Federation of Employers Calls for Immediate Payslips Review as Employment Drops 12 Per Cent
The Federation of Kenya Employers (FKE) has urged the government to urgently review statutory deductions and taxation on workers, warning that rising payroll burdens are eroding take-home pay and contributing to declining formal employment across the country.
“The combined burden of taxation, statutory deductions, and compliance obligations is squeezing businesses, reducing workers’ take-home pay, and weakening competitiveness,” Mugo said.
Shift Toward Informal Employment
According to the employers’ body, the shrinking value of salaries has driven many workers to explore alternative income streams such as freelancing, self-employment, and gig work, sectors that often operate outside formal labour protections.
FKE cited findings from a recent survey indicating that overall employment has declined by approximately 12 per cent, with the steepest reductions reported in manufacturing, retail, hospitality, transport, and financial services—sectors traditionally regarded as major job creators.
Employers attribute the downturn not only to taxation but also to rising operational expenses, including energy costs, wage pressures, and complex regulatory requirements.
Businesses Under Mounting Pressure
Mugo warned that firms are increasingly struggling to maintain payrolls under the current economic conditions, forcing many to freeze hiring, downsize operations, or restructure their workforce.
“Employers are under growing pressure from high taxes, rising energy costs, wage demands, and complex regulatory requirements, which are increasing the cost of doing business and forcing many firms to freeze hiring or restructure,” she added.
Business leaders argue that without intervention, the situation could undermine Kenya’s competitiveness as an investment destination and slow economic recovery.
Call for Comprehensive Payslip Reform
FKE is now advocating a broad overhaul of the payslip structure, aimed at reducing the tax burden on employees while simplifying deductions that employers say have become increasingly complex to administer.
“Employers are calling for tax reduction, policy stability, improved access to finance, and stronger alignment between education and industry to restore business confidence and support job creation,” Mugo said.
The organisation maintains that boosting disposable income would stimulate consumer spending, thereby benefiting businesses and the wider economy.
Government Signals Possible Relief
The call comes weeks after John Mbadi announced plans to introduce tax relief measures targeting low-income earners.
“We have agreed with the President that low-income earners in this country should be given a reprieve… Anybody earning KSh 30,000 and below in Kenya should not pay PAYE. You pay zero,” Mbadi stated.
The Cabinet Secretary added that the planned reforms would be included in a Tax Laws Amendment Bill to be tabled before Parliament ahead of the Finance Bill 2026.
Proposed Adjustments for Middle-Income Earners
Economic analysts note that while tax relief could boost consumer spending, the Treasury faces competing demands, including public debt servicing and funding essential services such as healthcare, education, and infrastructure.
Balancing Revenue and Growth
As discussions continue, stakeholders across business, labour, and government sectors are expected to engage in consultations to determine the most sustainable path forward.
For millions of Kenyan workers, the outcome of these deliberations could significantly shape future payslips—and the attractiveness of formal employment in an economy undergoing rapid change.
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Federation of Employers Calls for Immediate Payslips Review as Employment Drops 12 Per Cent
