Teachers and government employees will lose 3% of their gross salaries this month.

1.5% of the gross salary of teachers, government employees, and other workers will go toward the housing fund.

Up until July 1, 2023, the tax will be retroactive. Employers will donate the same amount on behalf of their employees.

The taxman’s instruction to businesses to use gross pay when assessing what to deduct from employee wages as a housing charge highlights the hidden cost to employees of the contentious tax that takes effect this month.

Human resource departments have been astonished by the Kenya Revenue Authority’s (KRA) new requirement that allowances given to employees, such as hardship, commuter, etc., be included when making monthly computations.

The allowances were not included in the earlier draft of the Finance Bill, only the housing fund.

In August, government workers expect pay increases.

The Salaries and Remuneration Commission (SRC) announced a 7–10% pay raise for civil employees, effective July 1.

The hike will cost taxpayers Ksh21.7 billion more for the fiscal year 2023–2024, with Ksh9.5 billion going to teachers.

Also read: Civil Servants and Teachers Will Receive Actual Salaries Following an Increase

Including the current notch increase, which generally rises by 3% annually, SCR predicts that the average hike over a two-year period will be 7 to 10%.

“Where the salary structures are frozen, the notch increase will continue as budgeted up to the maximum salary point,” SRC stated.

Of the Ksh21.7 billion, Ksh126.9 million will go to executive state officers, and Ksh78.9 million will go to parliamentary state officers.

Judges working for the state will receive Ksh308.2 million, county state workers Ksh408.9 million, and general government employees Ksh1.8 billion.

Uniformed and ordered forces will receive Ksh4.5 billion, and county governments will receive Ksh4.1 billion. 745.6 million Kenyan Shillings will go to other government workers.

The number of employees has increased, which is a significant contributing cause to the rise in the total cost of the pay bill. As a developing nation, the government will continue to hire in vital industries like education, healthcare, and security in order to achieve the proper ratios for effective service delivery. SRC claims that the delivery of essential services is not necessarily correlated with an increase in personnel numbers.

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