Employers want tax free income bracket raised to Sh35,000

Mugo said the downward review will go a long way in helping employers maintain the current workforce.

In Summary
  • Nevertheless, the government has raised the statutory minimum wage by 12 per cent. 
  • COTU wanted the minimum wage increased by 23.4 percent.
Executive Director and CEO Federation of Kenya Employers Jacqueline Mugo speaking in Kisumu on Wednesday April 20, 2022
Executive Director and CEO Federation of Kenya Employers Jacqueline Mugo speaking in Kisumu on Wednesday April 20, 2022

The Federation of Kenya Employers (FKE) has appealed to the government to soften the tax regime, saying they are struggling to sustain their wage bill. 

Speaking during the Labour Day celebration on Sunday, FKE chief executive officer Jacqueline Mugo said a revision of the tax bracket for low-income earners will go a long way in helping employers maintain the current workforce. 

Employers want the tax-free income bracket raised from Sh24,000 to Sh35,000 and tax relief bumped up to Sh3,500 (from Sh2,400).

Mugo said that employers take note of the high cost of living that is making life difficult for everyone and appealed to the government to focus on addressing the push factors behind it.

"Factors like the high cost of fuel, the disruptions in supply chains of essential commodities and the unfavourable tax policy need to be looked at,'' Mugo said. 

She said the Covid-19, ongoing Russia-Ukraine crisis, and other volatilities that continue to disrupt supply in the global market have pushed up the cost of doing business for members.

Mugo added that there is a need to support enterprises to create more job opportunities even as the country grapples with the youth unemployment challenge.

President Uhuru Kenyatta last reviewed the tax bracket for low-income earners in March last year as part of the government's Covid-19 relief measure. 

The 100 per cent tax relief for those earning below Sh24,000 was meant to increase the disposable income for low-income families by up to Sh1,700. The government has since maintained the measure. 

Employers are worried that global uncertainties are dragging Covid-19 recovery and further shrinking jobs. 

The latest survey by the federation shows the coronavirus has wiped out 80 per cent of all jobs created in the modern private sector since 2015.

According to the report released in 2020, the average number of employees in respondent companies reduced from 406 to 372, an 8.3 per cent reduction in the total number of employees.

FKE is now worried that more jobs will be lost if uncertainties persist as the country heads to general elections in August.   

The employers' lobby's views marry findings in The Purchasing Managers’ Index (PMI) findings in March. 

It showed that private sector leaders are uncertain about Kenya's business future due to rising inflation, upcoming general election and volatility in the global marketplace. 

This saw the future output index fall to its lowest level in the entire history of the survey.

Managers polled said the ongoing Russia-Ukraine crisis has added a wound to the global supply chain that was disrupted by Covid-19 control measures, negating business recovery. 

Generally, the country's PMI dropped to 50.5 in March, down from 52.9 in February as consumers cut their spending, leading to firms’ slower increase in sales volumes. 

Nevertheless, the government has raised the statutory minimum wage by 12 per cent. 

This now pushes the minimum wage to Sh15,120 up from the current Sh13,500 which was last reviewed in 2018. 

COTU secretary general Francis Atwoli said workers were expecting an increase of the minimum wage by 23.4 per cent.

“From 40 per cent, we negotiated and settled at 23 per cent. Please give workers that increment,” he said.

Atwoli further accused the Salaries and Remuneration Commission of being an impediment to better pay for workers.

“The SRC was established to play an advisory role and not set wages for workers. Employers and workers bargain collectively freely and fairly. They engage in giving and take but the SRC then comes in to say no,” he stated.

He added that SRC has been undermining free and independent collective bargaining between employers and workers.

FKE says it would have preferred a hike in 2023, saying the proposed hike will further tighten the labour market.

According to the employers' federation, the state of the labour market continues to remain fragile with enterprises remaining closed while others struggling to get back to full operation.

Mugo said  that in a recent tripartite meeting of FKE, Labour Ministry and COTU failed to reach an agreement on minimum wage “due to the extreme challenges facing the labour market.’

“Employers understand the hardships workers are facing. However, employers seek a wage structure that not only protects the lowest-paid workers but also increases productivity and is economically sustainable,” she said.

Despite this, Uhuru increased the minimum wage bill for unionisable workers, saying it is meant to cushion them against the rising cost of living. 

He said his administration fully appreciates “the critical contribution Kenyan workers have made to the economy during very difficult times.”

“As a caring government, we find there is a compelling case to review the minimum wages so as to cushion workers against further erosion of their purchasing power while also guaranteeing competitiveness of our economy,” he said

The high cost of commodities pushed Kenya's April inflation to 6.47 per cent up from 5.56 per cent the previous month

Inflation, as measured by the Consumer Price Index (CPI) was recorded at a lower rate of 5.56 per cent in the previous month.

The Consumer Price Index (CPI), a measurement of the percentage change in the price of a basket of goods and services consumed by households, increased by 1.69 per cent from an index of 120.139 in March to 122.173 in April.

The month-to-month food and non-alcoholic beverages index increased by 3.03 per cent between March and April.