Lowest paid workers get 13 per cent wage increase

The law currently provides for a three-month jail term or a maximum Sh50,000 fine or both as general punishment for employers flouting labour laws.
The law also provides for a 48-hour break for domestic workers or compensation at the set hourly or daily rate.

The government has given legal backing to the minimum wage increments it announced on Labour Day, ignoring employers’ warnings that the move risked limiting creation of jobs and worsening unemployment.

The lowest paid workers have officially won a 13.1 per cent wage increment beginning May 1, 2012, according to a Kenya Gazette notice published by the Ministry of Labour.  
The pay rise comes at a time when inflation is on a steady decline, translating to more purchasing power for the workers who have struggled keep afloat in the face of a swamping increase in the cost of living that peaked in the fourth quarter of last year.

Cashiers, heavy commercial truck drivers, bakery workers and tailoring assistants in major towns will receive the highest increment of Sh2,242.5 on their salary, excluding housing allowance, according to the gazette notice published last Friday.

Workers holding these positions and are based in Nairobi, Mombasa, Kisumu and other major towns are now entitled to a minimum of Sh19,360 per month up from Sh17,118 — or a daily wage, inclusive of housing allowance of Sh932.

Publication of the notice means the government did not agree with the Federation of Kenya Employers (FKE) proposal that the workers be awarded a nine per cent minimum wage increment but responded positively to trade unions’ demands for higher pay.

Inflation rose steadily from a low of 5.4 per cent in January last year to 19.7 per cent in November, eroding the earnings of workers at the low end of the labour market who form the bulk of the workforce.

“Employers will obviously comply with the new wage rates but the unintended consequence is that fewer people will hired as businesses work to contain their costs,” said Jacqueline Mugo, the executive director of FKE.

Ms Mugo said rising labour costs are likely to slow down new investments and business expansion, in effect limiting the creation of jobs.

The private sector has been lagging behind the government in formal sector jobs creation according to official records published in May.

The sector created 47,000 new jobs last year compared to 56,000 the year before as economic growth dipped to 4.4 per cent from 5.8 per cent in the same period.

Deloitte East Africa – a consulting firm – said that cost-cutting, including a freeze on new hiring, has become a top priority for corporate Kenya as it seeks less costly means of riding out business uncertainties related to next year’s General Election.

Inflation has steadily dropped in recent months to stand at 10.5 per cent last month on account of lower fuel prices, a stronger shilling and increased food supply.

The government has more recently come under criticism over the annual minimum wage increments announced on Labour Day.

“Significant political pressure continues to play a big role in inflating the minimum wage rates to the detriment of employers and the entire economy,” said Patrick Obath, the chairman of the Kenya Private Sector Alliance.

“We often see the minimum wage rates published in response to short-term economic problems like high interest and inflation rates,” he said, adding that workers should get pay increments whenever it is justifiable.