On 26 January 2024, the Court of Appeal declined to issue stay orders suspending the implementation of the High Court decision issued on 28 November 2023 that declared the provisions of the Employment Act, 2007 (the Employment Act) on the affordable housing levy unconstitutional (the High Court Judgment). The earlier stay orders issued by the High Court suspending the implementation of its decision and allowing the Kenya Revenue Authority (KRA) to continue collecting the housing levy until a formal application for a stay of the High Court Judgment is filed before the Court of Appeal or in case no such application is filed, until 10 January 2024 (the High Court Stay Order) lapsed on 6 December 2023. Therefore, employers had no legal basis to deduct the housing levy from employees’ salaries for the month of January 2024.

Employers who deducted the housing levy from January salaries should refund the same amounts to the employees.
While there is a risk that the KRA may backdate collection of the housing levy should the Court of Appeal overturn the High Court Judgment, we are of the view that this risk is remote because the non-payment of the housing levy by employers pending determination by the Court of Appeal is based on a final judgment of the High Court, being the High Court Judgment and the lapse of the High Court Stay Order.

The above said, employers should notify their employees of the risk (albeit remote) of the KRA backdating the collection of the housing levy and inform them that in such case the employer would recover such back levies from them.

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