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Cost of voluntary exits by State workers hits Sh1.6bn
Voluntary retirement is used in the public and private sector to cut payroll pressures, restructure departments or eliminate duplicate roles without resorting to compulsory layoffs.
Workers exiting State entities on a voluntary basis swelled the government’s separation bill by 73.8 percent to Sh1.57 billion in the year ended June 2025, signalling a rise in early exits from public service.
Consolidated financial statements of 570 State corporations, semi-autonomous government agencies and public funds show the voluntary retirement scheme liability rose from Sh905.88 million in the previous year.
The amount has been booked under employee benefit obligations meaning that it represents benefits that the State entities have committed to pay employees who agreed to retire early but had not yet been settled as at the end of last June.
Voluntary retirement is used in the public and private sector to cut payroll pressures, restructure departments or eliminate duplicate roles without resorting to compulsory layoffs.
Staff who take up the offer are entitled to severance packages calculated based on years of service, salary levels and other negotiated benefits.
The Treasury report did not give details on the number of employees who exited the State entities during the review period. The retirement age varies between 60 and 70 depending on disability status and sector but there is a provision for voluntary early retirement.
Public officers exit service in various ways including resignations, retirements, dismissals, and deaths. Public Service Commission data up to the end of June 2024 showed few (3.6 percent) officers left service with most exits arising from retirements and end of contract.
The PSC report showed 8,411 officers out of 231,830 quit the service in the year ended June 2024, with 5,260 leaving the work through various forms of retirements and end of contracts while 3,138 exited through resignations, dismissals and deaths.
The highest number of officers who exited the service were from State corporations (4,505) followed by Ministries and State Departments (2,129) and public universities with 1,160.
The rise in voluntary exit costs comes against a backdrop of sustained efforts to rein in the public wage bill, which remains one of the largest recurrent expenditures.
The Treasury document shows the State entities spent Sh223.47 billion on employee costs in the year ended June 2025 compared with Sh211.12 billion in the previous financial year.
The spending on basic salaries of permanent employees rose to Sh168.44 billion from Sh160.83 billion while personal allowances hit Sh10.69 billion from Sh9.34 billion. Basic wages to temporary staff hit Sh2.59 billion from Sh2.54 billion.
The Sh1.57 billion appears as a liability on the balance sheet. Many entities usually opt to stagger the actual cash payments to reduce strain on the cash position.
Treasury data shows the overall employee benefit obligations also include accrued salaries, leave, bonuses and long-term defined benefit pension commitments.
The employee benefit obligations amounted to Sh22.05 billion in the year under review from Sh20.82 billion, highlighting the scale of future cash outflows tied to current and former public servants.
A pile-up of the benefit obligations points to the difficulties of containing employee costs through natural attrition and retrenchment while managing the financial burden of exit packages.
Treasury data shows that nearly a third (165) of the 570 State entities closed June 2025 in a deficit position, meaning their expenditures exceeded their revenues during the review period.
