REPUBLIC OF KENYA

THE NATIONAL TREASURY

BRIEF ON THE PAY DISPUTE BETWEEN THE GOVERNMENT

AND THE TEACHERS UNIONS

A Briefing Note to HE The President

BRIEF TO HE THE PRESIDENT, HON UHURU MUIGAI

KENYATTA

ON

THE

PAY

DISPUTE

BETWEEN

THE

GOVERNMENT AND THE TEACHERS UNIONS

1.0

Preamble

1. Your Excellency, the purpose of this brief is to apprise you on the developments on
the Teachers Salary Award by the Court and the implications that the award portends
to the economy.
2. Your Excellency, the Industrial Relations Court delivered Judgement on the Nairobi
Industrial Court Petition No. 3 of 2015 as follows:
Award of basic salary to teachers of between 50 60% for 4 years, which
translates to an annual award of between 12.5 15%;
The award is with effect from 1st July 2013 and will therefore expire in 30th
June 2017;
The allowances increases already awarded to the Teachers by TSC with effect
from 1st July 2015, include:
i). House Allowance
ii). Leave Allowance
iii). Hardship Allowance
iv). Advance for Motor Vehicle Purchase and
v). Mortgage Facility are confirmed by the Court as awarded and the items to be
reflected in the Collective Bargaining Agreement (CBA) for the period 1 st July
2013 to 30th June 2017
All other allowances and benefits in the Memoranda of the Parties including;
i). Responsibility Allowance
ii). Hazard Allowance
iii).
Disturbance Allowance
iv).
Accommodation and Night Out Allowance
v). Mileage Claims
vi).
Study Leave
vii). Sabbatical Leave and
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viii).

Any Other Allowances and Benefits that the Parties may wish to

be reflected in the CBA as negotiable items are to be reflected in the

CBA for the period 1st July 2013 to 30th June 2017 in their current
status
The termS of the CBA to be reflected in the ultimate clause of the CBA
document to be from 1st July 2013 to 30th June 2017;
The CBA duly signed by the Parties to be registered with the Court in terms of
Section 60(1) of the Labour Relations Act, 2007 within thirty(30) days from
the date of the Judgement;
For avoidance of doubt, the judgement took effect from 30th June 2015,
notwithstanding any delay in preparation of the CBA Document and its
registration with the Court.
3. Your Excellency, The Government has always acted in good faith in matters relating

to teachers remuneration and welfare. However, statements presented by two teachers

unions regarding the pay disputes have consistently been misleading. Their claim that
teachers are grossly underpaid compared to other public officers in the mainstream civil
service is not true.

4. The unions have once again called on all teachers to boycott classes in order to force
the government to meet their pay demands.

2.0 ILLEGALITY OF THE STRIKE

5. Your Excellency, the Teachers Service Commission has not been served with any
strike notice from the Union as required under Section 76 of the Labour Relations Act
2007. To claim that a notice to strike issued in January 2015 is still in force is both
misleading and dishonest. That strike was called off on 14 th January 2015 by the

Industrial Court and teachers resumed duty on 19 th January 2015. This current strike
is therefore illegal, unjustified and uncalled for.
6. The pay dispute is still pending in court and therefore, teachers should hence await
for the finalization of the matter instead of resorting to strikes and demonstrations. A
court order cannot be enforced through a strike or demonstration in the streets. The
proper place for the resolution of this dispute is the courts.
7. The illegality of the strike notwithstanding, the right to strike should not override the
right to education of more than 12 million school going children as enshrined in the
Constitution.
8. Your Excellency, the law provides for the consequences of participation in an illegal
strike which includes disciplinary measures in accordance with the TSC Code of
Regulations. Teachers should be aware that they are answerable to their employer as
provided for by Article 237 of the Constitution. Hence no other entity can give them
direction or instructions on matters relating to attendance and performance of duty.
3.0 WAGE SETTING
Wage setting mechanism under the old Constitution
9. Your Excellency, before the new Constitution came to being, wage setting
mechanisms, including determination of wage awards in the public sector suffered
several weaknesses. These include:
i.

Lack of clear instruments and accurate information to guide wage awards

under collective bargaining agreements;

ii.

Use of ad hoc commissions/committees to review and award public service

wages; and

iii.

