Job Losses Imminent as Ruto Taxes Prompt Employer Layoffs
Employers are preparing for increased expenses when the provisions of the Finance Bill of 2023 go into effect on 1 July, and job cuts are imminent due to worker demands for higher pay.
Businesses anticipate that the doubling of the value-added tax (VAT) on fuel products will increase their operating expenses, as it will increase energy, transportation, and production costs.
They also anticipate that the implementation of a 1.5% housing levy on workers’ salaries, to which they will contribute the same amount, will increase wage costs.
“The (housing) levy will increase wage costs by 1.5% and reduce employees’ take-home pay by the same amount. The Federation of Kenyan Employers (FKE) predicts a rise in agitation from workers demanding wage increases.
The federation stated that it hopes the government will implement the housing program effectively “so that the benefits to the economy in terms of jobs, increased production, and money circulation are realized.”
However, the Kenya Association of Manufacturers (KAM), which represents the country’s manufacturers, is concerned that the manufacturing sector could lose at least 16,000 jobs due to the introduction of the housing levy and additional wage costs that will make it difficult for employers to maintain employment.
“When all factors are considered, the cost of maintaining employees rises by up to five percent. Some of our textile companies employ 15,000 individuals, so the impact of what we consider to be marginal measures will be substantial. It will force companies to rework their numbers, and in some cases, companies may begin reducing their workforce to manage their headcount, according to Anthony Mwangi, CEO of KAM.
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The manufacturing sector could lose up to five percent of the 329,000 jobs it created last year, according to his estimation.
Employers are also concerned that once fuel prices increase as a result of the doubling of the VAT on fuel to 16%, the cost of doing business will increase further, deteriorating an already poor business climate.
In addition to influencing the price of energy, the cost of transporting goods and raw materials, and the price of manufacturing goods, high fuel prices also affect the price of other commodities.
Employers and all Kenyans desire a significant reduction in energy prices, including the price of gasoline at the pump. The government must work on this issue. We hope that the government will examine other factors that are pushing up the pump price and ensure that the increase in the value-added tax will not result in a rise in the price of gasoline at the pump. The rise in energy prices is extremely detrimental to the economy, according to FKE.
The association stated that it has engaged the government on various provisions of the Finance Bill of 2023 “to ensure that we obtain policy directives that are beneficial to all parties.”
FKE stated, “We stand for social dialogue, and we hope that we will continue to engage until we have a business environment that encourages the growth of businesses to generate jobs and wealth for our nation.”
Job Losses Imminent as Ruto Taxes Prompt Employer Layoffs
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