The Federation of Kenya Employers (FKE) is calling on the government to take a fresh look at statutory deductions, especially the Housing Levy, which is putting a significant strain on Kenyans’ finances.
The FKE is suggesting that the government should consider setting a limit on how long this levy is applied, as it’s having a noticeable impact on employees’ take-home pay.
At the FKE’s annual meeting in Kisumu, CEO Jacqueline Mugo pointed out the challenges these deductions pose in complying with the 2007 Employment Act. This law states that deductions shouldn’t exceed two-thirds of an employee’s gross salary.
Mugo explained, “Often, employers find themselves needing to help employees by removing some non-statutory deductions. With the current deduction levels, businesses are under immense pressure, and employees are left with little disposable income.”
While acknowledging the government’s efforts to address the housing shortage, Mugo emphasized the necessity of having a conversation with the government to reconsider the levy. “There’s an urgent need for a national dialogue on taxation and wages. We need to explore if the level of contribution can be reviewed and if a cap can be placed on how long these payments are required,” Mugo urged.
Currently, the Affordable Housing Levy requires both employees and employers to contribute 1.5% of the employee’s monthly salary. This also extends to self-employed individuals, who must contribute 1.5% of their gross income. Although President William Ruto highlights the levy’s importance in funding affordable housing projects, its reception among Kenyans has been mixed.
Employers are keen on meeting statutory obligations, but they also stress the need for a balance between taxation, business sustainability, and employee welfare.
