Firms going slow on permanent hires in cost-cutting measures

This emerges in a period when Kenya’s soft economy has made firms reluctant to step up hiring and increase wages to cover inflation.

The trend of firms going slow on permanent hires has seen the share of casual workers in formal office and factory jobs rise gradually from 15.2 percent in 2020 to 17.4 percent last year.

A casual worker, according to the Employment Act 2007, is an individual whose terms of engagement involve pay at the end of the day and is not engaged for a period beyond twenty-four hours at a particular time.

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Hired on short-term contracts, casual workers fill the production quota gaps by working long hours under low wages, often without pension, health insurance, or access to loan facilities, lowering labour costs for employers.

Pension and housing levies have recently emerged as key drivers of operational costs in the wake of additional obligations on workers for the two items.

The affordable housing law requires employers in the formal and informal sectors to deduct 1.5 percent of gross monthly pay to workers and match the contributions towards the housing levy.

Contributions to the National Social Security Fund (NSSF) have also been increased twice in under two years.

Salary rises in 2024 lagged inflation or cost of living measures for the fifth year in a row, weakening workers’ purchasing power and their standards of living.

Inflation-adjusted real wages in Kenya continued to drop after recording a decline of 0.3 percent last year, says the KNBS, as employers remain reluctant to offer bigger pay rises to cover for rising cost of commodities.

This came in a year when the economy grew at the slowest pace since the Coronavirus pandemic four years ago, hobbled by floods that damaged crops, costly bank loans and disruptions that followed anti-government protests against the Finance Bill.