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Looming public wage bill purge to hit counties, parastatals hard

By Frankline Sunday | Nov 24th 2019 | 4 min read
By Frankline Sunday | November 24th 2019
Salaries and Remuneration Commission (SRC) chair Lyn Mengich with Commissioner Dalmas Otieno (left) during a briefing. [David Gichuru, Standard]

Officials in State corporations and county governments will be worst hit if the government pushes through with a purge on public sector workers to cut the country’s wage bill.

The Salaries and Remunerations Commission (SRC) last week raised the red flag on Kenya’s wage bill, stating that the country needs to trim salaries and allowances paid to public servants by more than 13 per cent, which would translate to at least Sh182 billion.

“Despite implementing three rationalisation programmes aimed at creating an efficient and cost-effective public service, concern remains that the public service does not meet the expectations of the citizens,” said SRC Chairperson Lyn Mengich.

“The public sector wage bill continues to rise even though it has reached unsustainable levels and rationalisation programmes are ineffective.”

The public wage bill reduced from 57 per cent of revenues in 2013 to 48.1 per cent in 2018 as a result of revenue growth and initiatives by the SRC, Ms Mengich said at a press briefing in Nairobi.

The Public Finance Management Act 2015 stipulated that the government and stakeholders work to bring down the public wage bill to a maximum of 35 per cent of total revenues in the medium term.

This recommendation came following several audits across all levels of government with the Ministry of Devolution and Planning contracting a private consultant in 2014 to establish the demand and capacity of civil servant workers.

The recommendations of the report alongside other findings of other human resource rationalisation studies conducted by the SRC over the years are however yet to be implemented.

This time however, the country’s massive public debt -- currently at Sh5.9 trillion and tipped to cross Sh7 trillion by 2022 -- is exerting pressure on the State to meet its recurrent obligations as well as finance development projects.

External lenders

According to Treasury’s medium term debt-management strategy paper, Kenya needs to make Sh1.6 trillion in repayments to external lenders between this financial year and the next.

This is expected even as the Kenya Revenue Authority (KRA) and Treasury struggle to fill up the revenue basket and bridge the fiscal gap, currently at Sh700 billion for the current financial year.

Alexandar Mwenda, National Treasury Director General for Budget, Fiscal and Economic Affairs says the country’s financial position makes the debate on the wage bill more urgent this time round.

“We need to look at the risks we are facing going forward,” he said. “We have a growing population and the government obligation to provide job opportunities for them in the public or private sector.”

“We have a limited pot and we do not want to grow our debt, so how do we ensure that the wage policy is consistent with the needs of the country?”

This is one of the questions that government officials and other stakeholders will seek to answer during a conference organised by SRC this week in Nairobi.

The meeting that will bring together State departments, ministries, commissions and county heads, as well as representatives from the private sector and civil societies will explore ways of reducing the huge burden on public resources, which includes a huge pensions bill.

Data from the SRC indicates the country had 842,900 workers as at 2018 with the numbers spiking in the last decade following the establishment of county governments.

Recent data on county government expenditure from the Controller of Budget indicates compensation of employees has increased by 131 per cent from Sh64 billion in the 2013/14 financial year to Sh148 billion over the 2017/18 period.

This means salaries and remuneration take close to 40 per cent of the county expenditure while another 22 per cent (Sh89 billion) is spent on administrative costs.

This excludes other payments of allowances and consultancy fees paid out during county operations and projects, leaving little to spend on development projects and social benefits, thereby eroding the anticipated benefits of devolution.

In fact, some counties splurge more than half of their budgets on employees’ salaries in direct violation of the Public Finance Management (PFM) Act 2013.

During the 2017/18 year for example, Laikipia, Homa Bay and Nyeri counties spent Sh2.1 billion, Sh2.9 billion and Sh2.9 billion respectively on compensation of employees, representing 50 per cent of their total revenue.

A study into Kenya’s public wage bill released this year by the SRC, World Bank and European Union among other development partners indicates that county governments and State corporations take up the bulk of the public wage bill.

The study, which looked at 122 public offices, revealed wide-scale distortions in public sector human resource systems that, if addressed, could lead to numerous roles being dropped.

Out of the offices sampled, 20 did not have schemes of service or career progression guidelines for employees.

At the same time, 15 per cent of the offices did not have a HR Information Management System, exposing the institutions to challenges of ghost workers and inflated wage bills.

The report also found that while 37 per cent of public sector employees were above the ages of 46, employee attrition in public offices is low, with departments within government recycling the same workers. Of the employees who exited the public service between 2013 and 2017, for example, 26 per cent joined the county executive governments while another 24 per cent and 15 per cent joined the national government and State corporations respectively.“Employees exiting county governments (45.5 per cent) join other county governments, while 44.1 per cent join the national government,” said the report.

“It is also evident that employees exiting commercial and strategic State corporations either join other State corporations (39.1 per cent) or the private sector (28.1 per cent).”

This indicates a revolving door that allows the same civil servants to move around a limited pool of jobs.

It limits the capacity for the civil service to engage more young graduates, who ironically are crucial in driving public policy.

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