Economy

Civil servants’ allowances capped at 40 percent of monthly salary

Lyn Mengich

Salaries and Remuneration Commission (SRC) chairperson Lyn Mengich at a press briefing in Nairobi on October 7, 2021. PHOTO | FRANCIS NDERITU | NMG

Allowances for public servants have been capped at 40 percent of their gross monthly pay starting July next year, as the State moves to lower the public sector wage bill and free up more funds for development projects.

The Salaries and Remuneration Commission (SRC) on Thursday said that it would abolish job-related allowances that account for the biggest chunk of gross monthly pay and merge others.

“There shall be streamlining of allowances to progressively achieve a proportion of basic salary to the gross salary that is no less than 60 percent,” SRC said on Thursday.

“Allowances whose rationale for payment is redundant and or overlaps with that of the basic salary shall be abolished.”

The cuts will ensure that basic salary accounts for not less than 60 percent of the gross monthly pay — a shift from the current unregulated model where allowances account for up to 259 percent of the monthly take-home for public servants.

Kenya is seeking to cut billions of shillings from the public sector wage bill as a part of a deal with the International Monetary Fund (IMF) to free up more funds for development projects.

The Treasury has been struggling to raise revenues to run the bloated public wage bill that consumes more than half of taxes.

The IMF directed Kenya to lower the public sector wage bill as part of conditions tied to Sh261 billion loan agreements with the country early this year.

The public sector wage bill stood at Sh827 billion in the year to June, with allowances accounting for 48 percent of the expenditure.

The number of allowances for public servants grew to 247, a 696 percent jump from 31 in 1999, with workers using them to increase their monthly pay.

“Job-related allowances are paid to enhance salary and account for the greatest proportion of allowances in the Kenyan public service. This category of allowances is expected to fall off once the relative worth of a job is appropriately determined,” the SRC said.

Allowances targeted for abolishment include those that the SRC says are already catered for through the workers’ basic pay.

These include medical allowance, entertainment allowance, and utility allowance to cater for water, electricity, airtime, and security bills.

The SRC has given all State agencies and ministries up to November 30 to present a list of the allowances they are currently paying their staff, setting the stage for a review that will harmonise the perks.

Scrapping some allowances and merging of others will cut an estimated Sh100 billion annually from the public service wage bill.

In June, the SRC froze a Sh82 billion salary increment for all civil servants for two years, highlighting Kenya’s rapidly deteriorating cash-flow situation that is marked by near-stagnant revenues and worsening debt service obligations.

Kenya delayed the pay review to June 2025, agreed to curb fresh hiring, and work on removing ghost workers, including staff who have died, retired, or deserted duty.

The freeze in non-essential hiring and pay sets the stage for tough times ahead as costs of basic items such as fuel, rent, and food continue to spiral.

The SRC says that the freeze on pay increments and harmonisation of allowances have the effect of reducing the burden of the public wage bill on Kenya’s revenues from 51.7 percent to 48 percent.

More emphasis was put on allowances starting 2015 as the government saw it as an alternative to controlling its pension bill by not raising salaries.

State think-tank Kenya Institute for Public Policy Research and Analysis (Kippra) said that allowances paid to civil servants have made the government the preferred employer and called for a radical review.