The Salaries and Remuneration Commission (SRC) jointly convenes the Third National Wage Bill Conference (NWBC) to provide a premier interdisciplinary platform for researchers, practitioners, and educators to present and discuss the most recent innovations, trends, and concerns, as well as practical challenges encountered, and solutions adopted in the public wage bill sustainability through productivity improvement.
During the 10th Ordinary Session of the National and County Governments Coordinating Summit meeting held at State House, Nairobi on 18 December 2023, under the Chairmanship of H.E. The President, the Summit resolved (Resolution 15) that SRC, jointly with the Intergovernmental Relations Technical Committee (IGRTC) and Council of Governors (COG), should convene the NWBC, 2024.
Further, the resolution states that the national government committed to reduce its wage bill to 35 per cent of revenue in line with the provisions of the Public Finance Management Act (PFM), 2012, by 2028 and urged the county governments to align.
The Salaries and Remuneration Commission (SRC) jointly convenes the Third National Wage Bill Conference (NWBC) to provide a premier interdisciplinary platform for researchers, practitioners, and educators to present and discuss the most recent innovations, trends, and concerns, as well as practical challenges encountered, and solutions adopted in the public wage bill sustainability through productivity improvement.
During the 10th Ordinary Session of the National and County Governments Coordinating Summit meeting held at State House, Nairobi on 18 December 2023, under the Chairmanship of H.E. The President, the Summit resolved (Resolution 15) that SRC, jointly with the Intergovernmental Relations Technical Committee (IGRTC) and Council of Governors (COG), should convene the NWBC, 2024.
Further, the resolution states that the national government committed to reduce its wage bill to 35 per cent of revenue in line with the provisions of the Public Finance Management Act (PFM), 2012, by 2028 and urged the county governments to align.
Theme of the conference
Theme: Fiscal sustainability of the public wage bill through productivity.
Justification for the conference
In absolute amounts, Kenya’s public service wage bill has continued to rise in an environment of revenue and financing constraints. The current ratio of the public wage bill to total revenue is estimated at 43.54 per cent in the financial year (FY) 2022/2023, which is above the target of 35 per cent provided for in the PFM Act, 2012.
According to the International Labour Organization (ILO), 2021, on labour productivity, Kenya is ranked 151 out of 185 countries ranked in the world, and 22 out of 46 countries in Africa.
Productivity gains are a key route to sustainable economic growth. It aligns the public service in pursuit of; lower wage bill to revenue ratio, and thus, more resources available for development; enhanced cost efficiency, accountability, and efficient utilisation of public resources; improved revenue and economic growth; improved service delivery and enhanced value for money; and reduced cost of doing business, thereby, increasing the country’s competitiveness.
The NWBC will bring together stakeholders to deliberate on strategies and develop action plans for wage bill sustainability with an aim of achieving the PFM threshold of 35 per cent wage bill to revenue ratio, as guided during the Summit. Further, the NWBC will provide an opportunity for sharing experiences on best practices that will lead to productivity growth and provide approaches in addressing emerging challenges in public service wage bill sustainability.
Rationale for the conference
The public wage bill in Kenya has been growing within an environment of revenue and financial constraints, consuming a significant portion of the national budget, thus putting pressure on development and investment share of our fiscal budget. A fiscally sustainable public wage bill is an enabler to achieving the desired outcome in economic development and public services delivery.
On the contrary, high level of public wage bill leads to:
- Crowding out resources that could have been used for development priorities and enhanced social services;
- Loss of competitiveness of the economy;
- Fiscal deficits; and
- Negative impact on economic growth and employment.
The public wage bill is a factor of both the quantum, as set by SRC, and the total number of employees in the public service. While SRC has a direct role in influencing the quantum, it has limited influence on the number of employees. In this regard, the current wage bill does not match economic and revenue growth.
However, there exists a huge potential of optimising and enhancing the productivity of the public service through enhanced governance, operational efficiency, and accountability for results. Implementation of productivity improvement programmes and attendant reward and financial incentive schemes will spur performance, thus, lead to better financial results and a favourable wage bill to revenue ratio.
