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' ih .i i .,'i "'*rgf*^'r: .., Salaries & Remuneration Commission Rewarding productivity FIRST ANNUAL REPORT for SATARIES AND REMUNERATION COMMISSION January -June,2012 -<ir \ lr Commissioners in a group photo with the Chief Justice during their swearing in on 10th January,2012 a Salaries & Remuneration Commission R. * a r d r n t p r o d u c I i v i!y FIRST ANNUAL REPORT For SALARIES AND REMUNERATION COMMISSION January - June, 2OL2 Salaries and Remuneration Commission 1 Annual Report 1 SALARIES AND REMUNERATION COMMISSION Vision To be a leading, independent and preferred center of excellence for determination of competitive and harmonized remuneration in the Public Service.
Mission To develop a harmonized, competitive and sustainable remuneration system that attracts and retains the best staff in the Public Service for promotion of productivity and ensure effective service delivery to the people of Kenya.
Core Values In addition to the Values provided under Article 232 of the Constitution, the following core values shall guide the Commission's operations: Integrity Professionalism Timeliness Couftesy Objectivity Confidentiality Creativity Responsiveness Teamwork Salaries and Remuneration Commission 1 Annual Report 2 Commission's obligations The Commission is committed to its stakeholders for: (i) Prompt acknowledgement of submitted cases within 7 days of receipt; (ii) Provision of well researched and objective decisions and advice; (iii) Action within one month if all the requisite information is availed; (iv) Treatment of urgent cases with the urgency they deserue; (v) Prompt action to facilitate payment to our suppliers of goods and services upon verification of the same; (vi) Undertaking to train and manage staff; (vii) Seeking information from the wider market to inform our seruices to our stakeholders; and (viii) Usage of current and relevant technology to attend to our stakeholders.
Salaries and Remuneration Commission 1 Annual Repoft 3 TABLE OF CONTENTS SALARIES AND REMUNERATION COMMISSION Vision 2 Mission 2 Core Va1ues.......... Commission's obligations ACKNOWLEDGEM ENT ............. CHAPTER ONE........ 1.0 Preamble...... 1.1 L.2 CHAPTER TWO 2.O Background of the Current Management of Remuneration and Benefits in the Public Senrice....... .................. 11 Remuneration Challenges Inherited by the Commission..................... 12 ...............15 ............2 2 3 8 ........9 .......,...........9 REMUNERATION ISSUES AFFECTIT{G SERVICE DELIVERY IN THE PUBLIC SERVICE...... Preamble .................... 15 15 2.L 2.2 2.3 2.4 2.5 3.0 3.1 3.2 3.3 3.4 3.5 3.6 4.3 4.4 4.5 4.6 4.7 Teaching Seruice........... AN OVERVIEW OF KENYA'S ECONOMIC PERFORMANCE AND THE COMMISSION'S FINANCIAL REPORT........ Preamble Economics of Remuneration.......... Globa!
Perspective Public- Private Sector Wage Levels.................
Percentage of Government Revenue to Expenditure........... Salaries and Remuneration Commission Financial Repoft for Year ending 30th June 2012.......... CHAPTER FOUR 4.0 4.L 4.2 rssuEs THAT REQUIRE URGENT ATTENTTON Preamble Restoration/Attaining Equity and Fairness in Salaries and Remuneration...... Institutionalization of Remuneration Reviews and Harmonization of Review Cycles........ Seruice Wide Job Evaluation Exercise Attraction and Retention of Perconne!

with Requisite Ski1|s...............


Productivity Measurement ...............

Pensions Review....... .......... 31 31 18 25 25 25 26 27 28 29 31 31 32 32 33 33 34 Salaries and Remuneration Commission 1s Annual Report 4 Collective Bargaining.
Review and Development of Public Seruice Remuneration and Benefits Management Policy 4.8 4.9 4.10 Housing Po1icy......... 4.11 Harmonization of Cross-cutting Allowances/Benefits CHAPTER FM ....... 5.0 5.1 5.2 5.3 ....... 35 ....................35 ...... 36 ......,.37 REMUNERATION STRUCTURES Iil THE PUBLIC SERVICE AS AT JUNE, 2OL2..,..37 Preamble 37 ............... 38 Sub-sectora!
Analysis Agenda Four and Constitutional Commissions.............. 39 ..................35 6.4 6.5 5.6 6.0 5.1 6.2 6.3 42 ACTIVITIES OF THE SALARIES AND REMUNERATION COMMISSION Induction Workshop.. ..................42 Establishing the Identity of the Commission .................... 43 Drafting Regulations for Submission of Proposals and Determining and Advising on Remuneration and Benefits ........43 Interpretation of Government Structure as Provided in the Constitution for Purposes of Setting Remuneration Packages................................. 43 Market Suruey on Private Public Sector Wage Differentials................ 44 Database for Analysis and Review/Determination of Remuneration Leve1s......... Job Evaluation Exercise 6.7 6.8 Harmonizing and Restoring Equity in Remuneration Cycle 6.9 Recruitment of the Secretary/Chief Executive ..............
Adequate Secretariat Staff for Commission's Functions 6.10 Office Accommodation .. 6.11 Cases of Setting and Harmonization Handled by the l^am miccian 6.L2 5.13 Stakeholders Consultations Fora... 6.L4 Benchmarking Visits..... 6.15 Challenges Experienced by the Commission CHAPTER SEVEN 7.O 7,t 7.2 WAY FORWARD................
.,..................54 Managing Remuneration Applying Univercally Accepted Principtes.... 54 Conclusion ...... 55 ............... 44 ...............45 46 46 46 46 47 48 49 ..................... 50 54 Salaries and Remuneration Comrnission 1* Annual Report 5 FOREWARD One of the greatest contributors to industrial unrest which subsequently threaten industrial peace and economic growth of this country has been remuneration and benefits issue for all cadres serving in the Public Sector.
The factors often cited include: inequity in remuneration occasioned by disparities in the review cycles, disparities in percentage increases, disparities in availability of funds for review; politicization of salaries assent; lack of job evaluation to determine comparability; lack of market surueys to ascertain the market labour cost; and lack of productivity indices to measure productivity and peformance.
These are the issues that establishment of the Salaries and Remuneration Commission as a Constitutional body is meant to address.

