The Federation of Kenya Employers (FKE) has raised an alarm over the increasing financial strain on employees due to the newly introduced tax deductions. According to FKE’s CEO Jacqueline Mugo, these changes have left many employees struggling to maintain their living standards, with their take-home pay significantly reduced.
Since the introduction of the new payroll deductions in March 2024, employees have seen a considerable reduction in their earnings. Mugo revealed that many employees have reached out to the FKE, expressing concerns about their shrinking salaries, which no longer meet the one-third threshold required by law for their take-home pay. This has prompted the federation to urge the government for a review of the current statutory deductions, which are putting employees in a difficult financial position.
The deductions, which are part of the Affordable Housing Programme and other mandatory levies such as contributions to the Social Health Insurance Fund (SHIF) and National Social Security Fund (NSSF), have been described as overly burdensome. As a result, employers are facing a tough choice: either comply with the tax regulations, which exceed the legal limit on deductions, or risk breaking labor laws. The Employment Act clearly states that the total amount of all deductions should not exceed two-thirds of an employee’s wages, but the current tax landscape is pushing employers beyond this limit.
Mugo emphasized that while FKE supports some of the initiatives, such as enhanced pension deductions for the long-term welfare of employees, the cumulative effect of these taxes is too much for many workers to bear. The rise in NSSF contributions, for example, has seen the minimum monthly deduction increase from Sh420 to Sh480, with high-income earners now paying up to Sh4,320, an increase from Sh2,160.
The new taxes have been implemented as part of President William Ruto’s agenda to fund the Affordable Housing Programme, a key pillar in his government’s plan to provide affordable housing and create jobs for Kenyans. However, the timing of these deductions, coupled with the ongoing economic challenges, has led to a growing sense of discontent among the workforce.
Mugo concluded by calling for continued dialogue with the government to harmonize the desire for social protection with the need for employees to maintain a decent standard of living. While FKE supports social welfare initiatives, it insists that a balance must be struck to ensure that workers’ take-home pay is not unduly affected.
