Bigger salaries not the answer, says FKE

November 26, 2011 7:44 am

, NAIROBI, Kenya, Nov 26 – The demand for salary increments will be virtually impossible to meet, the Federation of Kenya (FKE) warns, if the high inflation persists.

Mounting financial pressure has spurred strikes from the energy; airline and medical sectors after inflation hit an all-time high of 18.91 percent last month, affecting everything from fuel prices to food costs.

However, FKE Executive Director Jacqueline Mugo said that the current economic climate cannot afford higher salaries and that the rising inflation would continue for awhile.

“The answer does not lie in increasing salaries, just as a knee jerk reaction, because it doesn’t solve the problem. We should address the cost of basic commodities – that’s where the issue is and the government needs to address that,” she said.

Local enterprises cope with some of the highest labour costs in the region registering between 50 to 70 percent of total costs.

Mugo said on Friday that this has put more pressure on the productivity of locally operating companies that are trying to remain competitive in the region.

“That is something we need to look at. Where are we more expensive than other countries in the region? Where do we need to freeze salaries? In addressing competitiveness we need to ask tough questions, not saying Kenya should not pay competitive rates,” she noted.

In general, the cost of employment is going up due to indirect costs and benefits like transport, meals and medical cover that add up to 30 percent on the basic pay.

Though Mugo would not acknowledge future job cuts, she did allude to salary freezes or salary cuts to help companies retain employees and keep up production.

With the upcoming election and devolution process expected to put more of a burden on the economy in the coming year, the private sector is bracing itself against higher levies.

“Nobody has really figured how much it’s going to cost neither have we factored it into the plan for next year. We need a plan that assesses the capacity of a county to raise money for its operations without adding strain to the cost of doing business,” she said.

Ultimately, Mugo said the devolution process needs to translate into the formation of new business in the counties and contribute to good economic growth.


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