Lowest paid workers get 13 per cent wage increase

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.

FKE and KEPSA are rooting for future minimum pay to be revised based on the average annual inflation rates for the preceding three years, arguing that this would ground the wages on longer-term economic fundamentals.

Mr Obath argued that setting the minimum wage on Labour Day has created unreasonable expectations of double digit pay raise among workers.
The Central Organisation of Trade Unions (Cotu) had in April demanded a 60 per cent increase in the minimum wage, threatening to call a strike if its demand was not met.

Receptionists, telephone operators, general clerks and store keepers are the second biggest beneficiaries of the wage increment whose salaries must rise by Sh1,530 to stand at Sh13,214.6.

Employers using the services of these workers on a daily basis must increase their wages by Sh73.5 to Sh562 -- inclusive of housing allowance.

This group of workers is the most common in the formal sector where the rise in compensation is expected to push up fixed costs in the short-term.
Similar wage increments have been awarded to shop assistants, copy-typists and drivers of cars and light vans, raising their monthly take-home from Sh10,239 to Sh11,580.3 or a daily wage of at least Sh556.90 from Sh492.40.

The salary for a security guard now starts at Sh9,571 compared to Sh8,463 last year while the hourly compensation for night guards rises by Sh10 to Sh86.3, handing them a total monthly pay of over Sh14,000, including overtime.

General labourers, including cleaners, gardeners, messengers, day watchmen, baby sitters and house servants have won a minimum pay increment that lifts their salary to Sh8,579  from last year’s Sh7,586.

Those employed on  temporary terms are entitled to an hourly pay of Sh77 up from Sh67.80.
Kenya’s two million domestic workers are, however, not expected to benefit from the new wage rates in the short term due to the looseness of labour market surveillance and their employment by relatives.
“Payment of official minimum wages to  these workers is still limited to companies, formal organisations and upper middle class households,” said Albert Njeru, secretary general of Kenya Union of Domestic, Hotel, Educational Institutions, Hospitals and Allied Workers.

Mr Njeru, however, said the Labour Ministry together with trade unions are crafting new regulations that will strongly articulate the rights of domestic workers, most of who are unable to draw the line between professional roles and social relations or obligations in the households they serve.

The new regulations — expected to come into force next year — are based on stringent International Labour Organisation (ILO) guidelines aimed at improving the working conditions for those employed in the informal economy.

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.
If implemented strictly, the new laws will hit lower income households the hardest as they may be forced to set aside a larger proportion of their income to pay domestic workers or dispense with their services altogether.

Critics of the minimum wage for domestic workers have argued that the monetary compensation does not take into account the pack of freebies the workers enjoy, including food and accommodation.
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