Drastic reductions in public service allowances

Salaries and Remuneration Commission (SRC) Chairperson Lyn Mengich during a press conference in Nairobi on Thursday, October 07 2021, on the allowances Policy guideline for the public service [David Njaaga, Standard]

An estimated 900,000 public servants should brave for tougher economic times following a government decision to implement new austerity measures which will see drastic reduction of their allowances.

Consequently, Salaries and Remuneration Commission has initiated a process of setting new policy guidelines which will harmonise and rationalise allowances for the entire public service to end disparities which currently have seen some workers take home multiple allowances, more than 60 per cent of their salaries.

Yesterday, SRC chairperson Lynn Mengich instructed heads of all public service institutions to submit data on allowances by November 30 of this year so that the commission can review and formulate new structures.

It is expected that by April next year a new regime of salary allowances will be in place.

Mengich said, "the commission will then review and issue advise on allowances to the individual public service institutions by April 29, 2022 following which the compliance checks to enhance adherence to the police guidelines will be conducted in July 2022."

Harmonisation of allowances is part of a raft of measures agreed with the International Monetary Fund (IMF) in April this year as condition to grant the government US$2.34 billion (Sh234 billion).

The government committed to reduce debt vulnerabilities through a multiyear fiscal consolidation effort centred on raising tax revenues and controlling
spending within government.

Other key areas of focus include addressing weaknesses in some state-owned enterprises.

According to SRC, the new policy guidelines are aimed at providing a structured approach to streamline the management and administration of allowances, so as to improve transparency, accountability, equity and fairness in payment of allowances across the public service.

SRC explained that most of the allowances were set prior to 2010 Constitution and before establishment of the commission, which meant that different entities had their own policies on allowances that lead to widespread disparities.

"We must be equitable and fair with the new policy guidelines unlike the way it has been, where some employees get more salaries than others due to allowances, yet they are doing the same job,’’ said Ms Mengich.

She added that the proportion of allowances to gross salary ranges between 43 per cent to 259 per cent of the gross salary according to the 2019 SRC’s ‘Report on Streamlining Allowances Payable in the Public Service’, leading to a lower percentage of basic salary to gross salary in the public service.

Further, SRC said similar allowances are paid as a percentage of basic salary, while others are paid in absolute amounts, resulting in additional distortions in remuneration.

To correct this, SRC commissioner, Kennedy Monyonjo, explained, “There will be streamlining of allowances to progressively achieve a proportion of basic salary to gross salary that is no less than 60 per cent, while taking into account the impact on pension and allowances shall be paid in absolute amounts and not as percentage of the basic salary, unless where explicitly advised by SRC.’’ 

In the envisaged new categories, the allowances will be classified into house, commuter, job-related, task-related and labour market adjustment allowances. There will also be facilitative allowances which include per diems.

To avoid duplication, redundancy, disparities and varied eligibility criteria, allowances payable in the public service, SRC said some will be merged and renamed retained or abolished.

“Once we classify the allowances, we shall then know which ones to collapse or retain within those five,'' added Mengich.

Data from SRC indicate that for the 2019/2020 financial year, the total wage bill was 51.7 percent of ordinary revenue raised.

In addition, the wage bill to gross domestic product (GDP) ratio reached 8.3 percent in the 2019/2020 financial year, which is above the set target of 7.5 percent.

A 2019 study by SRC identified 247 allowances paid to public officers, which accounted for 48 per cent of the total wage bill as of 2019.

Up to this point, Mengich said it was not possible to determine how much money will be saved but this will become clearer once the new policy guidelines are operational.

But SRC assured that the new policy guidelines will not distort the relative worth of a job, thus, allowances shall not be paid for purposes that are already compensated in the salary.

At the same time, SRC explained that, ‘‘Allowances shall not be used for purposes of computing pension and gratuity,’’ adding that a policy guideline will guide on pensionable pay and employer contribution levels in the public service.

Asked about plans by MCAs to be granted house allowance, Mengich responded, ''The setting of house allowance is the exclusive mandate of SRC as provided in Article 230(4) of the Constitution and not he MCAs. As at the moment, the Bill is not passed but if it will be passed, the Commission will take the necessary steps,'' explained Mengich. 

Graphics

The International Monetary Fund (IMF) granted Kenya US$2.34 billion in April this year.

A 2019 study by SRC identified 247 allowances paid to public officers, which accounted for 48 per cent of the total wage bill as of 2019.

The entire public service workforce is 884,000

In the 2019/2020 financial year, the total wage bill was 51.7 percent of ordinary revenue raised.

The wage bill to gross domestic product (GDP) ratio reached 8.3 percent in the 2019/2020 financial year, which is above the set target of 7.5 percent.

Categories of allowances

1. House allowances
2. Job related allowance
3. Task related
4. Labour market adjustment
5. Facilitative allowance
6. Commuter Allowance