As companies struggle to control the wage bill, the Federation of Kenya firms (FKE) has warned that they may soon be obliged to stop hiring and reduce the number of employees on permanent and long-term contracts.

According to the employers, the government's decision to broaden the tax base has imposed a significant burden on formal companies and employees, potentially leading to firm closures, job losses, and a slowdown in economic growth.

PHOTO | COURTESY The Federation of Kenya Employers 

They believe that the country has already lost over USD 354 million in foreign direct investment in the last three months as a result of such unfavourable policies, and they want the government to reevaluate its strategy.

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FKE Executive Director Jacqueline Mugo told the press that All this raft of changes, whether it's looking at health, training, PAYE, and housing levy just means that there is more burden on employers, and they have to find innovative ways of getting the job done without being stuck with a fixed wage bill.

"The more you tax the formal sector, the more difficult it is for those who own businesses to create jobs, and we're seeing that." he added

PHOTO | COURTESY The Federation of Kenya Employers 

According to FKE President Habil Olaka, the underlying idea in tax administration should not be taxing people and corporations into poverty. Instead, it should encourage many enterprises and individuals to boost their output and therefore reach the tax bracket.

Employers have also criticised the planned legal amendments included in the Universal Health Coverage Bills 2023, alleging that they will raise business costs and pressure already stretched incomes at a time when Kenyans are dealing with high living costs.

According to FKE, the government's policy of putting the burden of supporting UHC on formal workers and employers is erroneous, given the formal sector accounts for a small percentage of total wage employment in the country as compared to the informal sector.

Employers are so warning of costly consequences in the business climate as a result of the unfavourable policies.

FKE urges the Ministry of Health to seek employers' perspectives on potential UHC amendments before the Bills are introduced.