Africa-Press – Kenya. KENYAN employers are grappling with mounting pressure from rising operational costs, unpredictable policy shifts and a weakening business environment.
This is forcing many firms to freeze hiring or restructure operations.
According to the Federation of Kenya Employers (FKE), the combined impact of high taxes, rising energy bills, wage pressures and regulatory compliance requirements is squeezing businesses and threatening their competitiveness.
FKE Executive Director and chief executive Jacqueline Mugo says employers are concerned by the growing tax burden and increased statutory deductions, which are driving up labour costs while reducing employees’ take-home pay.
The Star spoke to Mugo on the pressures facing Kenyan employers, the sectors most affected by job freezes and the reforms she believes government must prioritise to restore business confidence and spur job creation.
Kenyan employers say the cost of doing business is rising sharply. Which costs worry employers most today—wages, energy, taxes or compliance?
Employers are feeling pressure across all these areas. Wages, energy costs, taxation and compliance requirements cumulatively have a significant net effect on the cost of doing business. The combined burden is what is most concerning, as it directly affects competitiveness and sustainability.
In FKE Annual survey 2025 conducted in quarter four, 53.2 per cent of employers request government to urgently focus on tax reduction and fiscal reforms. The most overwhelming appeal is reduce taxes, harmonise rates, simplify tax processes and introduce reliefs. About 12.8 per cent call on improving access to finance, that is more affordable loans, credit facilities and reduced interest rates.
We also have 9.6 per cent of employers asking for improved infrastructure development which is better transport systems, electricity supply water and digital infrastructure.
About 8.5 per cent want simplification of regulatory and compliance processes that is less bureaucracy, digitised processes and accelerated VAT refunds. Lastly, about 6.4 per cent want the government to ensure political stability and good governance which includes anti‐corruption measures.
Are recent wage pressures driven more by inflation, government policy or labour shortages?
Recent wage pressures are largely driven by government policy. Increased statutory deductions reduce employees’ take-home pay while raising employers’ costs, particularly where employers are required to match contributions.
How are SMEs coping differently from large corporations under the current economic climate?
SMEs are under greater strain and we are seeing a surge in informality as businesses struggle to survive. This shift is not healthy for the country as it reduces compliance, weakens worker protections and shrinks the formal tax base.
Are employers cutting jobs, freezing hiring or restructuring, and in which sectors is this most visible?
Employers are increasingly restructuring and freezing hiring. Our internal survey, FKE Annual Survey 2025 conducted between December 4 and 15, 2025, shows overall employment dropped by 12 per cent with the slowdown most visible in manufacturing, wholesale and retail trade, accommodation and food services, transport and financial services.
What does FKE’s data show about job creation versus job losses over the past year?
FKE 2025 Annual Survey (conducted November-December 2025) data shows mixed signals but a cautious outlook overall. 213 firms expect to increase staff, 182 firms expect to reduce staff and 257 firms expect no change. This indicates a cautious employment environment, with many employers opting to maintain current staffing levels rather than expand.
So are young Kenyans entering a job market that is shrinking or transforming?
It is both shrinking and transforming. Parts of the financial and private sector are contracting while technological advancements are reshaping the nature of jobs. Young people must therefore be equipped with skills relevant to a rapidly changing labour market.
Which government policies are employers struggling with the most right now?
Taxation policies and increased statutory deductions are currently the most challenging for employers.
Has consultation between government and employers improved or deteriorated in recent years?
Engagement is happening but there is room for improvement in how we engage. Structured, meaningful consultation is essential to ensure policies are practical and sustainable.
Do you believe tax policy is aligned with Kenya’s goal of attracting investment?
To attract investment, a country must reduce the tax burden and create a predictable environment. At the moment, the opposite trend is being observed, which may undermine competitiveness.
What would you say about Kenya’s labour laws. Are they still fit for today’s economy especially in a gig- and technology-driven world?
Labour laws need to be regularly revised to respond to emerging trends, particularly the growth of the gig economy and technology-driven work models.
What is the biggest source of conflict between employers and trade unions today?
The main areas of conflict remain wages and terms and conditions of employment.
How can Kenya strike a better balance between worker protection and business sustainability?
Through strengthened meaningful and respectful social dialogue based on cooperation rather than adversarial approaches. Sustainable solutions require collaboration between government, employers and workers.
What reforms would FKE like to see in TVETs and Universities?
We would like to see stronger alignment of training programs with industry needs, greater involvement of industry in curriculum development and work based learning experiences to ensure graduates are job-ready.
What three policy actions would you prioritise if you were advising the President today?
First, reduce the tax burden. Second, intensify efforts to contain corruption and third, enhance efficiency in government operations and service delivery.
What gives employers confidence and what keeps them awake at night?
A stable and predictable policy and regulatory environment gives employers confidence. What keeps them awake at night is the challenge of remaining afloat amid unpredictable policy, regulartory shifts and rising operational costs.
As FKE CEO, what has been your toughest decision so far?
One of the toughest responsibilities has been navigating difficult policy environments while safeguarding the interests of employers and preserving constructive engagement with government and social partners. Tough decisions are made.
What misconception do Kenyans have about employers that you would like to correct?
That employers deliberately create bottlenecks or make life harder for employees. In reality, many payroll deductions and increased costs stem from government policy and legal requirements which employers have to comply with. They are not employer driven. Employers are equally affected by these changing policy and rising statutory obligations.
