The Lower Eastern Times Opening The Third Eye
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The Federation of Kenya Employers (FKE) has raised concerns over the impact of recent tax increases on employees’ living standards.
CEO Jacqueline Mugo highlighted that employers are caught in a difficult situation, facing the challenge of adhering to labor laws while being forced to make deductions that exceed the legal limit.
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Mugo explained that since the introduction of new payroll deductions, both employees and employers have reached out with distress calls, as take-home pay has been significantly reduced, falling below the one-third threshold employees are legally entitled to receive.
Speaking at a press briefing on Friday, Mugo noted that discussions had been held with the Cabinet Secretary for the Ministry of Labour and Social Protection, as employers are struggling to comply with the required tax deductions. She pointed out that employers are legally obligated to deduct no more than two-thirds of an employee’s earnings each month, but are forced into violating this rule due to the high level of deductions.
She added that, as a result, employers either have to top up employees’ salaries or breach labor laws to meet the required deductions. Mugo also called on the government to reconsider the statutory deductions, which are currently based on total earnings rather than just basic pay, as outlined in Section 19(III) of the Employment Act. This section specifies that no more than two-thirds of an employee’s wages should be deducted at any time.
Since March 2024, Kenyans have been contributing 1.5% of their gross pay to the Affordable Housing Programme, introduced after President William Ruto signed the Affordable Housing Bill into law. This deduction, along with new contributions towards the Social Health Authority (SHA) starting on October 1 and increased pension contributions to the National Social Security Fund (NSSF) in January, has placed a significant financial burden on employees.
While the FKE supports the increased pension contributions for the future benefit of employees, Mugo emphasized that the total tax burden has become too heavy for workers. She stressed the importance of balancing the government’s efforts to improve social protection with ensuring that employees are able to take home a decent salary. The federation will continue to engage with the government to address these concerns.
