Kenya’s Sh1trn wage bill crisis: State considers massive job cuts
SRC chairperson Lyn Mengich (right) welcomes the Cabinet Secretary for Public Service Moses Kuria (left) during a media briefing in Nairobi on April 12.
By Peter Mburu
What you need to know:
- Government plans to tackle a ballooning public wage bill, in the face of a bloated public sector workforce.
- The wage bill for national and county governments has surpassed the 35 per cent of tax collected by KRA.
A massive job cuts looms in the public service, as the government plans to tackle a ballooning public wage bill, in the face of a bloated public sector workforce.
Public Service Cabinet Secretary Moses Kuria yesterday promised a “serious, radical and surgical reform” of the public service, indicating that he would soon seek approval for its re-engineering from the Cabinet, with an expected outcome of firing workers and cutting salaries.
“The office of the Head of Public Service and my Ministry are partnering to undertake a very serious, radical and surgical reform of our public service. We will spearhead an initiative that is going to afflict the comfortable. When we put our eyes on something, it doesn’t matter how unpopular we will become, whether people will condemn us or whether we will be called Zakayo, we will cut this public service,” Mr Kuria said.
The statement by Mr Kuria came ahead of the National Wage Bill conference, organised by the Salaries and Remuneration Commission (SRC) from Monday to Wednesday next week, which will seek to identify strategies to lower the public wage bill to 35 per cent of taxes collected by Kenya Revenue Authority (KRA).
Kenya’s public service currently employs 968,425 workers, who are expected to gobble up Sh1.17 trillion in salaries and allowances in the year ending June 2024.
Last year, the public sector wage bill of Sh1.1 trillion was 46.6 per cent of Sh2.36 trillion taxes collected by KRA, which was higher that the recommended 35 per cent of taxes.
Salaries and Remuneration Commission (SRC) Chairperson Lyn Mengich (left) confers with Cabinet Secretary for Public Service, Performance and Delivery Management Moses Kuria during a media briefing on the National Wage Bill Conference held at Nairobi Safari Club on April 12, 2024.
This means that the government spent Sh274 billion on salaries and allowances over and above what the law permits.
Over the five years to June 2023, national and county governments paid Sh1.46 trillion in salaries and allowances that should not have been paid had they observed the 35 per cent cap.
The impact has seen reduced spending to development, with the wage bill gobbling up more than half of taxes collected.
On Friday, SRC chairperson Lyn Mengich noted that the main objective of the conference starting next Monday would be to seek commitment from duty bearers, to reduce the public wage bill to 35 per cent of revenues, in line with the provisions of the Public Finance Management (PFM) Act, 2012. The expectation is that this target will be achieved by June 2029.
“There is a lot of wastage that we need to have a conversation about. We see that as a key strategy to managing the wage bill. We can do a lot more by just looking at the wastage in the public service,” Ms Mengich said.
Over the past decade, the public sector wage bill has more than doubled from Sh563 billion in 2014 to the projected Sh1.17 trillion in the current financial year, as public sector workers increased by 267,625.
The SRC, however, continues to observe that productivity in the public sector remains low despite the bloated workforce, with Kenya ranked 153 out of 189 countries globally on labour productivity by the International Labour Organisation (ILO).
The low productivity is despite the total amount of Sh7.55 trillion that the national and county governments pay public sector workers.
On the contrary, the formal private sector, which creates more than double the jobs created by government, businesses spent Sh12.39 trillion to pay wages for 17.1 million jobs.
A comparison shows that of all the wages paid for all the jobs created between 2014 and 2022, on average, public sector workers earned 40 percent higher.
This has been attributed to agitations for salary reviews by trade unions despite a sluggish growth of revenues, leaving the wage bill taking lion’s share of taxes collected.
Doctors and other healthcaren workers are currently on strike demanding implementation of a Collective Bargaining Agreement, which has implication on wage bill as well.
The SRC has advised that the government should increase public sector workers’ salaries based on revenue projections by Treasury.
“Do we hold salary increments if the revenues do not get to where we projected? Once you have a salary, it is there, we cannot take it away. It is a given and that is one of the problems because you project an increase in revenue and salary increases are based on those projections, so if you don’t hit that revenue figure, that salary will still be increased and that is partly why we have that problem,” Ms Mengich says.
For instance, in the first eight months of the current financial year, KRA had only collected less than half (49 percent) of the Sh2.787 trillion original revenue targets, recording a Sh36 billion monthly shortfall for the eight months.
Once the government increases workers’ salaries, that becomes a permanent burden on the taxpayer, and this has caused the increase in the public wage bill.
“We are aware that you cannot reduce the salaries as they are today. Salaries are largely protected in the sense that we cannot just arbitrarily reduce them. It will take strategies such as being more productive by doing more with less, which will help us to bring the ratios down,” Ms Mengich says.
The national government is projected to spend Sh956 billion on the wage bill in the year ending June, as counties are projected to spend Sh215 billion.
This has come up from Sh706 billion (national government) and Sh163 billion (counties), just five years ago.
The SRC reckons that much of the wage bill is accounted for by huge wastage in the public service, saying there is a need to address excessive allowances and manual payrolls in government, which gatekeepers such as the Auditor Gneral and Controller of Budget have raised concerns about numerous times.
“If we were to do nothing else and wait for revenue to grow, then we would need to grow revenue by 9.6 percent, which is way above how we have been performing and therefore we must put in place other strategies other than revenue growth,” Ms Mengich says.
Despite workers in the public sector remaining unproductive, the government continues to hire thousands every year. Comparison of job creation in the public and private sectors over the past decade shows that while there was an increased by 34 percent in the public sector, the private sector increased jobs by 24 per cent.
Mr Kuria on Friday said part of the reforms his ministry would seek would be to re-look at existing staff establishments across the public service.
“We will start from scratch by condemning all those staff establishments and re-looking them a fresh. Somebody has to justify, this idea of replacing bodies for bodies- somebody has retired or passed on you replace them without considering that the attrition could be an opportunity to look at things differently, it’s not an automatic replacement,” Mr Kuria said.