The Commission following its constitution is focused to address the issues and also to ensure that public services are accessible to all Kenyans in all parts of the country and thus improve service delivery and general peformance in the different sub-sectors of the economy.
Ideally, the Commission should have been constituted immediately the Constitution was promulgated, to forestall some of the industrial unrests that the country has witnessed.

This notwithstanding, the Commission on constitution embarked on activities that would ensure that as it sets, review and advises on remuneration and benefits in the Public Service, there will be compliance with the general provisions of the Constitution and specifically Afticle aLQa) and 230(5).
This First Annual Report of the Salaries and Remuneration Commission therefore, contains the situation as inherited by the Commission, the challenges experienced in the past six months that the Commission has Salaries and Remuneration Commission 1 Annual Report 6 been in existence and the way forward in the management of remuneration and benefits in the Public Service.
The Report has been organized into Six Chapters as follows: Chapter 1; gives the Background of the Current Management of Remuneration and Benefits in the Public Service, Chapter 2; discusses the Issues affecting Seruice Delivery in the Public Service, Chapter 3; highlights an Overview of Kenya's Economic Performance and Commissions Financial Report, Chapter 4; presents Issues that Require Urgent Attention Chapter 5; presents Remuneration Structures in the Public Service as at June 20L2, Chapter 6; enumerates the Activities of Salaries and Remuneration Commission while Chapter 7; provides the Way forward.
Last but not the least; the Commission appreciates the support it has received from stakeholders and staff which has enabled it within the short period it has been in existence to embark on its mandate.

The Commission further urges the public and stakeholders to have patience especially in the handling of the historical injustices that have been entrenched in the system and whose address will require paradigm shift, changed mind set and systemic overhaul of the existing systems.

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*D Sarah J.C Serem Chairperson Salaries and Remuneration Commission 1 Annual Report 7 ACKNOWLEDGEMENT The Commission in presenting this First Annual Report wishes to recognize and appreciate the support accorded to it by all the arms of the Government for it to be operational and undertake its mandate.
The Commission further wishes to thank all the key stakeholders and in particular the public service organizations, Employers, Labour unions and other stakeholders for constantly agreeing to engage and share valuable information which have enriched Commissions operations.
The Commission wish to appreciate the various resource persons and their respective institutions who through their expeftise and presentations to the Commission enhanced the Commission understanding of the prevailing issues affecting remuneration management in the Public Service and led to quality and practical decisions.
Lastly, in the Commission it is understood that the success in managing the remuneration and benefits of public servants lies in solving the problems, resolving the' difficulties that have been created in the past and understanding that it is a process that will never stop as solving the challenges will create new ones.

We must therefore, soldier on involving all the stakeholders in getting lasting solutions.
G. A. Otieno (Mrs.), MBS COMMISSION SECRETARY Salaries and Remuneration Commission 1 Annual Report 8 CHAPTER ONE INTRODUCTION 1.0 Preamble 1.

The Salaries and Remuneration Commission is established under Chapter 12 Article 230(1) of the Constitution of Kenya, 2010.
Article 230 (4) provides the mandate of the Commission as to: set and regularly review the remuneration and benefits of State officers; and advise the national and county governments on the remuneration and benefits of all other public officers.
Article 230(5) of the Constitution further requires that the Commission in performance of its functions, shall take into account the principles of: ensuring the fiscal sustainability of the total public compensation bill; ensuring public service is able to attract and retain the requisite skills to execute their functions; recognizing productivity and performance; and transparency and fairness.

Members of the Commission were appointed on 16th December, 2011 and sworn in on 10th January, 2012.

2.
2.

To effectively undeftake its mandate, the Commission: collects, collates and analyses both primary and secondary data/information; undeftakes studies and surveys on trends in remuneration and factors affecting attraction and retention of staff in the Public Sector; undeftakes job evaluation exercises; and constantly liaises with fundamental stakeholders to ensure adequate budgetary provision and general acceptability of the decisions and advice it gives to the Service for effective implementation.

