Employers are expected to lay off thousands of workers in the next six months after more than half of the firms in the private sector reported inability to meet staff costs in a new survey.
The Federation of Kenya Employers said in the last five years, the private sector created more than 200,000 jobs but the coronavirus pandemic has wiped out more than 80 per cent of those jobs between March and July.
Releasing the survey findings on the impact of Covid-19 on enterprises, Federation of Kenya Employers Chief Executive Jacqueline Mugo said 84 per cent of companies reported adverse effects on their cashflows and over a million jobs were now at risk.
“This situation shows that if the government does not intervene in helping enterprises in improving their cash flows, then more than a million formal sector workers are at risk of losing their current incomes on jobs,” she said yesterday.
According to FKE, the average number of employees in respondent companies reduced from 406 to 372 between March and July. This is 8.3 per cent reduction in the total number of employees.?
This translates to a loss of 173,743 jobs, in the formal private sector in the five months scope of the survey.
“Consider that the private sector wage employment as of 2019 stood at 2.06 million and grew by 2.3 per cent according to KNBS, this means that Covid-19 has led to the loss of 173,743 jobs in the formal private sector in the last five months,” said Ms Mugo.
“This is a big loss considering that for the last five years since 2015, only 218,800 jobs had been created in the private formal sector therefore, Covid-19 has wiped out 80 per cent of jobs created in the sector since 2015.”
She called for more relief measures for businesses such as a further reduction of corporate taxes, the removal of the one per cent revenue tax slated to start early next year and setting up of a Wage Support Fund for companies.
“Businesses are in dire need of support to help them access and generate finances to help their cash flow. This includes linking loans repayment and credit facilities to cashflow projections,” said Ms Mugo.
The report shows that 51 per cent firms polled reported they were planning to cut staff costs in the next six months while 30 per cent were not planning to reduce staff costs while 19 per cent were not sure.
This also means firms have frozen recruitment. “Majority of organisations agreed that labour costs and employment entitlements like salary, wages, annual leave and 13th month salary were a constraint on their recruitment decisions,” said the survey.