Employers warn of job losses with minimum wage increase

Phyllis Wakiaga, Kenya Association of Manufacturers CEO. FILE photo | nmg 

By LYNET IGADWAH

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Summary

• The Kenya Association of Manufacturers (KAM) said the industry is yet to pick pace following last year’s setbacks, including high inflation rates, drought and prolonged electioneering.
• KAM chief executive Phyllis Wakiaga said a pronouncement to increase the minimum wage during Tuesday’s Labour Day celebration would be a big blow to industry.
• Labour Day wage increment has become one of the biggest challenges to industry in Kenya, especially because it is not linked to productivity improvement.

Kenyan employers on Monday warned against another Labour Day minimum wage increase, arguing that such a move will hurt an economy that is just beginning to recover from last year’s battering.
The Kenya Association of Manufacturers (KAM) said the industry is yet to pick pace following last year’s setbacks, including high inflation rates, drought and prolonged electioneering.

KAM chief executive Phyllis Wakiaga said a pronouncement to increase the minimum wage during Tuesday’s Labour Day celebration would be a big blow to industry with possible negative impact on the livelihoods of workers.

“A ceremonial wage increase will not help us to tackle the subject of poverty eradication in a sustainable way,” Ms Wakiaga said in a statement.

Labour Day wage increment has become one of the biggest challenges to industry in Kenya, especially because it is not linked to productivity improvement.

KAM argues that instead of increasing wages, the government should opt for an increase in the minimum taxable pay and continued exemption of overtime and bonuses paid to low income earners. 

READ: Employers say rise in minimum wage pushing them out of Kenya

KAM is also suggesting that government considers a reduction of VAT on items such as milk, sugar, salt, rice, tea leaves, wheat, beans, cooking oil and paraffin.

“If the cost of these products come down, citizens are able to save substantial amounts of money to afford other basic amenities,” Ms Wakiaga said, adding that escalating cost of labour will only push businesses to taking drastic actions, including job cuts and relocation of operations to other countries to remain afloat.

Her remarks come in the wake of an impending increase in statutory deductions burden as Parliament reviews the rules governing monthly contributions to the National Hospital Insurance Fund (NHIF) to include employers.

Doubling the Sh1,700 that top contributors make to the NHIF ranks high on the list of targeted outcomes of ongoing review of the NHIF Act. If the amendments are adopted by Parliament, the workers will continue paying same amounts with employers matching their contributions.

READ: Employers face fresh cost burden at NHIF

Ms Wakiaga noted the unpredictable regulatory regime had hampered growth in the labour-intensive industry, leading to its stagnation.

“Along with unpredictable regulatory regime, business growth and expansion have been hampered by high and multiple taxation, high costs of energy, scarcity of the technical skills and the high cost of labour,” she said.

Last week, UK agriculture multinational James Finlays announced plans to stop flower production on its Kericho farms, thrusting some 2,000 workers into a future without jobs.

Last year, President Uhuru Kenyatta directed that the minimum wage for Kenyan workers be raised by 18 per cent after a two-year freeze.

Kenya’s economy sunk to a five-year low of 4.9 per cent in 2017 as over a dozen Nairobi Securities Exchange-listed firms issued profit warnings, highlighting the worst corporate earnings season.