Money, Employees & Me: 12% Labour Day Wage Increase is Causing Trouble

If I can help it, I’d hardly ever miss national day celebrations. The parades are intriguing. Military parades - not so much. They are rehearsed to near-perfection. And, that routine has rarely changed over the years. A military match from when I was 15, is pretty much the same in my 30’s.

Let’s talk about Labour Day celebrations. Now, instead of the military - we have hordes - no, processions of workers from different sectors of the industry. It’s not marching, per se. There’s a bit of shuttling, and wobbling. The costumes are always ill-fitting, like the tailor had a few bad days.

The 2022 Labour Day celebrations weren’t different. I was there, let history take note. 

The presidential speech stole the limelight. In between political anecdotes and jabs - the Head of State sneaked in a decree that visibly excited the crowd. 

A “12% increase in the minimum wage” effective immediately.

It didn’t quite register, till operations resumed at my small agribusiness farm in the village. It’s small, growing to a medium enterprise. There’s four dairy cows, a fledgling herd of pigs, a modest flock of broilers and mid-sized layers. We practice seasonal maize, beans and sunflower farming on a leased parcel of land.

I didn’t know that decree would wreak havoc.

It sparked a silent go-slow protest. I have four employees - usually quite chatty. Now, it looked like someone had dumped a wet blanket over them. A cursory investigation led to a discussion on minimum wage. 

The Basics of the Minimum Wage

In Kenya the civil service is split into ‘Job Groups’. The classification depends on an employee’s certification, skills and level of education. In 2011, the Salaries and Remuneration Commission (SRC) was formed under the Salaries and Remuneration Act of 2011 to ensure equity and fairness in public service.

If you work for the government, the SRC basically places you in a particular job group - and decides how much you are paid as salary, perks and allowances.

Job Group B1 is the lowest, with the lowest wages and allowances. Job Group E4 is the highest, with high basic salaries and attractive perks.

Job Group B1 aggregates low-skilled labourers. The SRC, and in on-boarding documents - they’d be referred to as Officer III, Support Staff, Operator III, and Attendant III. The salary scale here ranges from Ksh11,553 to Ksh14,442.

That is, up until May 2022 - when the Head of State issued a decree that the minimum wage has been raised by 12%. That means, the lowest paid at Ksh11,553 gets a 12% addition to now earn Ksh12,939. The highest paid in Job Group B1 gets an additional Ksh1,733 to earn Ksh16,175. 

I’d assume that casual labourers in my farm would fall in this job group. It gets complicated. They often do semi-specialist jobs at the farm in between casual jobs, but are quite skilled in farm and animal husbandry. The enterprise employs four men on a permanent basis. 

Two of my men have college degrees. The others lack conventional schooling but more than make it up with priceless hands-on experience in farm operations. Over time, you don’t really need a college degree to safely castrate piglets. Keen observing and practice leads to perfection.

How do I make it worth their while at the farm in terms of remuneration, and - still maintain farm overheads at a manageable level?

A Brief Overview of the Job Group Hierarchy

Job group B1: Low-skilled labourers. These are Officer III, Support Staff, Operator III, and Attendant III. The salary scale from Ksh11,553 to Ksh14,442.

Job Group B2: Skilled and lower supervisory staff. The salary scale is between Ksh14,007 to Ksh17,508.

Job group B3: Similar skill set. Basic pay is between Ksh16,777 to Ksh20,972.

Job group B4: similar skill set. Basic pay between Ksh19,859 and Ksh24,823 (formerly Group G).

Job group B5: These are top specialists and senior specialists (heads of institutions). Salary ranges between Ksh23,176 and Kh28,970.

Job group C1: Skills vary from tech to managerial, bigger salary ranging from Ksh28,970 to Ksh39,110.

Job group C2: This category earns between Ksh36,411 and Ksh47,373 (formerly Group K).

Job group C3: Employees are usually absorbed after some in-house training. Take home pay is between Ksh44,898 and Sh56,326.

Job group C4: Longer experience and higher academic citations. This grade rakes in a salary of between Ksh54,532 and Ksh68,165.

Job Group C5: Higher skill sets. A salary scale ranging from Ksh64,919 to Ksh81,148.

Job Group D1: Features employees in entry-level management positions. Pay is between Ksh81,148 - Ksh109,550.

Job group D2: This grade earns between Ksh97,184 and Ksh130,226. It’s the 11 in the grading ladder. 

Job Group D3: It’s entirely managerial grade. The salary ranges between Ksh114,334 - Ksh152,064.

Job Group D4: Middle or high-level management, usually highly skilled. Earns a salary range from Ksh132,178 to Ksh174,425.

Job Group D5: The pay is between Ksh150,202 and Ksh198,267.

Job group E1: The 3r highest group. Employees enjoy a salary between Ksh198,267 and Ksh257,747.

Job group E2: It’s the 2r highest-paid grade, salary scale between Ksh221,508 and Sh282,954.

Job group E4: A basic salary between Ksh292,765 and Sh576,120, E4 holds the top cream - highly skilled and highly specialized, with multiple academic qualifications and long experience racked up over a long career. 

The Employee-Money Situation at the Farm

The senior-most employee earns Ksh9,000 every month, lives within the compound. Everything is catered for, and acts as a foreman. That translates to a daily fee of Ksh300. The other employees are ‘day-scholars’ - live in their homes. They draw a Ksh7,500 - and only lunch is provided. That means, they are entitled to a daily fee of Ksh250.

This arrangement is one year old.

A liter of cooking oil retails at Ksh360, as at May 2020. To refill a 6kg gas cylinder, you need Ksh1500. The price of charcoal has sky-rocketed from Ksh1,000 to almost Ksh1,800 per sack. The business depends on the price of milk, to meet the farm’s overheads.

Curiously, while everything has shot up, the price of milk still oscillates between Ksh38 to Ksh42 per liter. The math doesn't add up.

If I factor in an increase in wages, I’ll make losses. Or, I would be forced to reduce the number of employees. 

Suggestions: Ways to cushion low-income earners in a small enterprise

I hold a crisis meeting. I tag low profit margins in the business. To mitigate the farm’s inability to increase wages, ask for suggestions.

• Farm Produce

The employees would have access to farm produce at baseline prices, for their domestic use. This means, they’d be free to purchase milk, eggs and seasonal produce at low prices. Besides, the farm’s kitchen garden would be a group project, for a free supply of vegetables.

• An ‘Employee Emergency Fund’

The employees will forfeit a predetermined deduction from their salaries. This will be pooled to a central employee account at a local Sacco to act as a buffer whenever an emergency case arises to a member. The account would work on the Sacco share system. Members would enjoy annual dividends, access to loans and free to withdraw when they cease to be an employee.

WRAPPING UP

This is a personal narrative - to a fledgling, small agribusiness enterprise. However, the challenges and lessons generally cut across privately-owned small and medium enterprises. This category’s cash flow heavily depends on the mechanics of trade. How much is the monthly income versus the monthly overheads?