How to pay and manage Kenyan contractors: A practical guide

If you're paying independent contractors in Kenya, you need to handle payment carefully and understand currency dynamics. The payment part is straightforward once you know what works in Kenya. The compliance part—understanding KRA PIN requirements, currency volatility, and foreign exchange regulations—is where most foreign businesses struggle.

This guide walks through what you actually need to do. Then we'll show you where Kontrable helps organize the work.

The main things you need to do

1. Use Wise or Payoneer for payments. These are the best payment methods for Kenyan contractors. Wise costs $3-10 per transfer with real mid-market exchange rates. Payoneer costs $5-12 and is very popular in Kenya. PayPal works but costs $5-15 and has worse rates. Traditional bank transfers cost more and take longer. Use Wise or Payoneer.

2. Always pay in USD. Most Kenyan contractors prefer USD for stability and international purchasing power. The Kenyan shilling (KES) fluctuates, and contractors want certainty on what they're earning. Always confirm currency preference with the contractor, but expect USD.

3. Verify KRA PIN before starting work. KRA PIN is Kenya's tax identification number issued by the Kenya Revenue Authority. Always verify the contractor has a valid KRA PIN before the first payment.

4. Use a written contract. Document the contractor relationship with a clear service agreement covering scope, deliverables, payment terms, currency (USD), IP ownership, confidentiality, and explicit statement that they're an independent contractor (not an employee).

5. Keep payment records. Maintain documentation of all payments made. As a foreign company, you typically don't withhold Kenyan taxes, but you need records for your own country's tax compliance.

That's the foundation. Everything else builds on these five things.

Payment methods: What actually works

For paying Kenyan contractors:

Use Wise or Payoneer. Both are reliable payment methods in Kenya.

Wise: It charges $3-10 per transfer with real mid-market exchange rates—no markup. Transfers take 1-3 business days. Contractors can withdraw to local Kenyan bank accounts or M-Pesa (mobile money). Wise is widely accepted and has lower fees than most alternatives.

How to set up: Create a Wise business account (free). Get the contractor's bank details (account number, bank name, SWIFT code). Send USD to their account. The contractor receives money in 1-3 business days and can withdraw to their local bank or M-Pesa.

Payoneer: It charges $5-12 per transfer and is very popular with Kenyan freelancers. Many Kenyan contractors already have Payoneer accounts. Transfers take 1-3 business days. Contractors can withdraw to local bank accounts or M-Pesa.

How to set up: Create a Payoneer business account (free). Get the contractor's Payoneer account email. Send USD to their account. They can withdraw to their Kenyan bank account or M-Pesa.

What about PayPal?

PayPal works in Kenya and costs $5-15 per transaction. It offers instant transfers but has worse exchange rates than Wise or Payoneer. PayPal is widely accepted, so if the contractor prefers it, it works. But for regular payments, Wise or Payoneer are better choices.

What about M-Pesa?

M-Pesa is Kenya's famous mobile money platform and is ubiquitous in Kenya. It's great for local KES payments—instant and cheap. But for international USD payments, you can't send directly to M-Pesa. Instead, use Wise or Payoneer (both can withdraw to M-Pesa), or use M-Pesa as the final destination after converting to KES.

What about traditional bank transfers?

Traditional bank transfers are slower and more expensive than Wise or Payoneer. Use Wise or Payoneer instead.

Currency: Always USD

Most Kenyan contractors prefer USD for stability and international purchasing power. The Kenyan shilling (KES) fluctuates, and contractors want certainty on what they're earning.

Tech workers especially prefer USD because they're paid by international clients and need stability. USD also has better long-term purchasing power than KES. Some contractors may request KES, but this is rare and you should ask why.

Always confirm currency preference with your contractor before setting up payments, but expect them to say USD. If they request KES, explain the currency risk and ask if they'd prefer USD instead.

Understanding KRA PIN (Tax ID)

KRA PIN is Kenya's tax identification number issued by the Kenya Revenue Authority (KRA). All contractors must have one to operate legally in Kenya.

You need to verify the contractor has a valid KRA PIN before starting work. Ask them to provide their KRA PIN and keep it on file. This is the contractor's responsibility to obtain and maintain, but you should verify it as part of your contractor onboarding process.

Tax and compliance requirements

When hiring contractors in Kenya, tax obligations are straightforward: the contractor is responsible for their own taxes with the KRA (Kenya Revenue Authority). You don't withhold taxes or file anything with Kenyan tax authorities.

Your responsibilities: Verify the contractor has a valid KRA PIN. Have a clear written service contract. Keep documentation of all payments. Don't withhold Kenyan taxes. Ensure proper contractor relationship (they control their work, use their own tools, work for multiple clients, are project-based).

Contractor's responsibilities: They handle their own tax compliance with the KRA. They register and maintain their KRA PIN. They file tax returns as required by Kenyan law. They keep records of income and expenses.

