Minimum wage increase has over the years been the highlight of many Labour Day celebrations.
This is at least true for the workers, who will always cheer or jeer depending on the pronouncement by the president or the Labour Cabinet Secretary when delivering keynote speeches every May 1.
And this morning too, the workers will be waiting.
Unfortunately, all indications are that there may not be an increase in minimum wage this year. This is as the key organs that advise the government on the policy direction to take when it comes to labour matters, including whether to increase or retain current minimum wage, are not yet to be reconstituted after the term of previous members expired.
Additionally, the government increased minimum wage last year and current labour policy advises against raising minimum wage for two consecutive years, so as to balance the interests of employers and employees.
The president might, however, at his discretion, make a decision to increase the wages.
“This year, we do not have the institutions that normally determine and advice the government on labour matters, that is, the National Labour Board and the General Wages Council. Their term expired and they have not been reconstituted,” said Labour and Skills Development Principal Secretary Geoffrey Kaituko.
“If we had the two in place, they are the ones that advise the government on the minimum wage increment. At the moment one can say there is a lacuna,” said Kaituko.
The General Wages Council, made up representatives from trade unions, employer lobbies and government, gives recommendations to the CS on how to improve minimum pay as well as working conditions.
It is among the institutions set up by the Labour Institutions Act of 2007.
The Labour Relations Board is also set up by the act and also draws members from trade unions, employers and government officials. It advises the government on policy issues.
Kaituko, however, noted that the president can make such a decision as to increase the minimum wage.
“On this day we will be celebrating the role of the Kenyan worker in this particular economy. Globally, Kenya is celebrated as a country that produces the best minds and the best employees. We have a gold mine and we need to utilise it for the benefit of our country. Labour force is the most important factor of production,” said the PS.
Businesses are hoping for relief following last year’s increase that they termed as having been steep. The increment also came at a time when they were expecting some leniency, with expectations that the state would freeze on pay increments, as they were yet to make full recovery from the harsh impact of Covid-19 and global crises such as the Russia-Ukraine war and high cost of fuel.
Federation of Kenya Employers Executive Director Jacqueline Mugo noted that the government should balance between the interests of the employees and those of businesses, noting that the operating environment has been tough for businesses.
“We have not, as labour sector leaders, been able to engage this year as we normally do through the Wages Council and National Labour Board to see how to advice the Ministry of Labour on what to focus on from a policy perspective,” said Mugo
“The question is whether there will be a minimum wage increase or not. I think minimum wage should not be increased. We have clear provisions in our wage guidelines that say our minimum wage should not be reviewed more than once every two years. Last year, the president increased the wages by 12 per cent, which was a surprise considering business was still recovering and we are still grappling with that,” she said
“This year, we hope there will be stability… we should balance the speed at which we review the minimum wage and give business time to implement last year’s 12 per cent increase.”
Last year’s increase pushed wages to at least Sh15,201 per month for workers in major urban areas of Nairobi, Mombasa, Kisumu and Nakuru.
Mugo said increasing the minimum wage this time round would worsen the business conditions that companies have been grappling with, which have seen some shed jobs over the last couple of years. It would further slow down industries in terms of employment creation.
“The challenge that the country faces is that of bringing in more Kenyans to employment rather than increase the barrier every time we increase the minimum wage, we take that barrier of entry to employment even higher,” said Mugo.
“The economic realities have made it difficult to create more jobs. We need to contain the taxes that we are imposing on businesses and at the same time give them time to cope with new taxes after their introduction.
“Kenya is an expensive location to operate in. Companies love it because we have the infrastructure and the skills but then the conditions in which businesses are operating in are difficult and have not improved over time and this has made some of the firms opt out of Kenya,” she said.
Mugo added that the last few have been difficult for local firms, with many of them having been reporting difficulties even before Covid-19. Since the pandemic, they have had to cope with rising cost of oeparting seen in such areas as high cost of energy, the disruption of global supply chains and the local shortage of the US dollar that has hit firms that rely on importing their raw materials.
“We are in a difficult situation in regards to employment because of the factors that have affected the business environment and life generally. Even before the pandemic, business was already in distress and we were seeing the beginning of redundancies in some sectors and investors adopting a wait and see attitude with regard to investments. The pandemic put us in a crisis,” said Mugo.
“As we recover from the pandemic, we are still grappling with natural disasters including the prolonged drought, geopolitical challenges and tensions and the aftermath of Covid-19 had major disruptions in global supply chain.”
“All these factors have resulted in any progress that we could have seen in businesses and employment creation being put on hold. So we have not been able to create jobs to the extent that we had expected.”
Some businesses have sent home their staff through redundancies, which Mugo noted is due to the circumstances that they are facing.
“A decision to declare employees redundant is always the last option because these are people you have trained and understand your operations and a major resource… it is never a knee jerk reaction,” she said.
“It is a difficult decision that you make for the survival of the enterprise lest you all collapse together as you try to keep some of the jobs.”
Earnings by workers and companies are being eroded by new levies and taxes. These include the increase in National Social Security Fund (NSSF) rates following the Court of Appeal decision that implementation of the Act should go ahead. It will increase employee contribution to six per cent, which will be matched by employers, up from Sh400 per month.
There is also the proposed housing levy for civil servants but one that could eventually affect private sector firms and their workers.
“Income levels are quite low, the tax levels on the other hand are high and every day there is a new tax or levy that is being imposed and that puts pressure on the employees’ take home pay,” she said.
“On average, salaries sit at about Sh30,000 and Sh35,000 per month… very few Kenyans earn more than Sh100,000. With this being the case, quite a number are not able to take home the one third of their pay that is envisaged.
“And these are people in salaried employment who make up about 15 per cent of the people in employment. The majority in informal sector earn much lower than that.”
Kaituko however said Kenyans should not look at the higher NSSF rates and the housing levy as a burden but instead they should be viewed as savings for the future.
“You are contributing to your retirement so that you do not retire into poverty as it is the case today because you are paying Sh200 per month. In Tanzania, they are paying 10 per cent (and topped up by another 10 per cent from the employer), we have only increased to six per cent. It is an investment so that when you get our of service, you retire comfortably,” he said.
“The president under the affordable housing programme wants us to have a sustainable mechanism for financing our own homes. What we are proposing is that contribute and buy your own home or build your own house. In the long term, these things are meant to benefit Kenyans. It is not just taxing, we are also considerate… just view this as an investment in yourself.”