Employers will be barred from sacking their workers or forcing them to take pay cuts during the Covid-19 pandemic as Parliament moves to protect the livelihoods of millions of Kenyans.
The National Assembly’s Finance and National Planning Committee has recommended that employers who are struggling to pay salaries due to drastic drops in revenue streams can only grant unpaid leave days to their staff during the period of the pandemic.
“Where the Covid-19 pandemic has adversely affected the ability of an employer to pay salaries or wages, the employer shall not terminate a contract of service or dismiss an employee or coerce an employee to take a salary cut,” the committee chaired by Kipkelion Member of Parliament Joseph Limo has directed.
The recommendation is contained in proposals to the Tax Amendments Bill of 2020 that is aimed at cushioning millions of Kenyans from the economic meltdown occasioned by the Covid-19. The Bill is being debated in Parliament this week.
The move will come as a major relief to millions of Kenyan workers facing job losses as various sectors of the economy take a hit from the pandemic with drastic declines in revenues and reduction in operating hours.
Many companies have already directed their workers to take pay cuts or sent staff on unpaid leave while others have said they will have to lay off employees due to hits to their cash-flows occasioned by the disease.
If passed into law, the recommendation is likely to spark protests from employers who are mulling closing shop as the disease takes its toll on productivity and sales. High-end hotels last month suspended operations following drops in customer numbers, adding that they would remain closed until further notice, thus setting the stage for under-employment, possible job cuts and unpaid leave for workers.
Meanwhile, millions of workers may this month miss out on tax reliefs announced by President Uhuru Kenyatta after Parliament delayed passing a crucial Bill that would have seen those earning below Sh24,000 exempted from tax.
The Kenya Revenue Authority (KRA) clarified yesterday that the tax rates proposed in the Tax Laws (Amendment) Bill 2020 would only be effected once the Bill is passed by Parliament and signed into law by the President.
Most companies have either prepared their payrolls or are in the process of doing so, meaning that should they stick to their schedules, their employees will miss out on the relifs.
The National Assembly began debating the Bill yesterday afternoon but its passage is expected to take a while given that it also contains other proposals such as lowering corporate and turnover tax as well as scrapping a buffet of incentives. A Bill has to go through three readings before it can be voted on. Once it is passed, it has to be presented to the President for assent.
“Please note the PAYE rate is now a bill that is yet to be assented to by Parliament. Use the old rates until such a time when Parliament will pass the bill into law,” KRA said in tweet.
This will delay the onset of the lower taxation regime that was expected to put some additional money in the pocket of workers this month.
Nikhil Hira, a director at Bowmans (Coulson Harney LLP) law firm, said he expects debate on the Bill to take a while given that it also contains other proposals such as lowering corporate tax for resident companies from 30 to 25 percent and reducing turnover tax from five to one percent, as well as removal of several tax incentives. Such delays could be unpleasant news for workers because employers have up to May 9 of every month to remit PAYE tax to KRA.
“A potential solution is for employers to pay workers using existing rates and then if the Bill is passed into law, they recompute to new rates and remit to KRA by May 9,” advised Mr Hira.