Family Bank’s former chief executive officer, Peter Munyiri Maina, has been awarded Sh30.6 million by the Court of Appeal in the form of gratuity payments following a protracted legal battle with his former employer, though he had sought a larger payout of Sh57 million.
While the amount falls short of his claim, the judgment provides clarity on executive compensation disputes in Kenya’s banking sector and reinforces the binding nature of contractual terms.
The seven-year legal dispute centered on interpreting Mr Maina’s employment contract, which stipulated a 10 percent gratuity payout for his first year (2011-2012) and stated subsequent rates would be “aligned with banking industry rates.”
While both parties agreed on the wording, they sharply disagreed on what constituted the “banking industry rate” for a Tier 2 institution such as Family Bank.
The Court of Appeal clarified that once gratuity terms were included in a contract, they ceased to be discretionary and must be awarded strictly in accordance with contractual provisions.
Mr Maina, who served as CEO of the mid-tier lender from July 2011 to July 2016, maintained that comparable banks paid their managing directors gratuity at 31 percent of their gross annual basic salary. He wanted to be paid the same for each of his last four years of his contract.
To support his claim, he cited a 2016 PricewaterhouseCoopers (PwC) Employee Benefits Guide and findings from Manpower Services Kenya, which indicated that banking sector CEOs typically received gratuity rates between 30 percent and 31 percent.
He also referenced comparable practices at Housing Finance Company of Kenya and National Bank of Kenya, both of which set executive gratuity at 31 percent.
Family Bank, however, rejected the 31 percent benchmark, arguing that the PwC survey was not bank-specific and failed to account for mid-tier banks.
The bank presented a subsequent PwC survey it commissioned in October 2016 —limited exclusively to Tier 2 institutions— which found that only five out of 14 sampled banks offered gratuity, averaging 18 percent.
It contended that this figure represented the true “banking industry rate” as intended in Mr Maina’s contract. The bank maintained this specialised data, which better reflected the contractual term “banking industry rates” as applied to their tier classification.
Both the Employment and Labour Relations Court in its 2019 ruling, and now the Court of Appeal in 2025, sided with Family Bank.
While acknowledging the broader industry averages cited by Mr Maina, judges noted Kenya’s banking sector operates under strict Central Bank of Kenya classifications, making tier-specific comparisons most relevant.
Recognising that the April 2016 PwC report indicated a 30 percent average gratuity rate for senior executives, the appellate judges noted that the survey covered 41 organisations from all economic sectors and industries, both large and small, with only eight banks.
By contrast, the second PwC report directly addressed the dispute’s central question; the average gratuity rate for Tier 2 banks between 2012 and 2016.
The court deemed this distinction critical, emphasising that Kenya’s banking sector is formally classified into three tiers by CBK with Family Bank falling under Tier 2.
“In view of the classification of banks… the correct banking industry rates would be those of the tier in which the respondent was classified,” the judges ruled, affirming that the 18 percent rate accurately reflected contractual obligations.
Additionally, the Court of Appeal upheld the Labour Court’s rejection of the Manpower Services report, noting that it was never formally submitted as evidence and was improperly introduced during submissions.
Although the appellate judges dismissed Mr Maina’s push for a higher gratuity rate, they identified an error in the Labour Court’s calculations, which had applied a flat monthly salary of Sh3.1 million across all four disputed years.
Records showed that Mr Maina’s salary increased to Sh3.6 million in August 2015, meaning his fifth-year gratuity should have been based on this higher figure.
The Court of Appeal rectified the computation, recalculating the amounts using the 18 percent rate.
The final award remained Sh30.6 million —unchanged from the Labour Court’s total— but now correctly broken down as Sh2.7 million for the first year, Sh6.696 million for each of the second, third, and fourth years, and Sh7.867 million for the fifth.
The court also rejected Mr Maina’s request for interest dating back to 2016, stating that the gratuity rate had never been mutually agreed upon and required judicial determination.
Additionally, it declined to award legal costs, citing the nature of the employer-employee relationship and the fact that the contract had expired naturally.
The ruling sets a notable precedent in Kenya’s banking sector, reinforcing the importance of precise contractual language and tier-specific benchmarks in executive compensation disputes.
