Reports on Sunday suggested the Northern Irishman had been dismissed by Killie chairman Michael Johnstone on Saturday. But Press Association Sport has been told that is not the case and the 57-year-old is still in a job for now. His role will, however, be re-examined after the team failed to finish outside of the Clydesdale Bank Premier League's bottom three.
A four-match ban handed to Shiels following outspoken media comments will also be taken into consideration - as will "other internal problems" concerning the manager. A club spokesman told Press Association Sport: "Today's reports are wrong. We have not sacked Kenny.
"As was reported yesterday, Kenny's position is under review at present due to his failure to meet a contractual performance-related target and potential breaches of contract relating to media comments and observance of Scottish FA Articles and Rules and SPL Articles and Rules.
"In successive seasons we have finished fifth, seventh and now ninth. Our home record last season was the worst for over 30 years. These factors, along with the well documented SFA disciplinary issues and other internal problems concerning Kenny's conduct have necessitated the review. The outcome will be announced next week."
Shiels signed a two-year deal with Kilmarnock last summer just months after leading the club to the Scottish Communities League Cup with a 1-0 win over Celtic. But the agreement includes a clause allowing the club to sack him for failing to finish high enough up the table.
The Ayrshire outfit finished ninth in the Clydesdale Bank Premier League despite needing just one win from their final two games before the split to clinch a top-six slot. The terms of Shiels' contract were revealed in a newspaper article and the club have been angered by the revelation.
"Yesterday's Sun article was the result of a briefing from 'a source close to Kenny' and represented a serious breach of trust regarding a confidential internal process," said the spokesman.
"This has necessitated clarification from the club on a matter which we would have preferred to keep 'in house' and is extremely regrettable as it makes Kenny's situation even more difficult."
Kilmarnock posted their worst home record since the 1982/83 season, winning only five and drawing four of 19 league matches. Shiels also landed himself in trouble after claiming Celtic "were the monster of Scottish football" following a row with Hoops boss Neil Lennon.