Private Sector Workers Miss Out on Pay Rises as Business Activity Shrinks, New PMI Report Shows

Private Sector Workers Miss Out on Pay Rises as Business Activity Shrinks, New PMI Report Shows

Thousands of private sector employees across Kenya went through May without salary increments despite growing pressure from the rising cost of living, as businesses grappled with declining sales, shrinking demand, and worsening economic conditions, according to the latest Stanbic Bank Kenya Purchasing Managers’ Index (PMI).

The report, released on Thursday, June 4, paints a concerning picture of Kenya’s private sector, revealing that most employers chose to keep wage bills unchanged while simultaneously scaling back hiring and reducing workforce numbers amid weakening business activity.

The findings come at a time when many households are struggling with increased costs of food, transport, housing, and other essential commodities, raising fresh concerns about the purchasing power of workers and the broader state of the economy.

According to the survey, wage growth remained largely stagnant during May, with almost all participating firms reporting no changes in staff costs compared to the previous month.

“Wage costs across Kenya’s private sector economy rose only marginally again during May as the respective seasonally adjusted index remained close to the no-change mark of 50.0. Ninety-nine per cent of survey participants reported no change in staff costs since April,” the report stated.

The data suggests that despite mounting economic pressures on workers, salary reviews were either postponed or avoided altogether by employers seeking to contain operating costs.

Economists say the findings highlight the difficult balancing act many businesses currently face as they attempt to remain profitable amid slowing consumer demand and rising expenses.

The report further indicates that firms remained cautious about increasing labour costs, even after the government announced new wage guidelines aimed at improving workers’ earnings.

Just weeks earlier, the Ministry of Labour approved a 12 per cent general wage increase for Kenyan workers and a 15 per cent adjustment for employees in the agricultural sector.

Labour Cabinet Secretary Alfred Mutua had said the revised wage structure was intended to cushion workers from the high cost of living and guide employers in updating payroll systems.

However, the latest PMI findings suggest the impact of the directive may not yet be reflected across much of the private sector.

Beyond wages, the report reveals a significant deterioration in overall business conditions during the month under review.

The headline PMI dropped to 46.6 in May from 49.4 in April, marking one of the weakest performances recorded in recent months.

A PMI reading below 50 signals a contraction in business activity, indicating that more firms are reporting worsening conditions than those experiencing growth.

Analysts attributed the decline largely to weaker customer spending and reduced demand across key sectors of the economy.

Businesses surveyed reported that consumers had become increasingly cautious with their spending as inflationary pressures continued to affect household budgets.

Companies also cited higher operational costs and economic uncertainty as factors weighing heavily on commercial activity.

One of the most concerning findings in the report was the sharp decline in new business orders.

According to Stanbic Bank, new orders fell at the fastest rate since July 2025, reflecting growing hesitation among consumers and businesses to commit to spending.

The decline in demand subsequently affected staffing decisions, with employers opting to reduce workforce numbers rather than expand payrolls.

“Reduced pressure on capacity via a fall in new orders led firms to cut their workforce numbers for the first time in 16 months,” the report noted.

Temporary and casual workers were reported to be the hardest hit, as companies sought to reduce costs without making significant adjustments to their permanent workforce.

The employment decline marks a significant shift after more than a year of relatively stable hiring activity within the private sector.

Industry observers warn that prolonged weakness in demand could further affect employment levels if economic conditions fail to improve in the coming months.

Despite the challenges, some economists remain cautiously optimistic that government initiatives, improved agricultural performance, and infrastructure investments could help stimulate growth later in the year.

For now, however, the PMI report underscores the difficult reality facing both businesses and workers, with many firms prioritizing survival and cost control while employees continue to navigate a challenging economic environment without corresponding increases in earnings.

The findings are likely to reignite debate about wage growth, job creation, and the effectiveness of measures aimed at shielding Kenyan households from persistent economic pressures.

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Private Sector Workers Miss Out on Pay Rises as Business Activity Shrinks, New PMI Report Shows