Federation of Employers Calls for Immediate Payslips Review as Employment Drops 12 Per Cent

The Federation of Kenya Employers (FKE) is now calling for the immediate reduction in statutory deductions and other taxes imposed by the government on both public and private employees.

FKE, through its Chief Executive Officer, Jacqueline Mugo, on Tuesday, March 18, said high taxes, statutory deductions, and rising living costs are significantly reducing salaries, making formal jobs less attractive.

She noted that as a result of the high taxes, most Kenyans had begun turning to informal work such as freelancing and self-employment.

“The combined burden of taxation, statutory deductions, and compliance obligations is squeezing businesses, reducing workers’ take-home pay, and weakening competitiveness,” Mugo said.

According to the Federation, a recent survey showed employment had dropped by about 12 per cent, with hiring reduction mostly seen in manufacturing, retail, hospitality, transport, and financial services.

Employers attribute this decline to increasing operational costs, including high energy prices, wage pressures, and complex regulatory requirements.

FKE warned that the current payslip structure was unsustainable, arguing that excessive deductions are immensely hurting both workers and businesses

“Employers are under growing pressure from high taxes, rising energy costs, wage demands, and complex regulatory requirements, which are increasing the cost of doing business and forcing many firms to freeze hiring or restructure,” she added.

While lamenting over excessive taxation, the employers called for a comprehensive payslip review aimed at reducing the tax burden, simplifying deductions, and increasing employees’ income.

“Employers are calling for tax reduction, policy stability, improved access to finance, and stronger alignment between education and industry to restore business confidence and support job creation,” Mugo noted.

Govt to Introduce PAYE Relief 

The demand comes weeks after Treasury Cabinet Secretary John Mbadi announced the government’s intention to remove Pay as You Earn deductions for Kenyans earning below Ksh30,000.

Speaking on February 2, 2026, Mnadi said the Ministry would present the Tax Laws Amendment Bill before Parliament for approval of the reforms ahead of the publication of the Finance Bill 2026.

“We have agreed with the President that low-income earners in this country should be given a reprieve. He has directed me to take it to Parliament. I don’t think there is any MP who will oppose that,” the CS said.

“We have said the government should come for me and leave that person. Anybody earning Ksh30,000 and below in Kenya should not pay PAYE. You pay zero,” he added.

He stated that CS that the Bill will also include a 5 per cent PAYE reduction proposal for Kenyans earning between Ksh30,000 and Ksh50,000.