Lack of effective remuneration review framework to guide pay review and

determination of awards at the national level.

10.As a result, Your Excellency, wage awards were granted to sub-sectors of the public
service without regard to their implications on other sectors of the service,
macroeconomic stability, external competitiveness, effectiveness of service delivery
and affordability of such awards.
11. Your Excellency, to address these challenges and ensure fair and transparent
harmonization of public service salaries, and value for money, the People of the
Republic of Kenya consciously established the Salaries and Remuneration
Commission (SRC) under Article 230(1) of the Kenya constitution to address these
inherent weaknesses that created distortions, inequity and disruption of budget
implementation.
Wage setting mechanism under the new Constitution
12.In order to ensure fairness and transparent harmonization of public service salaries,
the Salaries and Remuneration Commission was established under Article 230(1)
with a clear mandate as outlined in Article 230 (4) to:
i.

Set and regularly review the remuneration and benefits of all state officers (as
defined under article 260 on Interpretation); and

ii.

Advise the National Government and County Governments on the

remuneration and benefits of all other public officers.

13.The institutionalization of SRC under the Constitution is, therefore, an important step
toward Kenyas public sector reforms, including linking remuneration to cost of
living, performance and productivity as well as ensuring the wage awards are fiscally
sustainable.
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14.Already SRC has ensured complete harmony of salaries across the entire civil
service. On allowances and benefits, this has now been harmonized beginning this
financial year (2015/16) with review of allowances on house, leave and hardship.
15.Your Excellency, to enable the Commission effectively discharge its advisory
mandate under Article 230 (4) (b) of the Constitution, SRC is conducting a job
evaluation exercise for the public service in order to have a remuneration system that
is equitable, harmonized, and fairly determined.
16.It is therefore important for Kenyans to note that any pay setting mechanism outside
the constitutional provisions will be retrogressive to the ongoing public sector
reforms.
4.0. ALLEGATIONS OF OUTSTANDING CLAIMS
17. Your Excellency, there are no outstanding claims owed to teachers. In 1997, teachers
were awarded salary increases of between 150 to 200% (minimum) vide legal notice
No.534 of 1997. The award was implemented over a period of 10 years in five (5)
phases and finalized in 2007 (Table 1).

Table 1: Comparative Minimum Basic Pay for Teachers Between 1997-2012

Equivalent Grade

Basic Salary 1997

(Kshs) - Minimum

Chief Principal

Basic Salary
2007 (Kshs)
Minimum
36,790

Basic Salary, 2012

(Kshs) Minimum

% Change
(1997-2012)

109,089

Senior Principal

23,925

34,010

89,748

275.1

Principal GAT 1

18,725

30,917

77,527

314.0

Principal GAT II

16,510

26,510

48,190

191.9

Senior GAT
14,530
GAT I
12,130
GAT II
10,280
GAT III
8,855
ATS IV
6,285
P1
5,175
Source: Teacher Service Commission

24,650
20,395
18,165
16,535
12,470
11,180

41,590
35,910
31,020
24,662
19,323
16,692

186.2
196.0
201.8
178.5
207.4
222.6

18.It is therefore clear that the Government has finalized the implementation of the
teacher salary awards and allowances as was agreed.
19. Your Excellency, in 2009 the Government agreed to harmonize teachers basic pay
with those of other public officers. This harmonization process was completed in
2012. Currently, teachers basic pay is the same as that of civil servants of the same
grade (Table 2).
Table 2: Current Salary Structure for Staff Serving in the Civil Service & Teaching Service
Civil
Service
Job
Group

G
H
J
K
L
M
N
P
Q
R

Teachers
Designation
P1
ATS IV
GAT III
GAT II
GAT I
Senior GAT
Principal GAT II
Principal GAT I
Senior Principal
Chief Principal

Basic Salary

Common Allowances

Gross Salary*

Min.

Max.

House

Commuter

Min.

Max.

