The Federation of Kenya Employers (FKE) has called for a review of PAYE bands and a reduction in the tax burden on workers, warning that high taxation is shrinking take-home pay and worsening pressure on businesses ahead of the 2027 General Election.

🇰🇪 Breaking It Down

FKE Executive Director Jacqueline Mugo, while speaking during a roundtable interview on NTV on Monday, said employers were increasingly concerned about the state of the labour market, noting that about one million young people enter the job market every year while the formal economy lacks the capacity to absorb them.

Mugo said a significant number of young Kenyans are instead forced into the informal sector, placing additional pressure on businesses while reducing the country’s formal employment base.

At the same time, the employers' federation boss said the high level of taxation was also creating dissatisfaction among workers, with employees taking home less money despite rising living costs.

📌 What You Need to Know

According to Mugo, FKE has proposed broadening PAYE bands and reducing high tax rates to allow workers to retain more of their earnings.

“We have made proposals for the government to broaden the PAYE bands, reduce high levels of taxation so that people can take home more in terms of money and pay,” Mugo said, arguing that increased disposable income would also benefit businesses by stimulating demand.

She warned that the pressure on employers was becoming increasingly difficult to manage, with some businesses struggling to comply with existing rules on remuneration because of the high cost of employment.

The call was backed by the Retail Trade Association of Kenya (RETRAK), which linked weak consumer spending directly to sluggish production and job creation.

RETRAK representative Wambui Mbarire said manufacturers could not expand production and create more jobs unless Kenyans had sufficient disposable income to purchase goods.

She cited the impact of statutory deductions, including NSSF contributions, the Social Health Authority (SHA) levy, and the Housing Levy, arguing that workers earning the same salaries as several years ago are now effectively poorer because of inflation and additional deductions.

📰 Source: Kenyans.co.ke