SRC: Counties on track to meet wage bill-revenue requirements

The wage-bill-to-revenue ratio in county governments remains above the 35 per cent threshold but shows a gradual improvement.

At the national level, the wage bill remains within the legal threshold. This is according to the latest first and second quarter wage bill bulletins for the financial year 2025–2026, covering the period between July and December 2025, released by the Salaries and Remuneration Commission (SRC) on Friday.

The bulletin, however, shows continued fiscal consolidation, with the wage bill-to-revenue ratio declining from 43.3 per cent in financial year 2023-2024 to an estimated 40.4 per cent in financial year 2024-2025.

In the first quarter of financial year 2025-2026, the ratio in counties stood at 39.64 per cent, while in the second quarter it was projected at 40.12 per cent, both lower than the 43-44 per cent levels recorded in comparable periods of financial year 2024-2025.

Across individual counties, 87 per cent exceeded the 35 per cent wage-bill-to-revenue threshold.

Machakos, Nyeri and Lamu counties recorded some of the highest ratios during the first nine months of the financial year 2024-2025.

Only six counties, Tana River (27.18 per cent), Siaya (30.25), Kilifi (32.49), Migori (32.83), Nakuru (33.26), and Nyandarua (34.84 per cent), are commended for maintaining wage-bill-to-revenue ratios that are below the statutory 35 per cent threshold during the period.

This, SRC said, demonstrates that fiscal discipline and compliance with the Public Finance Management (PFM) Act threshold are achievable at the sub-national level.

The regulation applies to both national and county governments, with a target to achieve this ratio by 2028.

"This downward trajectory signals progress toward the statutory 35 per cent threshold under the Public Finance Management (PFM) Act, 2012, and reflects strengthened expenditure controls, revenue growth and ongoing productivity reforms," said SRC in a statement.

During the first half of the financial year 2025-2026, SRC received a total of 192 requests from public institutions, that is, 108 requests in the first quarter and 84 requests in the second quarter.

Requests relating to job evaluation and salary structures, allowances and benefits, collective bargaining negotiations, and productivity and performance had a combined estimated cost implication of Sh17.2 billion, out of which SRC approved Sh13.5 billion.

The wage-bill-to-revenue ratio at the national level stood at 26.84 per cent in the first quarter and moved up slightly to 28.56 per cent in the second quarter of financial year 2025-2026, remaining below the 35 per cent ceiling.

In the macroeconomic context, Kenya’s wage bill-to-GDP ratio has steadily declined to 7.11 per cent, below the 7.5 per cent international sustainability benchmark for emerging economies.

At the same time, ordinary revenue grew by 13.4 per cent, while nominal GDP growth averaged about 7.9 per cent, supporting improved fiscal space.

Wage employment in the public service grew by 3.1 per cent in 2024, surpassing one million employees.

The Teachers Service Commission (TSC) accounts for the largest share of public employment with 410,700 employees and a wage bill that accounts for 32 per cent, followed by ministries and other extra-budgetary institutions, parastatal bodies and county governments.

SRC said it recognises the critical role of key stakeholders, among them, the National Treasury, Parliament, county governments and public institutions, in sustaining wage bill reforms and in the implementation of the Resolutions of the National Wage Bill Conference, 2024.

The commission will hold the fifth national wage bill conference in mid-May.

“SRC reaffirms its commitment to balancing fair and equitable remuneration with fiscal responsibility, productivity enhancement, and macroeconomic stability,” it said in a statement.

The remark comes a day after the Court of Appeal on Thursday dismissed a bid by SRC to deny judges a taxable car allowance of up to Sh10 million every four years.

The five-judge bench upheld an earlier ruling by the High Court that declared the SRC's attempt to revoke the allowance unconstitutional.

The SRC has vowed to appeal the ruling at the Supreme Court.

"In light of the weighty constitutional questions at stake — including the unlawful usurpation of SRC's mandate, violations of judicial ethics through conflict of interest, increased burden to taxpayers, concerns over affordability and fiscal sustainability, and the potential ripple effect of this ruling — SRC will promptly file an appeal at the Supreme Court of Kenya," it said after the ruling in a statement.

In the earlier proceedings before the High Court, SRC formally applied for the recusal of the presiding Judges and requested that the matter be referred to an Alternative Dispute Resolution mechanism.