About 17.6 % of staff in prime corporations are informal employees, as corporations more and more flip to contract employees to regulate prices.
Official statistics from the Kenya Nationwide Bureau of Statistics (KNBS) present that people engaged in informal employment grew from 416,900 in 2020 to 582,900 in 2025, accounting for 17.6 % of the three.32 million formal sector employees.
This comes at a time when Kenya’s smooth economic system has made corporations reluctant to step up hiring and enhance wages to cowl inflation.
The development of corporations slowing down on everlasting hires has seen the share of informal employees in formal workplace and manufacturing unit jobs rise progressively from 15.2 % in 2020 to 17.6 % final yr.
An informal employee, in response to the Employment Act, 2007, is a person whose phrases of engagement contain fee on the finish of the day and who shouldn’t be engaged for a interval past 24 hours at a selected time.
Employed on short-term contracts, informal employees fill manufacturing quota gaps by working lengthy hours for low wages, usually with out pensions, medical insurance or entry to mortgage amenities, decreasing labour prices for employers.
Pension and housing levies have not too long ago emerged as key drivers of operational prices following extra obligations on employees for the 2 objects.
The Reasonably priced Housing Act requires employers within the formal and casual sectors to deduct 1.5 % of gross month-to-month pay from employees and match the contributions in the direction of the housing levy.
Contributions to the Nationwide Social Safety Fund (NSSF) have additionally elevated from as little as Sh200 to as much as Sh6,480 below the newest up to date charges.
Beginning February 2026, NSSF contributions entered the fourth part of adjustment, elevating the Tier I decrease restrict from Sh8,000 to Sh9,000 and the Tier II higher restrict from Sh72,000 to Sh108,000.
The contribution charge stays at 6 % for each employers and staff, elevating the utmost worker contribution from Sh4,320 to Sh6,480 per 30 days.
KNBS information exhibits that wage rises in 2025 surpassed inflation for the primary time in six years, regardless of employers providing employees smaller pay will increase.
Inflation-adjusted earnings, or actual wages — a barometer for measuring staff’ buying energy — grew by 2.0 % final yr, marking the primary time since 2020 that progress in employees’ earnings has surpassed the rise in client costs.
Consequently, a often paid employee, or wage worker, noticed their month-to-month actual earnings enhance marginally to Sh56,566 final yr from Sh55,450 in 2024.
The earnings are, nonetheless, nonetheless decrease than in 2020, after they stood at Sh62,256, that means employees’ earnings have suffered an erosion of Sh5,690 in contrast with six years in the past.
Employees’ actual wages had fallen for 5 consecutive years, together with a detrimental 0.3 % in 2024.
The optimistic actual wage progress got here in a yr when financial progress slowed to 4.6 %, little modified from 4.7 % in 2024, pulled down by lowered exercise within the agriculture sector.
Public staff, nonetheless, continued to bear the brunt of the excessive value of dwelling, with their actual wages falling additional to Sh50,041 final yr from Sh51,191.67 in 2024.
President William Ruto’s authorities has cited steady inflation and alternate charges as a few of its key achievements, noting that they’ve laid a sound macroeconomic basis for progress.
The World Financial institution has downgraded Kenya’s progress forecast to 4.4 % from 4.9 % for 2026, weakening the economic system’s potential to generate jobs and pay increased salaries, whilst inflation is predicted to erode employees’ earnings.