The public service wage bill affordability and sustainability ratios is as shown in Table 1 below:
Table 1: Public wage bill, nominal GDP, ordinary revenue, recurrent expenditure and employment trends and ratios
| Economic Indicators (Ksh “Millions”) | 2018/19 | 2019/20 | 2020/21 | 2021/22 | 2022/23* | 2023/24+ |
| 2019 | 2020 | 2021 | 2022 | 2023* | 2024+ | |
| Compensation to Employees/ Total Wage bill (Ksh Millions) | 870,130 | 917,820 | 987,780 | 1,035,160 | 1,100,972 | 1,171,086 |
| GDP Real/Constant | 8,756,946 | 8,733,060 | 9,395,942 | 9,851,329 | 10,353,747 | 10,985,325 |
| GDP Nominal/Current Price | 10,237,727 | 10,715,070 | 12,027,662 | 13,368,340 | 14,521,600 | 16,290,300 |
| Total Ordinary Revenue | 1,704,363 | 1,797,665 | 1,803,536 | 2,199,808 | 2,528,825 | 2,894,900 |
| Total Revenue (Including Grants) | 2,042,969 | 2,255,535 | 2,151,976 | 2,616,660 | 3,181,686 | 3,642,270 |
| Total Public Sector Employees | 865,200 | 884,700 | 923,000 | 937,900 | 953,041 | 968,425 |
| Wage bill to Nominal GDP (Benchmark Target: 7.5%) | 8.50 | 8.57 | 8.21 | 7.74 | 7.58 | 7.19 |
| Wage bill to Ordinary Revenue (PFM Target: 35%) | 51.05 | 51.06 | 54.77 | 47.06 | 43.54 | 40.45 |
| Growth in Wage Bill | 10.91 | 5.48 | 7.62 | 4.80 | 6.36 | 6.37 |
| Growth in Nominal GDP | 9.61 | 4.66 | 12.25 | 11.15 | 8.63 | 12.18 |
| Growth in Real GDP | 5.11 | – 0.27 | 7.59 | 4.85 | 5.10 | 6.10 |
| Growth in Ordinary Revenue | 11.96 | 5.47 | 0.33 | 21.97 | 14.96 | 14.48 |
Source: The Economic Survey 2020, 2021, 2022 and 2023; Budget Policy Statements 2016–2023 *Means estimate +means projection
Wage Bill to Revenue Ratio as per PFM Regulation
The PFM Act, 2012, and PFM Regulations, 2015, stipulate that a public institution should not spend more than 35 per cent of its total revenue on personal emoluments (PE) and benefits. The ratio is calculated using the formulae shown below.
Wage Bill (WB) to Total Revenue (TR) Ratio = ( * 100%
From Table 1, it is observed that public service wage bill, in absolute terms, hit a trillion shillings mark in the year 2022. Further, the ratio of wage bill to total ordinary revenue in Kenya was estimated at 43.54 per cent in FY 2022/2023. This is far above the target of 35 per cent stipulated in the PFM Regulations, 2015, and threatens the country’s fiscal health and future development.
The public wage bill is a factor of both the quantum, as set by SRC and payable in the public service, and the total number of employees in the payroll of the public service. While SRC has a direct role in influencing the quantum, it has had little influence on the number of employees.
Public service productivity
Productivity is the process of converting resources (inputs) into products and services (outputs) efficiently, effectively and with optimum utilisation of human, capital, and physical resources for the benefit of society, the economy, and the environment. In the face of recurrent budget austerity measures and rising citizen expectations on service delivery, there is need for the public service workforce to deliver more with less funding.
Productivity growth reflects a country’s ability to produce more output with less resources by better combining inputs on the basis of new ideas, technological innovations, and progressive business models. Monitoring and improving public service productivity is a strategic intervention for the achievement of the PFM Act target of 35 per cent wage bill to ordinary revenue ratio and thus, making available, more resources for development.
However, there are challenges in public service productivity. They include; lack of a comprehensive productivity agenda in the public service, weak coordinating mechanism of multiple actors on productivity improvement, rewards not properly linked to measurable productivity and performance, inadequate capacity around productivity measurement including computation of productivity indices and development of metrics for tracking and improving productivity, weak productivity policy and legislative framework and poor productivity culture in the public service.
The conference will provide an opportunity to discuss and develop purposeful actions towards enhancing the role of productivity in fiscal sustainability of the wage bill.
Conference objectives
The broad objective of the conference is to establish how productivity will enable the achievement of the desired public service wage bill sustainability and inform productivity management.
Specific objectives are to;
- Establish strategies and action plans for wage bill sustainability with an aim of achieving the PFM threshold of 35 per cent wage bill to revenue ratio at both the national and county level;
- Establish how productivity improvement will aid in improving the wage bill to revenue ratio;
- Identify gaps in productivity and performance frameworks that impede the achievement of fiscal sustainability of the wage bill;
- Identify policy and/or legislative interventions for improving public service productivity; and
- Draw lessons from the private sector on productivity management and establish areas of collaboration.
Conference outcome
The conference will lead to resolutions and tactical strategies that will result in improving productivity to achieve a wage bill to revenue ratio of no more the 35 per cent. In addition, anchor conference resolutions in the executive offices at both the national and county government levels for implementation.
Conference Thematic Areas
| DAY 1: MONDAY, 15 APRIL 2024 |
| Thematic Focus Areas |
| Reaping the benefits of a fiscally sustainable public service wage bill.
