This archive report was first published on 27 November 2019.
Kenya's Treasury is facing a daunting task of cutting down the country's wage bill, which currently stands at 48.1% of the national revenue. According to the Public Finance Management Bill, the recommended level is 35%.
Salaries and Remuneration Commission (SRC) Vice Chairman Dalmas Otieno revealed that allowances make up over 40% of the public wages. The Treasury is targeting wages below 7.5% of the GDP as stipulated in international guidelines.
As of June 2019, allowances contributed Ksh 322 billion out of KSh 795 billion spent on Kenya's wage bill. The SRC has 247 different allowances, with many overlapping, which has led to the growth of allowances as the government avoided increasing basic tax with every subsequent union negotiation to avoid increasing pension liability.
“The wage bill at 48.1% of revenue is consuming much more revenue than the recommended requirement of under 35%,” Treasury CS Yatani said. “In five years, public sector wage bill must stay within the stipulated PFM to enable sufficient fiscal space to meet its obligations”, he added.
The Treasury is considering options to rationalise some allowances, scrap others, and replace permanent employees with contractual arrangements to reduce pension expenditure.
