The Employment and Labour Relations Court has delivered a major win to hundreds of former employees of the now-defunct National Hospital Insurance Fund (NHIF) by ruling that all staff affected by the transition to the Social Health Authority (SHA) must retain their full salaries and benefits.
Justice Byram Ongaya, delivering the judgment on July 23, 2025, ruled that salary protection was not only a matter of fairness but a legal obligation the government must honour when restructuring public institutions.
“The salaries of former NHIF employees must remain intact during and after redeployment. No one shall suffer financial loss as a result of structural changes in public service,” the judge stated.
The ruling follows months after NHIF was dissolved; it had employed 1,737 workers across Kenya before being replaced by SHA amid broad health sector reforms. Of these employees, only 815 were integrated into SHA during its establishment. The remaining staff were transferred to the Public Service Commission (PSC) for redeployment to other departments and ministries.
This transition created tension and uncertainty among the excluded workers. Many reported receiving deployment letters that placed them in lower job groups or roles that did not match their previous responsibilities or qualifications.
There were also widespread concerns that the new roles offered lower pay, with no guarantee of salary protection. Some former employees accused SHA of failing to consider their experience and institutional knowledge, while others felt excluded from ongoing recruitment processes at the new authority.
A group of affected workers took legal action, seeking protection from what they described as unfair treatment and possible financial harm. They asked the court to intervene and direct both SHA and PSC to preserve their salaries and ensure fairness in job placement.
In earlier hearings, the court had ordered SHA to publicly disclose its internal structure, grading system, and salary framework. It also froze the recruitment of several advertised positions, including quality assurance officers and compliance staff, until the matter of staff transition was resolved.
During the legal proceedings, SHA’s Chief Executive Officer was also cited in an application for contempt after allegedly failing to comply with previous court directives.
After the court intervened, the involved parties agreed to pursue mediation. During these negotiations, former NHIF employees, the Social Health Authority (SHA), and the Public Service Commission (PSC) reached a consensus with the court’s help.
The government committed to ensuring that all affected staff, including those not redeployed to SHA, would retain their last-earned salaries and job grades, regardless of their new postings. As part of the mediated agreement, the petitioners agreed to withdraw the contempt proceedings previously filed against the SHA Chief Executive Officer.
In his final ruling, Justice Ongaya confirmed the agreement and issued binding directives to enforce it. “The new letters must indicate that the employee retains the salary earned at NHIF, regardless of the new role or location of service,” he ordered. He also instructed the PSC and SHA to revise and reissue all previously sent deployment and appointment letters to ensure that they explicitly reflect this condition.
The ruling has been received with widespread relief among the affected workers, many of whom had spent months living in fear of losing their income. For some, the uncertainty had stretched their family finances and put their future into question.
One former regional manager, speaking anonymously, said the outcome restored their hope. “I was being asked to take up a job that would have cut my salary by more than 40 per cent. After 18 years of public service, that felt like punishment. This judgment gives us our dignity back,” the employee said.
The court also made it clear that no worker should be penalised for structural reforms outside their control. “The restructuring of institutions must not become a backdoor to deny public servants their rightful earnings,” the judge added.
The case sets a powerful precedent for how the government handles transitions of state agencies in the future. Labour experts have pointed out that many public servants have faced similar challenges when institutions are dissolved, merged, or replaced. The judgment reinforces the principle that even as policy reforms are implemented, public servants must be treated with fairness and continuity must be preserved.
Justice Ongaya reminded all involved parties that the public service is not just about institutions but also about the people who have served in them.
“What we are doing is enforcing the principle of legitimate expectation. These are employees who served under legal employment terms, and those terms cannot be brushed aside simply because a new institution has taken over,” he stated.
SHA, which now carries the responsibility of managing Kenya’s national health insurance under the Universal Health Coverage (UHC) programme, is expected to finalise its internal structure in line with the judgment. The PSC, on its part, has been directed to expedite the review and correction of all affected deployment letters and ensure they comply with the court’s decision.
Although the hiring freeze on contested roles has now been lifted, the court’s orders remain in effect. Any ongoing or future recruitment at SHA must be conducted with fairness, transparency, and consideration of the former NHIF staff, where applicable.
The judgment comes as a significant legal and symbolic win for public servants who have long feared being left behind in the wake of government reform efforts. It also serves as an important reminder to reforming institutions that transformation must not come at the cost of fairness.
Justice Ongaya concluded with a warning that sets a tone for all future institutional transitions. “Restructuring is not an excuse for injustice. When the government changes policy or structure, it must do so while respecting the rights and livelihoods of those who have served faithfully. No Kenyan should suffer for doing their job.”
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