Soaring minimum wage raising costs for firms, says FKE

Federation of Kenya Employers (FKE) chief executive Jacquline Mugo. FILE PHOTO | NMG
Federation of Kenya Employers (FKE) chief executive Jacquline Mugo. FILE PHOTO | NMG 

The continued increase of minimum wages is driving up the cost of doing business in Kenya, forcing some firms to relocate to neighbouring countries, the employers lobby has said.

The Federation of Kenya Employers (FKE) said the companies are getting attracted to Ethiopia, Egypt, Tanzania, Uganda, Malawi and Rwanda where the minimum wage is sustainable.

Jacqueline Mugo, the FKE chief executive, said the minimum wage in Kenya is about Sh12,600 compared to Egypt’s Sh6,500 and Ethiopia’s Sh5,000, for instance.

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

On Wednesday, President Uhuru Kenyatta also said he would be impressing upon the private sector employers to raise salaries for their workers on Labour Day, noting that they had not done so for two years.

The President spoke while on a tour of Aryan Company, an export processing zone garment factory in Nairobi’s Baba Dogo area.

But Ms Mugo told the annual general meeting of FKE’s Rift Valley branch in Nakuru Wednesday that the answer to workers poor salaries does not lie in increasing wages, which slows down job creation by enterprises instead.

She said minimum wage increases have a ripple effect on other statutory deductions and indirect benefits that an employer gives to its workers, including house allowances, and insurance and medical cover.

“The government needs to reduce further the prices of essential commodities such as milk, sugar, flour to ease pressure on the pockets of employees who are demanding for wage increase.”

“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.”

She noted that every time the wages are increased companies are forced to pass the wage burden to consumers, who include their workers.

Kenya, the FKE boss said, needs to develop a comprehensive wage policy to guide decisions whenever employees demand a wage increase.

FKE Rift Valley branch outgoing regional president Apollo Kiarii said employers were under pressure to cut down their workforce to sustain their businesses.

Mr Kiarii said that between June last year and January this year, a total of between 4,000 and 5,000 workers in the tea sector had been sacked as their employers could not sustain higher wages.

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