Kenya moves to tame rising wage bill with three-year contracts

Tuesday June 25 2019

Workers on strike.

Workers on strike. The demand for salary increments and more benefits by public servants — often resulting in strikes — like teachers, nurses, and police means the public wage will continue to rise. PHOTO | FILE | NATION MEDIA GROUP 

NJIRAINI MUCHIRA
By NJIRAINI MUCHIRA
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Kenya, grappling with a ballooning wage bill, now proposes an end to the hiring of civil servants on permanent and pensionable terms.

Instead, beginning July 1, new entrants into the civil service will be hired on three-year renewable contracts.

“By hiring on contract we want to disturb the comfort nest so that people are retained based on performance,” said Stephen Kirogo, Public Service Commission chairman.

POLICY

The shift in policy, which the government says is in line with international best practice, is geared towards easing the pressure of the runaway wage bill both in terms of salaries and pensions for retired public servants.

Kenya, with about 800,000 public servants, has seen its wage bill rise from $5 billion the 2013/14 financial year to $7.1 billion currently. In FY 2019/20, it is projected to hit $7.6 billion. The annual pension bill has also been on the rise with more public servants reaching the 60-years mandatory retirement age, increasing from $271.2 million in 2013/14 to $611.3 million this year and being expected to hit $997.8 million in 2019/20 financial year.

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At this level, the public wage bill accounted for about 55 per cent of the $12.5 billion ordinary revenue collected in the financial year ended June 2018.

More alarming is the fact that Kenya’s public wage bill to gross domestic product ratio stands at 8.29 per cent, which is above the 7.5 per cent global recommended rate.

“This poses major threats to the economy because it crowds out public investments and it makes it impossible for the government to invest in development,” noted Kirogo.

But Kenya is not alone in its quest to tame the wage bill. Recently Tanzania conducted an audit of public service payroll weeding out ghost workers and managed to reduce the wage bill to $247.2 million last year from $248.6 million in 2018. On its part Uganda has scrapped some public entities and merged others with duplicating roles in order to reduce the wage bill that stood at $1.2 billion last year.

NET CONSUMER OF RESOURCES

For Kenya, the demands for salary increments and more benefits by public servants like teachers, nurses, and police means the public wage will continue to rise. A report by the Salaries and Remuneration Commission (SRC) shows that the public service is a net consumer of resources through expenditures like basic salary, allowances, pension, medical cover, gratuity and bonuses.

“Our business is not to cut salaries but to manage the wage bill to make it sustainable,” said John Monyoncho, SRC commissioner.

Development partners like the International Monetary Fund have repeatedly warned that Kenya’s wage bill is at alarming levels that leave squeezed fiscal space for public investments.

According to the SRC report, the national and county governments have a penchant for wastage based on the reasons they use in hiring.

Though the main reason for hiring is approved staff establishment at 43 per cent, others employed based on provisions of the strategic plan at 15.7 per cent, institutional needs at only 13 per cent and budgetary at 11 per cent.

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