Why Companies Are Firing Permanent Employees in 2024- CBK

The Central Bank of Kenya (CBK) has revealed a rising trend that has emerged in the labor market where companies are reducing their permanent workforce since the beginning of 2024.

CBK in its report conducted in September 2024, stated that more companies not operating as banks have fired permanent employees compared to casual employees.

“Respondents were asked how the number of permanent, contract, and casual employees in their firms compare with those in a similar period in 2023. The results showed varied hiring expectations between banks and non-banks,” CBK stated.

While only 4 percent of banks have laid off permanent staff in 2024, a staggering 25 percent of non-bank firms have made similar cuts.

CBK Reveals That Banks Hire More Employees Compared to Companies

Banks have largely retained the numbers of casual employees they had in 2023 whereas non-banks have significantly reduced the numbers of casual employees.

At the same time, the responses showed that 59 percent of banks have hired new permanent staff in 2024 compared with only 10 percent of non-banks.

The survey findings also depicted that companies have employed less and laid off more in 2024 compared with banks.

Also Read: Local Companies Firing Employees in 2024

In the September survey, 76 percent of banks expected to hire more employees in 2024 compared with those they had in 2023 while only 38 percent of non-banks expected to increase their employees in 2024.

Banks largely expect to hire more in 2024 to support continued branch expansion and growth in business, launch of new products, and to replace exiting staff.

On the other hand, non-bank players had mixed expectations about hiring in 2024.

Non-banks expected the high cost of production, high overheads, low profit margins, low business, reduced income, high cost of operations, business uncertainty and the need to hold down costs with the reduced demand in the market to affect new hires in 2024.

Also Read: Standard Group Records Ksh200M Loss Amid Mass Firings

Reasons Why Companies are Reducing Employees

High Cost of Production: Non-bank companies are facing increased expenses in producing their goods or services, making it challenging to hire additional staff.

High Overheads: These businesses have substantial ongoing expenses, such as rent, utilities, and administrative costs, which further strain their budgets and limit hiring capabilities.

Low Profit Margins: With reduced profitability, non-bank firms may be hesitant to expand their workforce, as they need to prioritize financial stability.

Low Business Volume: Many companies are experiencing a decline in customer demand, which affects their ability to sustain or grow their workforce.

Reduced Income: A drop in revenue can lead to difficult decisions, including layoffs or hiring freezes, as companies look to cut costs.

High Cost of Operations: Increased operational costs, such as wages, materials, and logistics, make it harder for non-bank firms to invest in new hires.

Business Uncertainty: The unpredictable economic environment creates hesitation among non-bank players regarding future hiring decisions.

Need to Hold Down Costs: With reduced market demand, these companies are focusing on managing expenses carefully, which often means limiting new hires

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