Workers mark Labour Day with diminished earnings

Net pay for a worker earning Sh50,000 has since gone down from Sh39,617 to Sh39,029, while one earning a gross salary of Sh100,000 now takes home Sh71,617 which is Sh1,512 less than the take-home in January 2025.

Workers caught up in the higher NSSF deductions this year alone are estimated to be more than two million, underlining the magnitude of economic pain across Kenya’s formal workforce of just over 3 million.

The latest has been the increase in National Social Security Fund (NSSF) deductions since February, which caught up with about two-thirds of workers in the country.

The rise in NSSF deductions, which added to the pain from the housing levy and the Social Health Insurance Fund (SHIF) contributions, came at a time real annual average earnings per employee had already decreased by 4.1 percent in 2023 after accounting for inflation.

The NSSF deductions continue to rise even as other economic pressures including inflation and high cost of doing business have forced many companies to cut jobs.

Read:  Workers pay more to NSSF as regulator delays relief

A Central Bank Survey in October 2024 revealed that 42 percent of companies laid off casual workers while 31 percent fired workers on contract last year.

“Twenty-five percent of non-bank companies have so far laid off permanent staff in 2024 compared with only 4 percent of banks,” the survey said.

“Banks have largely retained the numbers of casual employees they had in 2023 whereas nonbanks have significantly reduced the numbers of casual employees. The survey findings therefore show that non-banks have employed less and laid off more in 2024 compared with banks.”

Among companies that have laid off workers recently is oil marketing firm, Ola, which cited tough economic times.

“Due to the foregoing challenges, OLA Energy Kenya is finding it difficult to sustain its current fixed costs. It is, therefore, with deep regrets, that we need to implement a redundancy program,” Ola said in March.

Communications and marketing firm WPP Scangroup also laid off 102 workers last year through a voluntary exit programme to address business challenges.

Many companies have been struggling with poor demand for goods they produce, weakening the purchasing power among Kenyans as commodity prices rise.

When prices go up, workers are forced to spend more on the same item and thus have to live on less by adopting tougher survival tactics, dropping consumption of non-essential commodities.

Inflation has averaged at 3.87 percent since last year, but has risen from 2.72 percent in October to 4.1 percent in April 2025, sending more signals of a further weakening of workers’ purchasing power.

Over the five years to 2023, real wage for workers in the public service dropped by 18.6 percent to Sh52,156 monthly as that of private sector workers dropped by 8.9 percent to Sh57,204, reflecting the impact inflation has on workers’ earnings.

Read: Higher NSSF deductions start this month: What the payslip will look like

As workers strain, the government has been collecting billions of shillings more from the additional deductions, with latest data showing that an extra Sh220 billion has been collected through the NSSF over the time contributions were raised since 2023.

“Within the short period of implementation, about two years, we have saved an additional Sh220 billion,” NSSF’s Managing Trustee, David Koross, said this month.

Pay-as-you-earn (Paye) taxes also increased from Sh495 billion to Sh555 billion between 2022/23 and 2023/24, partly due to an increase in Paye taxes on Kenyans earning Sh500,000 and above.

The government through the Finance Act, 2023, raised Paye from 30 percent to 32.5 percent for workers earning between Sh500,000 and Sh800,000 and 35 percent for those earning above Sh800,000 monthly.

The introduction of housing levy where workers are deducted 1.5 percent of their salaries has also seen the government collect Sh86 billion by December last year.