SRC Approves Ksh. 32.21 Billion in Wage Bill Requests: A Major Increase and Its Implications

The Salaries and Remuneration Commission (SRC) has recently approved a substantial Ksh. 32.21 billion in wage bill requests for the fourth quarter of the financial year (FY) 2023/2024. This approval marks a dramatic increase from the Ksh. 4.27 billion granted in the same period last year, reflecting a significant shift in public sector wage management.

This latest decision follows a record number of requests submitted to the SRC. During FY 2023/2024, the commission received 79 requests totaling Ksh. 52.02 billion from various public institutions. This is a considerable rise from the Ksh. 8.18 billion requested in FY 2022/2023, highlighting a growing demand for wage and benefit adjustments across the public sector.

The breakdown of the approved requests reveals a focus on allowances and benefits, which accounted for 79% of the total. This indicates a shift towards enhancing the overall compensation packages rather than just direct salary increments. Collective Bargaining Agreement (CBA) reviews accounted for 11% of the requests, reflecting ongoing negotiations to align employee contracts with current economic conditions. Bonus requests made up 6%, while salary reviews constituted 4% of the total requests.

In the fourth quarter alone, the SRC approved Ksh. 2.52 billion out of the Ksh. 5.46 billion requested, achieving an approval rate of 46.21%. This high approval rate can be attributed to the SRC’s role in advising on CBAs for various unions, including the Universities Academic Staff Union (UASU), Kenya University Staff Union (KUSU), and the Kenya Union of Domestic, Hotels, Educational Institutions, Hospitals and Allied Workers (KUDHEIHA) for the 2021-2025 cycle.

However, this increase in approved wage bills has significant implications for public sector finances. The county government’s expenditure on Personnel Emoluments (PE) for the fourth quarter of FY 2023/2024 is estimated at Ksh. 53.42 billion. This marks an increase from Ksh. 48.4 billion in the third quarter but a decrease from Ksh. 59.24 billion in the same period last year. Despite this decrease from the previous year, county government expenditure on wages remains above the 35% threshold set by the Public Finance Management (PFM) Regulations, 2015.

Similarly, the national government’s PE, excluding national security sector and Consolidated Fund Services (CFS), is estimated to rise from 25.51% in the third quarter to 23.54% in the fourth quarter. This indicates a decrease in the proportion of revenue allocated to wages but still reflects a significant portion of national expenditures.

The drop in ordinary tax revenue from Ksh. 484.22 billion in the third quarter to Ksh. 471.1 billion in the fourth quarter further complicates the financial landscape. This reduction in revenue has increased the wage bill to ordinary revenue ratio from 29.92% to 34.73%, just below the 35% threshold established by the PFM Act, 2012, and PFM Regulations, 2015.

The increased approval of wage bills, coupled with a drop in ordinary tax revenue, underscores the challenges faced by the government in managing public sector compensation within the limits of fiscal regulations. As public institutions continue to seek higher wages and benefits, balancing these demands with sustainable fiscal practices remains a critical task for the SRC and government financial planners.

In summary, the SRC’s recent approvals signify a notable increase in wage bill requests, reflecting broader trends in public sector compensation. While this may address immediate demands from various public sector employees, it also raises important questions about long-term fiscal sustainability and the need for ongoing reforms in public sector financial management.