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Corporate

Employers say rise in minimum wage pushing them out of Kenya

Federation of Kenya Employers (FKE) executive director Jacqueline Mugo. FILE PHOTO | DIANA NGILA | NMG
Federation of Kenya Employers (FKE) executive director Jacqueline Mugo. FILE PHOTO | DIANA NGILA | NMG 

The continued increase of minimum wages to workers is pushing potential employers to relocate to neighbouring countries, the Federation of Kenya Employers (FKE) has said.

The FKE's warning comes as president Uhuru Kenyatta announced that he would impress upon the private sector to give Kenyan workers salary increments on the next Labour Day.

The secretary-general of the Central Organisation of Trade Unions (Cotu) Francis Atwoli wants the minimum wage for workers increased from Sh12,600 to Sh15,372.

However, the employers' body says the cost of doing business in the country has gone up by 30 per cent, forcing many companies to move to Ethiopia, Egypt, Tanzania, Uganda, Malawi and Rwanda where the wages are more sustainable.

“The government needs to reduce further the prices of essential commodities such as milk, sugar and flour to ease pressure on the pockets of employees who are demanding for wage increase,” said FKE executive director Jacqueline Mugo yesterday.

Ms Mugo said that while the minimum wage in Kenya is about Sh12,600, the same in countries such as Egypt is Sh6,500 and Sh5,000 in Ethiopia, adding that pay increases have a ripple effect on other statutory deductions and indirect benefits an employer gives to employees including house allowance, insurance and medical cover.

'Focus on job creation'

The employers reckon that the answer to workers' poor pay does not lie in raising wages as this has led to a slow job creation by businesses.

“Many of our enterprises are struggling because they are forced to use the little profits they make to sustain their bloated wage bill instead of expanding and create more jobs,” said Ms Mugo.

She noted that every time pay is raised, the employers are forced to pass the wage burden to consumers who include their workers.

FKE Rift Valley branch outgoing regional president Apollo Kiarii said employers were under pressure to slash their workforce, noting that a total of between 4,000 and 5,000 workers in the critical tea sector have been sacked as their employers could not sustain higher salaries.

“The only way to make the businesses sustain themselves and become competitive is to peg wages on productivity...This will see the enterprises make profits and create more job opportunities,” said Mr Kiarii.

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