The Federation of Kenya Employers (FKE) is urging the government to revise key taxation and statutory policies in a bid to cushion workers and foster a stable, pro-growth business environment. Among its proposals, FKE wants the housing levy reduced from the current 1.5% to 0.5% and pegged to employees’ basic pay rather than gross income.
This comes amid concerns that the rising cost of statutory deductions, combined with recent VAT policy shifts, is squeezing both employee take-home pay and business margins. Currently, the Housing Levy requires a 1.5% deduction from both employers and employees, totaling 3% of gross pay. FKE argues that linking this and other deductions such as PAYE, NHIF, and NSSF to basic pay would provide financial relief to workers.
At the same time, the lobby group is calling for the zero-rating of VAT on basic food items to prevent price hikes as proposed changes in the 2025 draft Finance Bill threaten to shift many goods from zero-rated to exempt status. This reclassification would deny manufacturers VAT refunds on input costs, prompting them to increase product prices to cover losses.
Items likely to be affected include sugar, milk, medicine, mobile phones, solar equipment, and animal feed. FKE warns that such price surges would heighten the cost of living, hurting low-income households and reducing purchasing power.
The federation is also advocating for a revision of tax relief bands from KSh 24,000 to KSh 36,000 to reflect current economic realities. In the same spirit, FKE has directed its members to fully implement the 6% wage increase gazetted last year, backdating payments to November 2024.
FKE CEO Jacqueline Mugo emphasized the need for a predictable, simple, and business-friendly tax framework that encourages local production, boosts competitiveness, and drives job creation. She also underscored the importance of proper legal processes in ratifying international labour conventions, calling for full adherence to treaty procedures.
With the business community calling for a stable policy environment, FKE maintains that empowering local industries and increasing disposable income are key to sustainable economic growth.