16,692
19,323
24,662
31,020
35,910
41,590
48,190
77,527
89,748
109,089

21,304
24,662
29,918
41,590
45,880
55,840
65,290
103,894
120,270
144,928

3,000
3,000
3,500
6,000
12,000
12,000
13,000
15,000
15,000
15,000

4,000
4,000
4,000
5,000
6,000
8,000
8,000
12,000
14,000
16,000

23,692
26,323
32,162
42,020
53,910
61,590
69,190
104,527
118,748
140,089

28,304
31,662
37,418
52,590
63,880
75,840
86,290
130,894
149,270
175,928

NOTE: Gross Salary is derived using the House Allowance Rates for Other Municipalities.

20.The salary increment demanded by teachers will distort the equity in remuneration
compared to other civil servants of comparable qualifications and Job Group and goes
against what is envisaged in the Constitution (Table 3).

For example a P1

teacher( lowest grade) which is equivalent to a civil servant in Job group G will earn
a gross salary of Kshs.41,086( at maximum) compared to Kshs.28,304 for a civil
servant, while a chief Principal(the highest grade) will earn a gross salary of KShs.
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302,392 (at maximum) compared to KShs. 175,928 for a civil servant on job group
R who is equivalent.
Table 3: Salary Structure Proposed by Teachers (50% - 60%)
Teachers
Designation
P1
ATS IV
GAT III
GAT II
GAT I
Senior GAT
Principal GAT II
Principal GAT I
Senior Principal
Chief Principal

Basic Salary
Min.
Max.
26,707
34,086
30,530
38,966
38,473
46,672
48,391
64,880
56,020
71,573
64,049
85,994
74,213
100,547
116,291
155,841
134,622
180,405
163,634
271,392

Common Allowances
House
Commuter
3,000
4,000
3,000
4,000
3,500
4,000
6,000
5,000
12,000
6,000
12,000
8,000
13,000
8,000
15,000
12,000
15,000
14,000
15,000
16,000

Gross Salary*
Min.
Max.
33,707
41,086
37,530
45,966
45,973
54,172
59,391
75,880
74,020
89,573
84,049
105,994
95,213
121,547
143,291
182,841
163,622
209,405
194,634
302,392

NOTE: Gross Salary is derived using the House Allowance Rates for Other Municipalities

21.Further, Your Excellency, the Government has harmonized house, commuter and
leave allowances for teachers and civil servants. Currently, teachers are better off
because they earn more hardship allowance than civil servants; this will however be
fully harmonized over the next three years and will be paid as shown in Table 4.

Table 4: Hardship Allowance for Teachers and Civil Servants (1997- 2015)

5.0 REVIEW OF PUBLIC SECTOR WAGE BILL, 1997 - 2015

22. Your Excellency, a review of wage to teachers and other Public Sector shows that in
1996/97, total wage bill for public sector amounted to Ksh 58.7 billion or 8.1 percent
of GDP (Table 5). Of this Teachers earned Ksh 18.3 billion or 2.5 percent of GDP
that was lower than Ksh 21.5 billion (2.9 percent) paid to other Public Servants.
However, beginning 2009/10, Teachers wage bill amounted to Ksh 87.4 billion (2.9
percent of GDP) and higher than other public sector workers (Ksh 82.9 billion or 2.7
percent of GDP). Teachers wage bill has therefore, remained higher than that of
other public sector workers since 2009/10. By 2014/15, Teachers wage bill
amounted to Ksh 164.5 billion (2.9 percent) while other public sector wage amounted
to Ksh 143.0 billion (2.5 percent of GDP) and total public sector wage was 9.9
percent of GDP.
Table 5: Growth, Inflation and Wages

23. Your Excellency, real GDP improved from a growth of 3.9 percent in 2009 to 8.4
percent in 2010 and 5.3 percent in 2014. We have seen average inflation decline from
11.2 percent in 1997 and 14.0 percent in 2011 to 6.9 percent in 2014 and 6.6 percent
by July 2015. This implies that cost of living as measured by the change in Consumer
price index has declined overtime.

