Kenya’s Salaries and Remuneration Commission (SRC) has reported significant progress in its efforts to manage the country’s public wage bill, a critical component of national fiscal policy. Over the past six years, the SRC has implemented strategic interventions that have resulted in a notable reduction in the wage bill-to-revenue ratio, an essential indicator of fiscal sustainability. According to the SRC’s end-of-term report, the ratio has dropped from 51.54% in the 2017/2018 financial year to 46.64% in 2022/2023. The Commission projects a further decline to 39.22% by the end of the 2023/2024 financial year.
This achievement is significant, given the overall increase in the public wage bill in absolute terms. The wage bill rose from KSh 785 billion in the 2017/2018 financial year to KSh 1.035 trillion in 2021/2022 and is expected to reach KSh 1.17 trillion in 2023/2024. This increase is primarily driven by the expansion of employment in essential sectors such as education, health, and security. Despite this growth, the SRC has managed to keep the wage bill-to-revenue ratio on a downward trajectory through targeted interventions.
One of the key strategies employed by the SRC to achieve this reduction has been the implementation of fiscally sustainable salary structures across the public sector. By freezing salary increments for over 90% of State corporations and Constitutional Commissions during the second and third review cycles, the SRC was able to curb the rapid growth of the wage bill. However, to cushion public officers against the rising cost of living, the SRC allowed an average 3% annual automatic increment within the existing salary structures.
The SRC’s approach to wage bill management also involved streamlining allowances payable to public officers. In 2019, the SRC conducted a comprehensive study that identified 247 different allowances being paid across the public service, accounting for 48% of the total wage bill. The introduction of the Allowances Policy Framework led to the abolition of certain allowances, resulting in annual savings of approximately KSh 11.2 billion.
Another critical aspect of the SRC’s strategy has been its advisory role on salary reviews, collective bargaining negotiations, bonuses, and other benefits. Between the 2020/2021 and 2023/2024 financial years, the SRC received requests amounting to KSh 150.89 billion. However, through its advice, the Commission managed to reduce this amount to KSh 45.1 billion, freeing up KSh 105.7 billion for other government priorities.
Looking ahead, the SRC aims to continue its efforts to ensure that Kenya’s public wage bill remains fiscally sustainable. The full implementation of resolutions from the 3rd National Wage Bill Conference, held in 2024, is expected to play a crucial role in this endeavor. The Conference adopted 10 resolutions aimed at achieving a wage bill-to-revenue ratio that will not exceed 35% by 2028, further solidifying the government’s commitment to prudent fiscal management.
The SRC’s end-of-term report highlights the importance of maintaining fiscal discipline in managing the public wage bill. By balancing the need to attract and retain skilled public officers with the imperative of fiscal sustainability, the SRC has demonstrated that it is possible to achieve both economic growth and responsible wage bill management. As the Commission continues to implement its strategic interventions, Kenya is well-positioned to realize its fiscal goals and ensure the efficient use of public resources.
