Employers warns that Uhuru’s 12pc wage rise will lead to increased redundancies, less hiring

NAIROBI, Kenya, May 6 – The Federation of Kenya Employers(FKE) says that the 12 percent increase in minimum wage instituted by President Uhuru Kenyatta is unsustainable warning that it will lead to increased redundancies and less hiring.

FKE President Habil Olaka, during a media briefing held on Friday, said that the review will have a negative outlook on cashflows and financial positions of companies as it will lead to a higher demand for a review of general wages and collective bargaining agreements.

“In the medium term, as enterprises readjust their operations to meet the increased payroll costs, we expect to see an increase in redundancies, increased automation and outsourcing, and depressed hiring. The new graduates entering the market at all levels should be prepared for an extended period of searching for employment and remaining employed,” he said.

FKE says the agriculture sector which contracted by 0.2 percent in 2020 will be among the worst affected as it employs the majority of  Kenyans especially minimum wage workers.

While the federation said that it will comply with the directive, it called for the Government to instead raise the upper limit of the lower income tax bracket from Sh24,000 to Sh35,000 per month and increase the tax relief to Sh 3,500 per month.

“This would have had a greater positive impact in increasing people’s purchasing power while cushioning enterprises,” FKE said.

It urged the government to recognize the high cost of living and the state of the economy and adopt a balanced approach to protect jobs and promote the sustainability of enterprises.

FKE decried that many employers face deteriorating productivity that reduces the employer’s financial capability to create jobs and also pay higher wages.

” If we want workers in Kenya to earn higher than what they earn today, we need to focus on improving productivity, resilience and competitiveness of our enterprises, It is important to analyze the key fundamentals in the economy before wages and other parameters in the labor market are reviewed,” the employers said.