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24.Assuming the starting base wage to Teachers of Ksh 18.3 billion (2.5 percent of
GDP) in 1996/97 and adjusting this annually for (i) drift of 2.0 percent (basic salary is
normally adjusted by 4 percent, but allowances like house and commuter are
normally not adjusted), (ii) average annual inflation shows that wage bill to Teachers
would have increased to Ksh 103.8 billion (1.6 percent of GDP) by 2014/15. Your
Excellency, this is lower than the actual wage that Teachers were paid in 2014/15

of Ksh 164.5 billion (2.9 percent). This implies that that the increases of wages to
Teachers made over time has been higher than what they would have earned had the
Government kept adjusting the wage by the cost of living (Cart1 and Chart 2).
Chart 1: Teachers and Other Public Servants Wages, Ksh billion
200.0
180.0
160.0
Teachers Wage Bill
140.0
120.0

Ksh Billion

100.0

Other 80.0
Public Servants Wage bill
60.0
40.0
20.0
Ajusted0.0
Wage bill for Teachers by Drift and Inflation
2009
2011
2013
2015F
1997
2010
2012
2014
Year

Chart 2: Teachers and Other Public Servants Wages as a percentage of GDP

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3.5
3.3
3.1
Teachers Wage Bill as a % of GDP
2.9
2.7
Wage as a Share of GDP 2.5
2.3 Servants Wage bill as a % of GDP
Other Public
2.1
1.9
1.7
Adjusted1.5
Wage with Drift and COL
1997 2009 2010 2011 2012 2013 2014 2015F
Year
6.0 ARE TEACHERS UNDERPAID?
25. Your Excellency, the teachers salaries and allowances are now fully harmonized with
those of other civil servants and therefore the misconception that they are underpaid
compared to other civil servants does not arise
Teachers with a P1 certificate enter the teaching service at Job Group G with a
maximum gross pay of Kshs.28,304.
P1 teachers in private institutions earn an average gross salary of approximately
Kshs.20,000 as compared to those employed by the Teachers Service Commission
that earn Kshs.28,304.
A Chief Principal teacher in Job Group R currently earns a maximum gross
monthly pay of Kshs.144,928 which is comparable to a senior lecturer in public
universities who earn Kshs.150,926. The academic requirement for one to be a
senior lecturer is higher than that of a Chief Principal. If the 50-60% award is
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implemented, the Chief Principal will earn a maximum pay of Kshs.302,000

higher than a full professor at Kshs. 296,632.
26.It is therefore evident, Your Excellency, that teachers salaries are now comparable to
other public servants and their peers, but with the award the harmonization will be
distorted.
7.0 PUBLIC WAGE BILL SUSTAINABILITY
27. Your Excellency, the public sector wage bill as a percentage of GDP is currently
about 10 percent. This is high and unsustainable for an economy at the stage of
development as Kenya. Our medium-term target is between 5-6.5 percent which is
the benchmark prevailing in most developing middle-income countries; the subSaharan Africa average is about 6.5 percent indicating that Kenya has a long way to
go in managing her wage bill to achieve Vision 2030 objectives of being a middleincome country.
28.Implementing the salary increment, Your Excellency, will raise the public wage bill
by Kshs 154.6 billion from the current Kshs 627.8 billion in FY 2015/16 to an
estimated Kshs 782.4 billion or 10.5 percent of GDP by 2016/17. This is an
underestimate because we have not even taken into account the impact of the award
on pension which will further raise the cost. Nevertheless, the wage bill is still way
above the sub-saharan an average of 6.5 percent and will push Kenyas wage into
deeper levels of un-sustainability.
29.The increase in the wage bill will similarly increase the proportion of recurrent
expenditures to total budget from the current 69 percent to 75 percent, leaving
development budget at 25 percent. This is inconsistent with the Public Finance
Management Act, 2012, which requires that the provision of the development budget
should be at least 30 percent.
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30. Your Excellency, the proportion of wages and salaries to ordinary revenue will
increase from the current 50 percent to about 54 percent. The sustainable benchmark
trend is to keep salaries at below 35 percent. It is clear that the wage pressure will
reduce the provision for development and other operations. It will strain government
budget and deny the economy the much needed resources for infrastructure and social
services like health and education. Further salary adjustment without creating saving
in the recurrent budget is not sustainable.
8.0.
31.

FINANCIAL IMPLICATIONS OF A SALARY INCREMENT

In line with the principle of equity and fairness, Your Excellency, the pay hike

for teachers will inevitably have a spiral effect to other civil servants, police and
prisons officers. It is estimated that this will cost the tax payer Kshs. 154.6 billion
(Table 6). Teachers alone will require about KSh.99.8 billion in the period 2013 to
2017, in the current financial year 2015/16, it is estimated that the Government
requires Kshs.103.0 billion to implement the award.
32.

