Why ICT sector workers got top rate payrise in 2016

ICT sector workers were the biggest winners in last year’s annual pay rise that jumped by an average of Sh72,000 per employee, according to newly released official data.

The Economic Survey 2017 report, which was released last week, shows that private sector workers in the information and communication segment saw their annual pay rise to an average of Sh874,105 in 2016, up from Sh802,169 the previous year – representing a nine per cent growth.

This translates to an average monthly pay cheque of Sh72,842, or slightly above the national average wage.

The nine per cent wage growth put the workers among the few whose actual purchasing power rose when the increase is adjusted for inflation that averaged 6.3 per cent last year.

The data shows that though private sector workers in education still earn higher than those in ICT on average, their pay rose at the slowest pace among all employees.

Education sector workers got a paltry 1.3 per cent pay rise last year, a change that marginally lifted their average wage to Sh896,491 a year, or Sh74,707 a month.

“Besides profit-making telcos, the increasing focus on digitisation of virtually every sector of the economy has ensured premium margins for ICT firms with the benefits cascading down to employees in terms of pay increases,” said Bitange Ndemo, an associate professor at the University of Nairobi’s School of Business.

Dr Ndemo, however, said the education sector was experiencing cut-throat competition arising from the recent mushrooming of private colleges that have narrowed margins and slowed down growth of staff benefits.

“Education sector is price-sensitive in the sense that there is a limit beyond which private institutions cannot increase fees without causing student flight,” said Dr Ndemo, even as he clarified that there are a few exceptions, like Strathmore University and USIU, that attract diverse students from regional markets.

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The survey released last week shows that the ranks of private sector workers in ICT increased 4.7 per cent last year to 108,700 while those in education increased 4.1 per cent to 196,900.

Wholesale and trade came second behind ICT on the list of sectors where employees reaped bigger pay rise at 8.8 per cent, followed by agriculture (7.8 per cent) and health (6.8 per cent). At a monthly average of Sh72,842, employees in the ICT sector are the sixth best paid in Kenya.

The top position is held by financial and insurance sectors, which are the best-rewarding and where the average wage now stands at Sh139,793 a month, a 3.2 per cent increment from Sh135,370 in 2015.

They are followed by energy sector workers whose average wage grew 4.5 per cent to Sh121,998 a month and those in administrative and support service with an average pay of Sh111,156 a month.

Pay increase fails to match inflation

In real terms, however, the majority of private sector workers earned less last year than their 2015 take-home despite the salary increases that failed to match inflation.

The survey found that a private sector worker earned Sh52,444 per month on average, an increase of 5.7 per cent that was below the average inflation rate of 6.3 per cent, meaning workers were left worse off.

Besides, the survey found that the number of workers in formal private sector employment expanded 3.3 per cent to 2.6 million last year, accounting for 16.2 per cent of Kenya’s total workforce of 16 million.

The total private sector wage bill stood at Sh1.1 trillion last year, up from Sh1 trillion in 2015. The Economic Survey shows that the private sector accounted for 67.2 per cent of the 85,600 new formal jobs created last year or 57,600 jobs, down from 90,200 a year earlier.

The slowdown has been blamed on tough economic conditions that saw hundreds of formal sector workers lose jobs in retrenchments.

While the State did not adjust the minimum wage last year, President Uhuru Kenyatta has already signalled his intention to award another pay rise on May 1. This was despite employers warning that the wage increases risk pushing potential investors to neighbouring countries or sparking another round of retrenchments.

“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,” Jacqueline Mugo, the executive director of Federation of Kenya Employers (FKE), said earlier this month.