Govt Orders Tax Waiver on Payments of Bonuses, Overtime and Retirement Benefits

Kenya’s low-income earners will have their bonuses, overtime and retirement incomes boosted if a tax waiver on them is implemented.

President Uhuru Kenyatta issued the order on Friday when he officially opened the 2016 African Employers’ Summit in Naivaisha.

The President said his directive was part of the conscious drive to continually strive to improve the living standards of Kenyans and has instructed the National Treasury to include in the 2016 Finance Bill sustainable measures for its implementation.

The President, however, said that the taxation adjustment should be done in a manner that does not cause the cost of employment to increase.

“This will be done in a manner that does not place an additional burden on employers, or increase the cost of employment.”

During Labour Day, the Nairobi Senator Mike Sonko had said he will draft a bill and table it before The Senate to ensure that bonuses and allowances paid to employees are not taxed.

The Nairobi Senator says it is wrong for such allowances to be subjected to taxes.

“It is wrong for such allowances to be subjected to taxes. Bonuses and overtime allowances should be tax-free. We should not overtax our workers because they do a lot in building the nation,” he said on his FaceBook page.

The move by the President is cautionary after the government failed to announce an increase in the minimum wage proposed by the Central Organisation of Trade Unions (Cotu).

However, the government said it was willing to engage with all the trade unions by embracing collective bargain. It further stated that, through the National Youth Service (NYS) program had been re-launched to equip the youth with relevant skills for a meaningful employment and it will create an environment that is conducive for them to earn a living.

Through, Phyllis Kandie, the Cabinet Secretary Ministry of Labour and East African Community, the government said the passage of the National Employment Authority Bill (National Assembly Bill No. 08 of 2015 will provide a legal framework for the State to take affirmative measures to ensure youth and marginalized groups access employment and economic empowerment.

Subsequently, at the Employers Summit, the President urged workers’ group COTU and the Federation of Kenyan Employers (FKE) to actualize the creation of a Centre to promote productivity.  “I urge engagement between my administration, the FKE and COTU, to consider and actualize the creation of a Center dedicated to promoting productivity — much along the lines of one implemented by the Japanese Government,” said the Head of State.

He also urged the  private sector to do all it can to mitigate the youth unemployment crisis.

“Together, let us mentor, equip, train and support youth, so that they can take up their roles as creators of wealth and value,” said the President.

Last year, the government increased the minimum wage by 12 per cent for the country’s lowest paid workers.

The gazetted monthly average minimum wage in urban areas, excluding housing allowance, is between Sh12, 136 (all other towns) and Sh15, 357 (Nairobi, Mombasa, Kisumu). The average pay set for the agricultural industry, is much lower at Sh6, 054 a month, with unskilled workers getting Sh4, 854.

Read: Minimum Wage Increase Opposed as Kenya Sets to Mark 2016 Labour Day

With a 12 per cent rise, the average minimum wages in the agricultural industry is currently Sh6, 780, with unskilled labourers — the lowest paid — getting Sh5, 436. Average minimum wages in urban areas are between Sh13, 592 and Sh17, 199.