The Federation of Kenya Employers (FKE) is urging the government to lower the housing levy deduction rate to 0.5%, zero-rate VAT on essential food items, and base statutory deductions on employees’ basic salaries instead of gross pay. FKE believes these reforms will improve workers’ welfare and ensure business sustainability amid rising living costs.
FKE also wants tax relief bands revised from Sh24,000 to Sh36,000 and has asked employers to comply with a 6% wage increase, backdated to November 2024. The federation argues that these measures would increase workers’ disposable income and enhance competitiveness for Kenyan businesses.
Currently, employees and employers each contribute 1.5% of gross pay to the housing levy. Other statutory deductions—like PAYE, NHIF, and NSSF—are also based on gross pay. FKE says pegging these deductions to basic pay would increase take-home earnings.
Concerns have also been raised over proposed changes in the 2025 Finance Bill that would reclassify some items from zero-rated to VAT-exempt. This change would prevent producers from reclaiming VAT on inputs, likely raising costs for items like medicine, milk, sugar, mobile phones, and solar products.
FKE supports ratification of ILO Conventions 189 and 190, but stresses that Kenya must follow proper legal procedures under existing international frameworks before implementation.
Lastly, the federation criticized COTU-Kenya for excluding employers from this year’s Labour Day celebrations and called for a more stable and pro-business tax framework to boost production, attract investment, and create jobs.
