Cost of living: How salaries have changed since last Labour Day

Central Organization of Trade Unions (COTU-K) Secretary General Francis Atwoli addressing at Solidarity Building, Nairobi on April 26, 2025, during their meeting with Union's Secretary Generals and Stewards ahead of May 1st Labour Day celebration. [Boniface Okendo, Standard]

Kenyan workers will today keenly follow the proceedings of Labour Day celebrations with expectations that the government will put in place measures to increase their take-home pay or lighten their tax burden.

The pay for many workers has been through a multi-year battering, with high taxes and levies reducing their disposable income.

In addition to the direct raids on payslips, there are also the indirect taxes, such as Value Added Tax, which have been on the rise.

Other factors at play that have worsened the plight of workers include a lack of jobs, with firms scaling down operations and others closing down operations, citing a tough operating environment in Kenya.

Kenyans have in the last year seen their pay shrink following the introduction of the new state-backed health insurance scheme - the Social Health Insurance Fund (SHIF) - as well as the implementation of higher contributions to the National Social Security Fund (NSSF).

Another recent deduction that has eroded how much workers take home is the 1.5 per cent Affordable Housing Levy (AHL) that came into effect in 2023. Contributions to SHIF, the successor of the National Health Insurance Fund (NHIF), came into effect in October 2024. It hiked the health insurance contributions to 2.75 per cent of a worker's pay.

This is a steep increase, especially for many when compared to NHIF rates that were on a graduated scale, with the least employee contribution being Sh150 per month and capped at Sh1,700 per month. This changed in 2021 when workers and their employers paid a combined Sh700 per month, or Sh350 each.

Under SHIF, the minimum contribution is Sh300, while the maximum is set at Sh5,000, which will mean for high income earners, the monthly cost might go up to Sh5,000 from the previous cap of Sh1,700.

Contributions to NSSF have also been on a steep rise following the implementation of the NSSF Act 2013, which started implementation in February 2023 following a decade-long court battle. Following the first phase in 2023 that saw employee contribution go up to Sh1,080, it further went up to Sh2,160 in February 2024 in the second phase of implementation and has gone up again this February to Sh4,320.

The employee contribution is then matched by the employer, which brings the total contribution to NSSF to Sh8,640.

The impact of this was the more than doubling of the money NSSF receives from employees saving for their old age, which stood at Sh62.29 billion as of June 2024, a 132 per cent increase from Sh26.87 billion the previous year.

Over the last two years, different deductions have shaved off more than Sh4,000 from the pay of a Kenyan earning Sh90,000.

Since 2023, a Kenyan earning Sh90,000 has been slapped with a Sh1,350 affordable housing levy and seen their contribution to NSSF rise to Sh4,320 from Sh1,080, while SHIF has also more than doubled to Sh2,475 from Sh1,200.

Other than the direct deductions on employee pay that reduce their disposable income, the government has introduced a host of taxes on essential products that have further pushed up the cost of living.

The Transport Ministry in July last year increased the Road Maintenance Levy, which is used by the different road agencies to repair roads, by Sh7 to Sh25 per litre of super petrol and diesel, up from Sh18.

It had earlier in 2023 doubled Value Added Tax (VAT) on petroleum products to the standard VAT of 16 per cent from eight per cent.

The two taxes have increased the cost of transportation, forcing many Kenyans to rethink their mode of commuting to work. This has also increased operating costs for companies, which have also been hit by a generally high cost of doing business, including rising labour costs due to contributions such as NSSF, and rarely absorb the higher costs but pass them to consumers.

Bogged down by these factors, workers hope that the government might look into their plight and possibly increase the minimum wage or offer reprieves through a lighter tax burden.

Last year, President William Ruto appeared to be trying to strike a balance between appeasing workers who have been grappling with reduced incomes and the high cost of essentials and employers, who have protested the rising costs of doing business in the country, which they argued has seen businesses close and others scale down operations.