Treasury is looking to cut civil servants’ allowances in a bid to curb the country’s growing wage bill.
The current wages stand at 48.1% of the national revenue. The recommended level is 35% under the Public Finance Management Bill.
According to Salaries and Remuneration Commission (SRC) Vice Chairman Dalmas Otieno, allowances make up over 40% of the public wages. Treasury is targeting wages below 7.5% of the GDP as stipulated in international guidelines.
The public wages are too high and therefore shrink funds available for development. As a result, Kenya should cut down spending on salaries to allow for development expenditure.
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“The wage bill at 48.1% of revenue is consuming much more revenue than the recommended requirement of under 35%.” Yatani said. “In five years, public sector wage bill must stay within the stipulated PFM to enable sufficient fiscal space to meet its obligations”, he added.
Allowances Pushing Wage Bill Higher
Allowances contributed Ksh 322 billion out of KSh 795 billion spent on Kenya’s wage bill for the financial year to June 2019.
“If you look at the wage bill, 40 per cent goes to allowances, introduced as the government avoided to increase basic salary, which would increase pension liability,” said Mr Otieno.
According to the vice-chair, SRC has 247 different allowances, with many overlapping. Moreover, the allowances grew because the government avoided increasing basic tax with every subsequent union negotiation to avoid increasing pension liability. Therefore, the SRC is considering to rationalise some allowances as well as scrap others.
Other options on the table include replacing permanent employees with contractual arrangements which will reduce pension expenditure.