His Excellency the President Uhuru Kenyatta yesterday (Sunday 20th September 2015) broke the silence on the teachers pay dispute. His speech, together with the judgment delivered by the Industrial Relations Court has sparked numerous discussions among policy makers, politicians and the public at large, on the legitimacy of the teachers strike and its potential impact on the economy. While this debate has been colored by interests represented in the pay dispute, it has yet again exposed the reckless disregard for the law and due process in the settlement of pay disputes in Kenya.

The role of existing institutions

The formalities of the law and due process are in place to protect parties in a dispute. It is apparent that the pay dispute is still under consideration by the court and should rightly be settled within the judicial system. While strikes and protests are constitutional entitlements granted to every citizen, it should be exercised within the provisions of the law. An unprotected strike has denied over 12 million students the right to education, as well as exposed the teachers to disciplinary measures to disciplinary measures that the Teachers Service Commission could institute. What is clear is that both the teachers and the teachers unions have disregarded the judicial process and resorted to boycott the classrooms as a means to settle the pay dispute.

The Teachers unions also disregarded the role of the Salaries and Remuneration Commission (SRC) in negotiations reviewing the teachers’ salaries, calling them “strangers at the negotiation table”. This gesture reinforces the lack of respect for institutions that the teachers unions have adopted in settling pay disputes. The constitution established the SRC as an independent institution to harmonize the salaries in the public service and ensure remuneration was aligned to productivity, cost of living and fiscal sustainability.

Economic and Budgetary Implications

The public sector wage bill currently stands at 10% of GDP, and has consistently been flagged as unsustainable. Economic forecasts indicate that the implementation of the proposed salary increment will blot the public wage bill that stands at 627.8 Billion FY 2015/2016 to an estimated 782.4 Billion, an increase that translates to 10.5% of GDP by 2016/2017. These figures however do not give an accurate representation of the impact on the wage bill. This is because they do not recognize the additional impact of pensions which substantially raise the costs further. It will also have a negative effect on our ability to balance our budget, as it inevitably raises the recurrent expenditure from 69% to 75% leaving the allocation to development expenditure at 25%

Government estimates also indicate that the implementation of the wage increase will attract an additional 154.6 Billion cost to the tax payer. Increases to the spending lines of government imply a commensurate increase in revenue or debt. The government relies heavily on taxes to raise revenue. Kenya’s tax system is heavily dependent on income taxes which account for 50% of the tax revenue (9% of GDP); while consumption taxes such as VAT, contribute 5.7% of GDP FY 2013/2015. Government forecasts indicate that the amount required to meet the teachers pay demands, would require adjustments to the level of taxation. The other option available for balancing of budgets is financing deficits through borrowing. This would imply that the government incurs additional debt to fund recurrent expenditure. This approach completely contravenes the principles of fiscal responsibility provided in the Public Financial Management Act 2012.The budgetary adjustments required to meet this additional cost should be carried out within the budget cycle, specifically, during the formulation of the budget. It is clearly ill timed given the recent presidential accent to the Finance Act 2015.

National Productivity

The teachers pay dispute needs to also be evaluated within the scope of national productivity. Productivity level is an indicator of a country’s competitiveness and its prosperity status. Kenya’s productivity level has remained relatively low at a multi factor index of 0.84 compared to the emerging economies of South East Asia, whose average productivity index is in the range of 5. This implies that the country has to be held in a low productivity trap. The role of wage formulation in improving labor productivity is critical. While government has endeavored to mainstream productivity in wage determination through the issuance of various wage guideline instruments, the teachers strike exemplifies the poor implementation of the appropriate wage formulation mechanism. It is clear that the labor market players do have a common understanding about productivity, and its role in guaranteeing public interest and driving the country’s competitiveness. Education is indeed anchored in the Social pillar of the Vision 2030 and its delivery has to be driven by improved labor productivity. Government reports have indicated that teachers employed by the TSC earn salaries significantly higher than teachers employed by private schools. This disparity raises productivity concerns given that private schools have in several cases performed better than public schools.

As a result, Kenya’s public school system has largely suffered from poor management of labour relations. The 2015 pay dispute is yet another manifestation of a lack of trust between union representatives, government and the public. This weak partnership has resulted in the non-inclusion of teachers in decision making, poor communication structures and information asymmetry between the parties. This has lead to the antagonistic relationship that exists between the TSC, Teachers, Government and the unions, which unfortunately has been to the detriment of the children in Kenya. The Unions need to give due consideration to the low productivity levels plaguing the countries public education system.


While remuneration grievances are a legitimate concern, it is important to recognize and appreciate the role of existing institutions in addressing these grievances. The unions should therefore recognize and respect the court process in the settlement of the pay disputes. It should therefore call off the strike and await the judgment of the courts. The SRC being a key institution is carrying out job evaluations in the public service, in order to harmonize pay disparities. The teachers being public servants, like all other persons in the civil service, should recognize the importance of this task and allow the commission to conclude this process. The unions should also realize that budgeting is a planning function of government. It is therefore prudent for them to negotiate with the TSC prior to the next budgetary cycle, in order to facilitate the inclusion of the new salary package in the 2016/2017 budget. As the chief representatives of the Teachers, the unions should also advocate for improved productivity among its members, in order to safeguard the public interest.




STANDARD BRIEF OF THE INSTITUTE>>The Institute of Certified Public Accountants of Kenya (ICPAK) is the professional organization for Certified Public Accountants in Kenya established in 1978 by the Accountants Act, CAP 531 which has since been repealed and replaced by the Accountants Act No. 15 enacted in 2008. Since 1978, ICPAK has been dedicated to development and regulation of the accountancy profession in Kenya so as to enhance its contribution and that of its members to national economic growth and development


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