The average monthly pay in Kenya’s private sector has fallen for the first time in over three decades to Sh75,781. According to the Kenya Revenue Authority (KRA), this reflects the impact of the country’s soft economy that has pushed firms to keep a lid on costs.
The pay per employee has dropped from the Sh78,034 recorded in the quarter ended September last year, suggesting that firms are preferring lower-paid workers as they navigate slow sales.
The reduced pay comes at a time when inflation has wiped out the average 2.8 percent salary increase offered to Kenyan workers last year, making it the fourth consecutive year when wage rises have lagged behind the cost of living measure. KRA recorded a shortfall in pay as you earn (PAYE) taxes from the private sector, signaling the impact of a tough labor
market on government revenue.
Businesses have been facing a cash crunch due to eroded consumer purchasing power, economic uncertainty, and the introduction of new levies such as the housing levy and the Social Health Insurance Fund (SHIF) levy.
The Federation of Kenya Employers (FKE) has reported a rise in notifications from its members on intentions to declare redundancies to cope with rising operational costs and protect profit margins.
When private sector wages are declining for the first time in three decades, and businesses are increasingly issuing redundancy notices, shouldn’t we be asking ourselves if Kenya’s current economic growth model is truly sustainable? With mounting operational costs from new statutory deductions and eroding consumer purchasing power, how long can businesses maintain their workforce before widespread layoffs become inevitable? And if the average worker’s purchasing power continues to decline while GDP grows at 5.2%, who exactly is benefiting from Kenya’s economic expansion?