The Federation of Kenya Employers (FKE) have opposed government plans to increase taxes warning that it will trigger massive job losses.
Speaking on Friday, September 15, FKE Executive Director Jacqueline Mugo said employers will be forced to stop hiring new staff and layoff some employees to contain the wage bill.
According to employers’ umbrella body, the new tax measures, which President William Ruto‘s regime introduced, have placed a huge burden on formal employers and employees.
“We have been seeing a reduction in the number of formal sector jobs even before the current regime. The more you tax the formal sector the more you make it difficult for those enterprises to create jobs and we are seeing that,” said Jacqueline Mugo.
FKE opines that this could result in business closures, job losses and a slowdown in economic growth.
Additionally, FKE said employers have been forced to reduce the number of staff on permanent and long-term contracts as a mechanism to reduce the wage bill.
“The changes that we see in the world of work have made it difficult for us to have permanent and pensionable jobs or people on long-term contracts.
So increasingly we are looking for short and flexible terms of engagement because if you have full-time employees then there are so many other costs that go with that. You can add thirty percent on the wage bill,” said Mugo.
FKE Opposes Proposed UHC Bills
Additionally, the lobby group has opposed the new proposed health bills included in the Universal Health Care (UHC) of 2023 including Social Health Insurance, Primary Healthcare, Digital Health, and Facility Health Improvement Bills.
Mugo explained that should the bills sail through, they will increase business operation costs and strain employees’ incomes in these tough economic times.
Further, the federation argued that the government made a wrong decision to place the cost of funding UHC on formal workers.
FKE said the formal sector accounts for a small percentage of the overall wage employment in the country as compared to the informal sector.
“FKE holds the view that this model will face challenges given that the formal wage employment is only 15% of the total wage employment,” said Dr. Habil Olaka, CEO, Kenya Bankers Assocation.
Mugo explained that the informal sector, which accounts for 75% of the wage employment has created most opportunities in recent years.
Also, the federation asked the government to seek the opinion of the employers on the proposed new UHC bills before they are tabbed in parliament.
Further, Dr. Olaka stated that Kenya lost $345 million foreign investments in the last three months.
He attributed these losses to the sharp drop in economic growth brought by unfriendly business policies.