not improve, the employer must issue a formal Notice to Show Cause. This notice must clearly set out the specific areas of underperformance, reference prior evaluations or warnings, and notify the employee of the potential consequences, including termination. This step is critical in establishing that the employee was aware of the deficiencies and given an opportunity to respond. An employee must be given sufficient time to respond to the charges in the Show Cause Letter.
Disciplinary Hearing (Mandatory Requirement)
The employer must then convene a disciplinary hearing in compliance with Section 41. At this stage, the employee must be given a fair opportunity to respond to the allegations and to be accompanied by a colleague or union representative. In Kenfreight (E.A.) Limited v Benson K. Nguti [2016] eKLR, the Court of Appeal held that termination without a proper hearing was unfair, even where the employer had paid terminal dues. The hearing must be substantive and not a mere formality. The employer must genuinely consider the employee’s defence before making a decision.
Decision and Termination Letter
Following the hearing, the employer must make a reasoned decision based on the evidence presented. If termination is justified, a termination letter must be issued clearly stating:
- The reason for termination (poor performance);
- Reference to prior warnings, evaluations, and PIP;
- Compliance with notice requirements or payment in lieu.
The decision must be consistent with the evidence and the process followed.
Post-Termination Compliance
After termination, the employer must comply with statutory obligations, including payment of all terminal dues and issuance of a Certificate of Service under Section 51 of the Employment Act. Failure to comply may result in additional liability.
Key Judicial Principles from Recent Case Law
Proof of Poor Performance is Mandatory
In Omondi & 9 Others v Brava Food Industries Ltd [2025] eKLR, the court found termination unfair where performance-based dismissal was not supported by sufficient evidence or a fair process.
Procedural Fairness is Central
In Postal Corporation of Kenya v Andrew K. Tanui [2019] eKLR, the Court of Appeal emphasised that termination must comply with Sections 41, 43, and 45, failing which it is unfair.
In Kenfreight (E.A.) Limited v Benson K. Nguti [2016] eKLR, the court held that even where an employer pays terminal benefits, failure to follow due process renders the termination unlawful and exposes the employer to compensation of up to 12 months’ salary.
Recent appellate decisions have reinforced that employers must act in accordance with fairness, justice, and equity when terminating employees, particularly in performance-related dismissals.
Best Practices for Large Organisations to Avoid Litigation
Large organisations must adopt a proactive and structured approach to performance management. A compliant framework should include clearly defined job descriptions, measurable performance metrics, and periodic performance reviews. Human resource departments should ensure that all performance issues are documented contemporaneously and that employees are provided with clear feedback and support.
It is also critical to institutionalise Performance Improvement Plans and ensure that they are properly implemented and recorded. Disciplinary processes should be centrally coordinated to ensure consistency and compliance with statutory requirements.
Employers should further ensure that all disciplinary hearings are conducted fairly, with proper records maintained. Legal oversight, particularly in high-risk terminations, can significantly reduce exposure to claims of unfair dismissal.
Conclusion
Termination of employment on account of poor performance is lawful under Kenyan law, but it is subject to strict statutory and judicial controls. Employers must demonstrate both a valid reason and a fair process, as required under Sections 41, 43, and 45 of the Employment Act.
For large organisations, the primary risk lies not in terminating underperforming employees, but in failing to follow a structured, documented, and legally compliant process. Kenyan courts have consistently awarded substantial compensation where employers fall short of these requirements.
A disciplined approach to performance management and termination is therefore essential to safeguarding the organisation against litigation.
Having Termination of Employment Legal Matter?
If your organisation is dealing with employee performance issues or contemplating termination on account of poor performance, it is critical to ensure strict compliance with Kenyan employment law and evolving judicial standards.
F.M. Muteti & Co. Advocates provides specialised legal advisory to corporate clients, including:
- Structuring compliant performance management systems
- Advising on disciplinary and termination processes
- Representing employers in employment disputes
Contact us today to ensure your organisation’s employment practices are legally sound, strategically structured, and fully defensible before the Employment and Labour Relations Court.