Labour Day: Financial strain as Kenyan workers struggle with higher deductions

Kenyan workers are facing a harsh reality this Labour Day, as increased deductions from their salaries, rising job cuts, and higher living costs continue to take a toll.

The challenges are compounded by inflation, which has further eroded their earnings, making it harder for many to meet basic needs.

Since February, the National Social Security Fund (NSSF) has raised contribution rates for workers earning Sh36,000 and above, following the implementation of the NSSF Act, 2013.

The increase has been particularly steep for those earning Sh72,000 and above, whose deductions have doubled.

For instance, a worker earning Sh50,000 now takes home Sh39,029, down from Sh39,617, while someone earning a gross salary of Sh100,000 now receives Sh71,617, a reduction of Sh1,512.

The impact of these higher deductions is felt across Kenya's formal workforce, with over two million workers affected by the changes.

These new deductions add to the growing financial burden workers are already facing due to inflation and rising business costs.

In 2023, the real average earnings per employee in Kenya fell by 4.1% after factoring in inflation, exacerbating the economic strain.

As if that weren’t enough, job cuts have also been on the rise.

According to a Central Bank survey, 42% of companies laid off casual workers last year, and 31 % dismissed workers on contract.

Non-bank companies have been particularly hard-hit, with a significant reduction in their workforce.

In light of these difficulties, many companies have cited the tough economic environment as the reason for job cuts.

Ola Energy, for example, announced in March that it was implementing a redundancy program due to challenges in maintaining its fixed costs.

Similarly, WPP Scangroup laid off 102 workers in 2024 through a voluntary exit program to address business difficulties.

The struggles faced by businesses are closely tied to weak consumer demand, as inflation continues to drive up the prices of goods and services.

Inflation has averaged 3.87% since last year, and the rate has risen even further in recent months, from 2.72% in October to 4.1% in April 2025.

This increase has only worsened the purchasing power of Kenyan workers.

Over the past five years, the real wages of public sector workers have decreased by 18.6%, while those in the private sector saw a drop of 8.9%.

These reductions reflect the harsh reality of living in a country where inflation outpaces wage growth.

Despite the increasing hardship, the government has seen a rise in revenue from the additional salary deductions.

According to the NSSF’s Managing Trustee, David Koross, an extra Sh220 billion has been collected through the increased contributions since 2023.

The Pay-As-You-Earn (PAYE) tax collections also surged, rising from Sh495 billion in 2022/23 to Sh555 billion in 2023/24.

This increase is partly due to the Finance Act, 2023, which raised the tax rate for those earning over Sh500,000 a month.

In addition, the new housing levy, which deducts 1.5% of workers' salaries, has generated Sh86 billion for the government as of December 2024.

While these increased revenues may be a lifeline for the government, they have placed a heavier burden on workers who are already struggling to make ends meet.

As the country observes Labour Day, workers are not just marking the day with celebration, but with a sense of frustration over the financial pressures they face.