Dorcas Kirui is a nurse in Kiambu County. She has ambitions to grow in her career and loves her family. She has always maintained a strict financial discipline since she secured a job in 2019, saving a portion of her income for development projects and budgeting for the critical needs of her parents living in her rural home such as food, clothing and medical insurance.
But today, Dorcas says she is already feeling financial pressures due to growing deductions on her earnings together with an increase in commodity prices that have left her unable to save and support her parents.
“This whole thing is stressful because, despite all these deductions, there is no increment in my salary. After all these deductions, you are left unable to even budget for the money you are left with. Sometimes, it becomes difficult to service some of my parents’ expenses that are on my shoulders such as paying for their medical cover and sending them money for upkeep,” Dorcas says.
While she would love to see them have decent meals all the time and under a secure medical cover, she has sometimes been forced to see them survive without the much-needed support, and the nurse has her misgivings about the government’s insistence that some of the deductions on her pay and additional ones it is proposing to introduce in the coming days are a priority.
This is the situation many workers have found themselves in as the government seeks to pile on further deductions on payslips.
The government in February raised deductions to workers’ salaries towards NSSF from the uniform of Sh200 for every worker to six per cent of their salaries, with many now paying Sh1,080.
In the Finance Bill 2023, the National Treasury has proposed to also introduce a three per cent deduction to workers towards the National Housing Development Fund (NHDF), which would see workers earning at least Sh83,300 contribute Sh2,500. The deduction will be mandatory.
Last month, President William Ruto also proposed to increase workers’ deductions to the National Health Insurance Fund (NHIF) to 2.7 per cent of the basic salary.
Should all the proposed deductions come to pass, many workers will be affected as their take-home pay will take a hit. This will also affect millions of other people, considering the high dependency ratio in Kenya, where the few members of the working class are heavily depended on by their extended families.
The World Bank ranks Kenya’s age dependency ratio — the ratio of dependants (people younger than 15 or older than 64) to the working-age population (those aged 15-64) at 70 per cent by 2021.
The international financial institution also reports that Kenya’s gross savings as a percentage of GDP — defined as disposable income less consumption — was 16 per cent in 2021, up from 15 per cent in 2020 and 14 per cent in 2019.
President Ruto has been bullish about improving Kenya’s saving culture to rescue the country from over-reliance on borrowing for development projects, introducing mandatory measures for workers and businesses, most of which have elicited strong criticism on their need.
“Progressive countries like ours, in other jurisdictions, are in the region of 30 to 40 per cent savings as a ratio of GDP. For us to grow our culture of savings, we must bring the culture of savings into business so that as you do business you are saving for tomorrow and the day to come,” he said in November last year, as he announced a mandatory deduction on Hustler Fund that would be channelled to borrowers’ savings accounts.
A high unemployment rate in the country compounds problems for the working population, where many employees find themselves assuming the responsibility to take care of the financial needs of their relatives who official statistics recognise as being in the working population.
Central Bank of Kenya (CBK) data also show that most of the remittances by Kenyans working abroad come in to take care of the normal day-to-day needs of their families.
The CBK’s 2021 diaspora remittances survey showed that 63 per cent of recipients are either self-employed, retired, or unemployed people looking for work or students/interns. Last year, remittances from across the world crossed Sh400 billion.
The CBK survey showed that at least 16 per cent of remittances come to address needs such as the purchase of food and household goods, medical expenses (12 per cent), education expenses (11 per cent), payment of rent and household utilities (10 per cent) and clothing (6 per cent).
This month, the Retirement Benefits Authority (RBA) partnered with Enwealth Financial Services on an initiative to rope in the informal sector into the formal pension scene.
“Lack of resources is the most common reason preventing workers from contributing to pension,” Cooperatives and MSMEs Cabinet Secretary Simon Chelugui observed.