Important note: As a foreign company paying a Kenyan contractor, you typically don't have tax withholding obligations in Kenya. The contractor handles their own KRA tax compliance. Consult with a tax professional in your country about reporting requirements in your jurisdiction.

Contractor vs employee classification

One mistake businesses make is treating contractors like employees. Kenya has labor laws that distinguish between the two, and misclassification can create legal risk.

A proper independent contractor relationship means they control how work is done, use their own tools and equipment, work for multiple clients, and are engaged on a project basis with defined deliverables. They shouldn't have set working hours, provided equipment, exclusive work requirements, or ongoing employment-like arrangements.

Document the relationship carefully with a written contract that explicitly states independent contractor status.

Why hire Kenyan contractors?

Kenya has a thriving tech ecosystem (known as Silicon Savannah) with excellent advantages. Nairobi is East Africa's tech hub with strong startup culture. The country has skilled developers and a growing freelance workforce. English is an official language—most tech contractors speak English fluently. Rates are 50-70% lower than US or EU while maintaining quality. Time zone alignment (EAT is UTC+3) overlaps well with Europe and has some overlap with US East Coast. Kenya is a world leader in mobile money innovation with M-Pesa, showing tech sophistication. The country has expanding tech education and training programs producing growing talent.

Common mistakes and how to avoid them

Mistake 1: Paying in KES. You assume KES is simpler for the contractor. They lose significant value due to shilling fluctuations and are unhappy about it.

Solution: Always pay in USD. Most Kenyan contractors prefer USD. Have the conversation upfront about currency.

Mistake 2: Using expensive or slow payment methods. You use traditional bank transfers which are slower and more expensive than modern alternatives.

Solution: Use Wise ($3-10) or Payoneer ($5-12). Both are faster and cheaper than traditional methods.

Mistake 3: Not verifying KRA PIN. You hire a contractor without requesting their KRA PIN. They may not be properly registered with the Kenya Revenue Authority, creating potential compliance issues.

Solution: Request KRA PIN before the first payment. Keep it on file as proof of contractor tax registration.

Mistake 4: No written contract. Verbal agreements lead to disputes about scope, deliverables, and payment terms. Without documentation, there's no clarity when disagreements arise.

Solution: Always have a written service agreement before starting work. Cover scope, deliverables, payment terms, currency (USD), IP ownership, confidentiality, and termination terms.

Mistake 5: Misclassifying employees as contractors. You treat a contractor like an employee—setting hours, providing equipment, requiring exclusive work. This creates legal risk.

Solution: Ensure true contractor relationship. They control how work is done, use their own tools, work for multiple clients. Document this in the contract.

Frequently asked questions

Q: Should I pay Kenyan contractors in USD or KES? A: Most Kenyan contractors prefer USD for stability and international purchasing power. Always confirm with your contractor, but expect USD.

Q: What's the best payment method for Kenya? A: Wise and Payoneer are both excellent. Wise typically has lower fees ($3-10), while Payoneer is very popular among Kenyan freelancers and many already have accounts. Both allow contractors to withdraw to M-Pesa if they prefer.

Q: Can I use M-Pesa to pay contractors? A: M-Pesa is great for local KES payments and is instant. For international USD payments, you can't send directly to M-Pesa. Use Wise or Payoneer to send USD, and contractors can withdraw to M-Pesa if they prefer.

Q: Do I need an EOR platform for Kenyan contractors? A: No. EOR is for hiring employees internationally. Kenyan contractors handle their own KRA tax compliance. You just need a good payment method (Wise or Payoneer) and the ability to organize contracts and payment records.

Q: Do I need to withhold Kenyan taxes? A: No. As a foreign company paying a Kenyan contractor, you typically don't withhold Kenyan taxes. The contractor is responsible for their own KRA tax compliance.

Q: Do I need a local presence or business registration in Kenya? A: No. You're paying independent contractors for services. You don't need a Kenyan business entity, registration, or tax ID. The contractor handles their own compliance.

Q: What should be in a contractor agreement for Kenya? A: Include scope of work, deliverables, payment terms, currency (USD), independent contractor status, IP ownership, confidentiality, and termination terms. A simple written agreement protects both sides.

Getting started

If you're paying Kenyan contractors, here's the process:

1. Verify contractor has valid KRA PIN
2. Set up Wise or Payoneer business account (Wise typically has lower fees)
3. Confirm currency preference (will likely be USD)
4. Get contractor's payment details (bank account for Wise, Payoneer email for Payoneer)
5. Create written service agreement
6. Set up regular payment schedule
7. Keep records for your tax purposes
8. Maintain contractor contact and documentation

Kontrable helps with steps 2, 4, 5, 6, 7, and 8 by organizing contractor information, tracking payments, managing contracts, and storing invoices. You stay in control of your payment method and use Wise or Payoneer directly.

If you're managing a few contractors, a spreadsheet works. If you're managing dozens or coordinating across a team, Kontrable saves time and keeps contractor data organized.

Ready to get organized?

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