A highlight of the benefits accruing from a fiscally sustainable wage bill of 35%, as required by the Public Finance Management (PFM) Regulations, 2015, public wage bill trends and ratios, key drivers of public wage bill, key challenges in wage bill management and strategies to achieving 35% wage bill to revenue ratio. |
| Public service productivity as a driver of economic growth: international perspective
A case study of experiences from selected countries on the role of productivity in economic performance and draw lessons for Kenya, embedding and sustaining productivity as a core driver to economic growth in public service, productivity measurement and recognition, strategies for linking remuneration to measurable performance and productivity; and share experiences in fiscal sustainability and value for money in delivery of public services. |
| Productivity mainstreaming in the public service: Lessons and the way forward for Kenya
a) The nexus between productivity and performance, challenges and lessons learnt in productivity mainstreaming. |
| b) A synopsis of the productivity measurement model, current status and strategies to institutionalise productivity to improve public service delivery. |
| Evaluating institutions staffing level for wage bill sustainability in the national government.
A comprehensive analysis of authorised staff establishment and in-post staffing levels. |
| Optimal staffing levels for a fiscally sustainable public service wage bill at both national and county governments.
An assessment of approved staff establishments versus optimal staffing levels, technical versus non-technical staffing levels, the impact on the wage bill and the way forward. |
| Implication of devolution and transfer of functions on fiscal sustainability of public service wage bill
A highlight of the implication of devolution and transfer of functions on fiscal sustainability of wage bill and productivity in Public Service, areas of duplication of functions and strategies to address duplication of roles at both levels of government. |
| Towards prudent management of public resources:
a) An overview of the public service payroll shortcomings. An assessment of the areas of public resource payroll shortcomings that impact on public service wage bill, proposed strategies, and action plans to achieve the PFM target on wage bill to revenue ratio through effective payroll management. |
| b) Identified areas of wastage in the public wage bill
A highlight of the areas of public resource wastage, with special focus on public service wage bill and the impact on the economic performance of State corporations. |
| Leveraging technology to enhance controls accountability in the public service payroll.
An assessment of how technology adoption has impacted payroll management accountability and the benefits accruing to leveraging on technology to modernise and optimise payroll management for greater efficiency, accuracy, transparency, and accountability. |
| Caucus Discussion Topic |
| Overcoming the huddles towards 35% wage bill to revenue ratio and Strategies and Action Plans for a fiscally sustainable wage bill |
| DAY 2: TUESDAY, 16 APRIL 2024 |
| Thematic Focus Areas |
| Public service productivity as a driver of economic growth and service delivery – case of South Africa
Productivity in public service and its benefits, productivity measurement models, challenges and lessons learnt in South Africa and a comparative analysis on selected African economies. |
| Impact of productivity on organisational performance in the private sector: Lessons for the public service
A systematic overview of the drivers of productivity in the private sector and its contribution to the attainment of organizational goals. |
| Lesson learnt from productivity mainstreaming in two select State corporations.
Sharing of success stories and lesson learnt in productivity mainstreaming from two state corporations |
| Towards a transformative public service culture in Kenya: Productivity, accountability and citizen centricity
An analysis of the current status, where do we want to be, what needs to be done and way forward. Public perception on the culture, what do the citizens expect, their current experience and recommendations |
| Caucus Discussion Topic |
| Strategies and action plans for productivity improvement in the public service. |
| The ideal public service culture |
| DAY 3: WEDNESDAY, 17 APRIL 2024 |
| Thematic Focus Areas |
| Role of Leadership in Economic Transformation |
| Highlight on Strategies and Action Plans from public institutions |
Conference structure and methodology
The NWBC combines lessons learnt from the implementation of the Resolutions of the NWBC, 2019, and addresses challenges that specifically relate to enhanced productivity across the public service for the fiscal sustainability of the public wage bill.
The conference will discuss the challenges facing public service productivity and develop appropriate resolutions around policy and legislative interventions, including the potential re-organisation of value chains, digitalisation, and enabling conditions for productive investments for sustainable development, economic growth, and wage bill.
The NWBC will run for three days with presentation of conference papers aligned to various thematic areas, from approved subject experts and institutions, followed by panel discussions.
Post-conference activities will include;
- Adoption of Resolutions by the Summit;
- Development of productivity improvement strategies for wage bill sustainability;
- Implementation by the Technical and Steering Committees; and
- Publishing and dissemination of conference reports.
The conference will be facilitated by experienced resource persons sourced from both local and international levels.
Conference participants
The NWBC will bring together national and county governments; international organisations; academics; experts in productivity, wage bill management and productivity; members of the civil society organisations, non-governmental organisations and faith based organisations; business community; private sector; development partners, youth groups; special interest groups, public, and the media.
Conference Administration
The successful implementation of the conference requires an intergovernmental and multi-agency approach and support by requisite experts.
Co-convenors of the conference include:
- Salaries and Remuneration Commission
- Public Service Commission
- Council of Governors
- Intergovernmental Relations Technical Committee
- Ministry of Public Service, Performance and Delivery Management
[1] Public wage bill is defined as the total remuneration and benefits paid to public employees by the public employing institutions for work performed.
[2] Total ordinary revenue is the summation of revenues classified as Taxes on income, profits, and capital gains; Value Added Tax (VAT); Taxes on other goods and services; Taxes on international trade transactions and other non-tax revenues as collected by KRA.