Kenya Power has been put on the spot by the Auditor General for allowing a quarter of its employees to rack up deductions on their pay slips that exceed two-thirds of their basic wages in contravention of the Employment Act.
The Auditor General, in a management letter to the utility covering audits for the financial year ending June 2022, flagged excessive deductions as a potential cause for corruption in a bid to meet their basic needs.
The State-run, listed power distributor had 10,177 staff members on its books as at June 2021, its latest available annual report shows.
The auditor found that at least 2,653 of these workers were ceding at least two-thirds of basic pay to deductions in June 2022. Section 19(3) of the Employment Act 2007 stipulates that the “total amount of all deductions which…may be made by an employer from the wages of his employee at any one time shall not exceed two-thirds of such wages.”
This should, however, be done without prejudice to any right of recovery of any debt due, the law states.
“No sufficient explanation was given for breach of law on payment of salaries and allowances,” said the Auditor General in the Kenya Power letter. “Officers overcommitting their salaries could lead to pecuniary embarrassment and lead to perpetration of corrupt practices as means to sustain their basic needs.”
Flouting the rule on deduction limits is indicative of lax oversight on the part of a company’s finance and human resource managers, but is also indicative of the possibility of staff drawing high allowances that allow them to commit to loans without fear of failing to meet basic needs.
In some firms, it has also been flagged as an indicator that employees are fraudulently receiving income from elsewhere, with the huge loan commitments meant to act as cover for illegally acquired assets.
Kenya Power has in the last few years been beefing up its governance in order to cut power theft, which has cost it billions in revenue leakage.
Some of the illegal connections and billing irregularities have been abetted by the firm’s staff, which saw the firm lay off over 100 who were found to have aided power theft. A year ago, the company threw staff into panic after ordering them to present their official financial and asset records as part of a lifestyle audit aimed at curbing fraud at the utility.
The audit was part of recommendations of a task force that was looking into woes that saw the firm post its first loss in 17 years in the year ending June 2020, despite the huge potential for profitability.
Kenya Power has also been trying to clean up its procurement, which saw 59 staff in its supply chain and logistics department suspended last year to pave the way for a forensic audit of tendering processes. They have since resumed their duties following conclusion of the process.