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Reducing the public wage bill to 35 per cent is possible -SRC says

The Salaries and Remuneration Commission (SRC) will convene the 3rd National Wage Bill Conference next month to discuss strategies and action plan towards achieving a 35 percent public service wage bill.

Three months ago, a meeting by the National and County governments summit held at state house a resolution was muted which will see the national government reduce its wage bill to 35 percent of revenue in line with Public Finance Management (PFM) Act, 2012, by 2028

Speaking during a media breakfast on preparations for the national wage bill conference, 2024, the Chairperson SRC Lyn Mengich said Kenya is not doing well in terms of productivity in comparison with other countries in Africa and globally.

“According to statistics on labour productivity from the International Labour Organization (ILO), in 2021, Kenya is ranked at number 151 out of 185 countries globally, and number 22 out of 46 countries in Africa”, she explained.

Mengich noted that the public service wage bill, in absolute terms, hit about a trillion shillings’ mark in the year 2022, and has shown a positive trend as a percentage of revenue due to interventions by SRC in collaboration with other stakeholders.

Key amongst these interventions, she added, is the implementation of the resolutions from the last wage bill conference.

“We are not where we need to be, but the trend is clear, that we are heading to the right direction and therefore the upcoming conference will plan for a path of achieving the desired outcome of economic development and public services delivery as well as provide an opportunity to discuss and develop purposeful actions towards enhancing the role of productivity in the fiscal sustainability of the wage bill.

SRC Commissioner John Monyoncho gave a picture of the current situation on the wage bill saying public wage bill in Kenya has been growing within an environment of revenue and financial constraints, consuming a significant portion of the national budget, thus, putting pressure on development and investment share of the fiscal budget.

“The wage bill to ordinary revenue ratio has declined from 54.77 percent in the FY 2020/2021 to 47.06 percent in FY 2021/2022. It is projected to reduce further to 43.54 percent in FY 2022/2023 and 40.45 percent in FY 2023/2024”, he said.

Monyoncho mentioned that some of the drivers in the public wage bill was Low labour productivity, disproportionate increase in the number of public service employees, Sub-optimal organizational structures and even high remunerative allowances payable in the public service among others.

In order to reduce the Wage Bill to Revenue Trajectory towards 35 percent, the Commissioner said that the government had been able so far to evaluate jobs to determine the relative worth of them and this resulted in freezing of salary structures of over 90 State Corporations and Constitutional Commissions and Independent Offices in the 2nd and 3rd remuneration review cycle.

There was also Salary structure freeze for all public officers in the first two financial years of the 3rd review cycle (2020/21– 2021/22), two percent average growth of the average monthly gross earnings per employee between 2019/20–2023/24 and harmonization of salary structures towards the 50th percentile and freezing those above, except for Commercial State Corporations whose target positioning is 75th percentile.

Projections in achieving the required 35 percent wage bill by 2028, Monyoncho said will be to improve labour productivity, Manage the wage bill through SRC setting and advice, control employee numbers and leverage technology in payroll management and service delivery.

Council of Governors (CoG) Chair – Human Resource, Labour & Social Welfare, Mutahi Kahiga said County governments public wage bill has been on an increasing trend due to the increased demand for service delivery in health and education and subsequent rise in the number of County Public Service employees and the quantum of compensation.

“Wage bill as a percentage of total public sector spending is important since it accounts for a large share of spending and this affects overall expenditure trends. When this ratio rises to over 25 percent, governments risk reducing their effectiveness by squeezing non-wage bill expenditure such as goods and services, maintenance and capital expenditure needed for long term growth and development. High Public wage bill also signifies high pension liabilities in the future”, the chair who is also the Nyeri Governor said.

Kahiga called upon SRC to work towards ensuring Public Service remuneration is fiscally sustainable, and that the pay should be able to attract and retain requisite and scarce skills in the County Public Service, recognize productivity and performance as well as be transparent and fair.

The theme of the upcoming conference which will be held on the 15th to 17th April has been crafted as, ‘Fiscal sustainability of the public wage bill through productivity’.

By Wangari Ndirangu

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