Your Excellency, the Ksh 154.6 billion does not include the additional

pensions costs associated with the revised salary award.

33.

In the current financial year 2015/16, Your Excellency, the Government

requires about Kshs.67.6 billion to implement the award for teachers. This comprises
arrears of Kshs.40.6 billion that must be paid immediately.

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TABLE 6: SUMMARY OF THE PROPOSED ADJUSTMENT ON BASIC SALARY FOR TEACHERS AND ITS SPIRAL EFF
S/NO
CATEGORIES
1.0 Basic Salary

2013/14
ARREARS

2014/15

2015/16
2016/17
Total
Additional Additional Additional
ARREARS RequirementRequirementRequirement

23,667,958,228
36,946,535,970
42,395,822,862
51,568,063,742
154,578,380,801

1.0 Teachers/1

15,559,558,110
25,040,087,523
26,987,183,984
32,212,791,919
99,799,621,536

2.0 Civil Servant

3,541,910,0425,200,972,9046,124,145,5957,211,181,43822,078,209,978

3.0 Police and Prisons

4,566,490,0776,705,475,5429,284,493,283
12,144,090,385
32,700,549,287

Grand Total Financial Implication

23,667,958,228
36,946,535,970
42,395,822,862
51,568,063,742
154,578,380,801
1/ - Includes 3.4 billion arrears on hardship allowance which was based on 30% basic salary before FY 2015/16

9.0 BUDGETARY IMPLICATIONS 2015/2016

34. Your Excellency, the Teachers Service Commission as an independent Commission
has its own budget and is allocated funds by the Government. In the 2015/2016
budget approved by Parliament, TSC was allocated Ksh.174 billion and the 50-60%
salary award was not factored.

The TSC therefore has no additional funds to

implement the salary increment.

35.In addition, the Government currently does not have additional funds to implement
any salary increment and the National Treasury has communicated the same to TSC.
Therefore any attempt to implement the salary increment will require consideration of
the following options with resultant consequences:
Raising Taxes: The tax burden on Kenyans is already heavy. Any increase in
taxes will sharply raise the price of basic commodities pushing up the cost of
living. For instance, to raise the required amount, Value Added Tax (VAT) needs
to be increased from the current 16% to 21% in the financial year 2015/16. This
would not only affect Kenyans directly but also undermine Kenyas
competitiveness and slow down economic growth.

15

 Additional Borrowing: Additional borrowing to finance payment of salaries

which is a recurrent expenditure will be a violation of the fiscal responsibility
principle as stipulated in the Public Finance Management Act, 2012. Further
borrowing would push interest rates upwards, negatively impacting on private
sector investment, undermining growth prospects and further lowering standard of
living. Ideally, borrowing should be reserved for building infrastructure which
increases the productivity of the economy, generate jobs and thus enhances the
wealth of the economy.
Expenditure Cuts: It is important to note that there is very limited scope for
expenditure cuts as most of the recurrent expenditures are already committed to
salaries, debt service, and transfers to Counties and State agencies. The residual
financial resources are committed to operations and maintenance.
Your Excellency, cutting development expenditure will hamper growth and
poverty reduction, in addition to affecting the completion of the ongoing projects
(which may result into stalled projects). More fundamentally it will reduce the
share of development expenditures to total budget to 25 per cent which is below
the 30 percent required under the Public Finance Management Act 2012.

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10.0 RECOMMENDATIONS
36.As you may have noted in this brief Your Excellency, the Teachers have been more
than compensated through the increases made so far and currently earn higher wages
than other Public sector workers.
37.Your Excellency the options to (i) raising taxes, (ii) borrow from either the domestic
or international markets, or (iii) expenditure cuts among the Ministries, Departments
and Agencies, all have severe consequences for the economy and would therefore not
be appropriate at this time.
38.Your Excellency, taking these considerations into account, it is recommended that
Government awaits the conclusion of the appeal process and ensure a more vigorous
defense of the Government position.
39.In the meantime, Your Excellency, there should be no salary payment to the teachers
on strike.

THE NATIONAL TREASURY

September 11, 2015

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