The Federation of Kenya Employers (FKE) has urged the government to cut statutory deductions and taxes affecting both public and private sector employees, warning that high levies are eroding salaries and discouraging formal employment.
FKE Chief Executive Officer Jacqueline Mugo, speaking on Tuesday, March 18, said the combined burden of taxes, mandatory deductions, and rising living costs is squeezing workers’ take-home pay. “The current structure is making formal jobs less attractive, with many Kenyans turning to informal work, freelancing, or self-employment to survive,” she said.
Citing a recent FKE survey, Mugo revealed that overall employment has dropped by about 12 per cent, with the most significant reductions seen in manufacturing, retail, hospitality, transport, and financial services. Employers attribute the decline to rising operational costs, including energy prices, wage pressures, and complex regulatory requirements.
“The heavy tax burden and compliance obligations are straining businesses, forcing some to freeze hiring or restructure, and undermining competitiveness,” Mugo added. The federation called for a comprehensive review of payslip structures to simplify deductions, reduce the tax burden, and increase workers’ disposable income.
The demand comes shortly after Treasury Cabinet Secretary John Mbadi announced plans to exempt employees earning below Ksh30,000 from Pay As You Earn (PAYE) and reduce PAYE by 5 per cent for those earning between Ksh30,000 and Ksh50,000. The reforms are expected to be presented to Parliament through the Tax Laws Amendment Bill ahead of the Finance Bill 2026.
Mugo emphasized that broader tax relief, policy stability, improved access to finance, and better alignment between education and industry are critical for restoring business confidence and supporting job creation in Kenya.