UKur Yatani

National Treasury Cabinet Secretary Ukur Yatani during the launch of Kenya Revenue Authority ‘s eighth corporate plan at Times Tower in Nairobi on June 24, 2021. 

| Francis Nderitu | Nation Media Group

Salary increase relief for civil servants

What you need to know:

  • Civil servants on contract will be hired on permanent and pensionable terms following a review by the Public Service Commission.

The National Treasury has directed ministries to set aside money to cover salary increases for civil servants next year even as contract workers will be absorbed as permanent employees.

This comes barely two months after the Salaries and Remuneration Commission (SRC) announced a freeze on hikes in salaries and allowances for two years to save taxpayers from an additional tax burden.

SRC said the freeze will save Sh82 billion in the 2021/22 - 2024/25 remuneration review cycle, money that could be directed to priority spending areas.

“The National Treasury advised the commission that due to the effects of Covid-19 on the performance of revenue and the expected slow economic recovery, it should consider postponing the review for the next two fiscal years until the economy improves,” SRC chair Lyn Mengich said 

“The National Treasury will review the performance of the economy and advise SRC as and when the review can be done based on the prevailing circumstances to ensure affordability and fiscal sustainability.”

But in a circular to ministries, departments and agencies (MDAs) for preparation of the new budget, Treasury Cabinet Secretary Ukur Yatani has instructed MDAs to set aside sufficient funds for civil servants’ pay rises in the next financial year, in what is set to be a relief for thousands of government workers who qualify for raises.

Mr Yatani will officially launch the FY 2022/23 and medium-term budget preparation process this morning.

“The National government expenditure on compensation to employees is not expected to exceed 35 per cent of the national government’s revenue in line with fiscal responsibility principles,” he said. 

Public wage bill burden

“To ensure the wage bill remains within the medium-term targets, SWGs (Sector-Working Groups) should not allocate resources for new recruitment, interns, casuals or upgrading unless there is prior approval from the National Treasury.

“MDAs should, however, provide adequate resources to cater for movement from one salary scale to another.”

This comes as taxpayers heave under a growing public wage bill burden that grew by 34.5 per cent between 2015 and 2020, crowding out money left for development spending. 

SRC data shows that the public wage bill grew from Sh615 billion in 2016 to Sh664 billion in 2017, Sh733 billion in 2018, Sh795 billion in 2019 and Sh827 billion last year.

Meanwhile, government employees hired on contract are set to become permanent and pensionable following a fresh review of their terms by the Public Service Commission (PSC).

PSC had frozen the hiring of new government staff on permanent and pensionable terms in July 2019 as part of drastic reforms of the public service to stem the rising wage bill, cut rising pension obligations and monitor the performance of civil servants.

Employment of contract workers comes after the government in January finally put into force the long-mooted savings pension scheme where public workers now contribute to their pensions on a monthly basis, in a bid to save taxpayers from footing billions of shillings in pensions paid to civil servants annually.

Current employment terms

Contribution is mandatory for government employees aged below 45, and covers teachers employed by the Teachers Service Commission, National Police Service, Prisons Service and National Youth Service.

The workers contribute 2 per cent of their monthly salaries to the scheme in its first year, while the contributions will increase to 5 per cent next year and 7.5 per cent in the third year. They are supplemented by a corresponding 15 per cent contribution from the government.

But PSC has now changed the employment terms of entry-level contract employees hired from May 2019 to permanent and pensionable, with outstanding dues to the scheme since it was set up in January to be recovered from their salaries within 12 months. 

“The Public Service Commission has in the recent past appointed officers at entry level on contract. This decision was made before the operationalization of the Public Service Superannuation Act,” said PSC vice-chair Charity Kisotu in a notice on Tuesday. 

“On January 1, 2021, the government rolled out the Public Service Superannuation Scheme with a commencement date of January 1, 2021.

“Employees appointed at certificate, diploma and graduate entry levels on contract terms from May 2019 to date will have their terms of service translated to permanent and pensionable terms with effect from their respective dates of appointments.” 

Personal staff of top government officials will be retained on their current employment terms.

The pension scheme is a relief to taxpayers, who have been dipping deeper into their pockets to pay rising pension dues to civil servants, with the payments steadily rising each year.