Anne R. Gitau is Commission Secretary at the Salaries and Remuneration Commission


In 2014, the Salaries and Remuneration Commission initiated a national discussion on the rising public-sector wage bill. The national debate was not only timely but an important policy discourse for the country. Over the years, the rise in the wage bill has been compromising fiscal and debt sustainability, and jeopardising growth by generating excessive deficits and crowding out growth-enhancing public investments.

 

In 2012/2013, the public wage bill was Ksh465 billion ($4.4 billion). Over the past five years, it has grown rapidly, to Ksh522 billion ($5 billion) in 2013/14; Ksh568 billion ($5.4 billion) in 2014/15 and Ksh627 billion ($6 billion) in 2015/2016, an annual average growth of 9 per cent. SRC’s projections show that the wage bill will be Ksh676 billion ($6.5 billion) in 2016/2017. However, as a percentage of nominal gross domestic product (GDP), it declined from 10.3 per cent in 2012/2013 to 9.5 per cent in 2015/2016. This is an encouraging trend we hope to sustain.

Last week, it was reported that the Kenyan Cabinet has approved a Ksh100 billion ($965 million) for civil service salary increases in 2017/2018. The Cabinet’s decision has raised a red flag, with the IMF waxing sceptical over the sustainability of the wage bill in Kenya, a syndrome the Fund argues is a characteristic of emerging markets and low income developing countries, especially during an election year. The Fund also argues that the Cabinet’s decision is in contravention of Kenya’s commitment to the Fund to manage its fiscal deficit during the run-up to the August 8 general election.

The rising wage bill is due to several factors, the major one being the country’s transformation as it implements the Constitution. Whereas SRC’s mandate covers the setting of salary scales, the numbers have been growing due to increased employment in existing institutions and the creation of new offices and positions.
The centrepiece of the Constitution is devolution of power, which has seen the establishment of 47 counties, each with its own government. County governments consist of a county assembly and executive.

In addition, unlike before, Kenya’s parliament consists of two Houses: the National Assembly and the Senate. These are among several structures and offices that have been created with a view to improving and bringing services closer to the people.

The wage bill situation would have been worse without SRC, if the numerous demands from various public institutions, who often ask for wages and benefits way above affordable levels, is anything to go by.  The Commission often carries out research that informs its decisions. Besides salary surveys and wage disparities studies, the Commission embarked on job evaluation for state officers in 2013, and public officers in 2015. Appropriate remuneration and benefits levels for state officers were determined.
Previously, the wage bill for state officers was Ksh15.4 billion ($148 million), compared with Ksh15.1 billion ($145 million) currently, including salaries for the newly created offices at the county and national government levels. Even with devolution, the country has saved at least Ksh500 ($4.8 million) million that can be channelled into development projects. Moreover, the compression ratio (the gap between highest and lowest remuneration) has declined from 1:58 to 1:10, while allowances have been capped. We are also currently in the process of reviewing state officers’ salaries, and the recommendations of that review will be effected after the general election of 2017.

The just concluded job evaluation for the public service will play an important role in stabilising the wage bill in the medium term. Using the results, the Commission is advising the national and county governments on the remuneration and benefits of all other public officers. Implementation of job evaluation results for the public service will therefore lead to the addition of Ksh100 billion to the annual wage bill. In four years, based on the assumptions of economic growth, the ratio of the wage bill to GDP will have declined to around 7 per cent from the estimated 9.5 per cent in 2016/17.

The Commission has also reviewed the CBA cycle from two years to four years, giving the economy time to grow. The previous two-year cycle did not allow the employer enough time to implement the awards and was too costly to the economy.So, whereas the IMF argues that the Cabinet’s decision is not supported by the performance of the economy, it is worth nothing that Kenya has witnessed an average growth in real GDP of 5 per cent per annum over the past five years.

It is envisaged that sustainability of the wage bill will be achievable in the medium term, releasing more revenue for development projects. This will put Kenya at par with its competitors. Even as we strive to ensure that the country has a sustainable wage bill, the aspect of labour productivity cannot be ignored. Further reduction in the wage bill to GDP ratio will require improved performance and productivity in the public service


The entrenchment of performance contracting, reduction of wastage in the public service, cleaning up of the payroll system, the Capacity Assessment Rationalisation Programme (CARPS) and other reforms initiated by the government will go a long way towards ensuring Kenya’s public wage bill achieves the desired sustainability ratio. It will take concerted effort from all, bearing in mind that the wage bill is driven by the values payable, the numbers of institutions/positions and performance.

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CONTACT US

Salaries & Remuneration Commission,
Williamson House 6th Floor,
P.O. Box 43126 - 00100 Nairobi, Kenya.
Phone: +254 (20) 2710065/81,
Email: info@src.go.ke

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