3.
3.

Generally, the purpose of remuneration and benefits to employees is to: attract and retain, especially those with critical and scarce skills; compensate them for work done; and motivate them to peform well in offering quality and acceptable services efficiently.

A fair and sufficient remuneration therefore, depresses the need for constant recruitment and training for replacements which is costly.

4.
4.

The argument that adequate and fair pay is crucial to sustaining attraction, motivation, performance and integrity of public servants is widely accepted and documented.

There is evidence world over that Government workers either cut back their productivity or hours of work when salaries are low and reduction in production is greater as the compensation diminishes otherwise, the workers actively seek to change jobs in favor of the private Salaries and Remuneration Commission 1 Annual Report 9 sector.
Low salary levels result in absenteeism, alternative employment, rent-seeking (e.9.

the "per diem" problem or sitting allowance), absenteeism, moonlighting, petty corruption including the sale of government services and low productivity.

Subsequently, recruitment and retention and governance especially of highly qualified and critical professionals, becomes more difficult to the management.

5.

Remuneration reform has been an impoftant issue in public service management all over the world.
Remuneration is a significant feature of human resources management, and human resource is the most crucial factor in the delivery of public services.

Public service remuneration reform has for many years focused on reducing government employment and containirig the wage bill.

This approach however, ignores a diversity of policy objectives that could be achieved through remuneration decisions.
Examples of these include: (i) Remuneration policy being used to pursue egalitarian and equity goals; (ii) Alternatives to raising remuneration during budgetary constraints and high cost of living to ensure that the operational and maintenance costs including other development expenditures are not adversely impacted on; (iii) The need to ensure devolvement of a rational and transparent com pensation structu re; (iv) Development of appropriate and adequately competitive remuneration levels to allow public service to attract and retain the desired number and quality of human resource with appropriate requisite skills and experience; (v) The evolvement of an incentive regime with appropriate rewards (and sanctions) to adequately motivate public servants towards acceptable standards of peformance; (vi) Significant improvements in service delivery entail expansion of the workforce and subsequently wage bill; and (vii) Remuneration operating in conjunction with other organizational and managerial systems to ensure realization of organizational objectives.
Salaries and Remuneration Commission 1't Annual Report 10 1.1 Background of the Current Management of Remuneration and Benefits in the Public Seruice 6.

Before the establishment of the Salaries and Remuneration Commission, various processes were used to determine remuneration and benefits levels in the Public Seruice.
The processes included: (i) Administrative reviews which relied on ad hoc Commissions and Committees to determine the terms and conditions of service for public servants when need arose; (ii) Collective bargaining where remuneration and benefits for unionized workers are determined through an industrial process which sets out agreed terms and conditions of seruice for the affected workers for a specific period of time, usually two to four years; and (iii) Institutional processes which involved: Ministry of Finance issuing wage guidelines to guide employers and employee representatives in negotiating the terms and conditions of service at the workplace; Ministry of Labour and Human Resource Development setting statutory minimum wages which are Gazetted and announced by the Minister; and Pensions Department which regulates, processes, and pays pensions and other related benefits in the Public Service as provided by various statutes.
In addition, special institutions were charged with setting 7. remuneration levels and benefits for different sub-sectors of the Public Service.

For instance, the Parliamentary Seruice Commission, the Judicial Service Commission, the Teachers Service Remuneration Committee and the Kenya National Audit Commission were established by Acts of Parliament to set and review terms and conditions of service for their respective workers.
State Corporations Advisory Committee (SCAC) was also established by an Act of Parliament to advise the Government on, among other matters, remuneration levels and other terms of seruice for the employees of state corporations.

There was also the Armed Forces Remuneration Review Board (AFPRB) that was constituted through a Gazette Notice to advise on matters pertaining to terms and conditions of service for members of the Armed Forces and Constabulary.

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8.

The last attempt was the establishment of the Permanent Public Service Remuneration Review Board (PPSRRB) through Kenya Gazette Notice No.

7941 of November, 2003.

This was in recognition of the need for a central body with the mandate to continuously review and harmonize Salaries and Remuneration Commission 1 Annual Report 11 remuneration in the entire Public Service.
The Board made several strides in harmonizing and re-aligning remuneration and benefits in the Public Service as is outlined in its Eighth Report.

The PPSRRB however, lacked legal backing to effectively perform its mandate and enforce its supremacy as a central remuneration body among parallel and sectoral remuneration review institutions.

L.2 Remuneration Challenges Inherited by the Commission 9.
Coming from a background where remuneration and benefits have been set through ad hoc Committees/ Commissions, undue pressure from unions and other influence, the current remuneration and benefits in the Public Seruice reflects both vertical and horizontal disparities and inequities.
Specifically: (i) The varied Committees and Commissions on remuneration reviews introduced wage disparities across different sub-sectors of the Public Service; (ii) The creation of parallel remuneration review institutions for different sub-sectors of the Public Service further widened the wage differentials; (iii) The independence of the three arms of Government was used to introduce wage disparities; (iv) The overall remuneration of professional staff who are non-unionized remained low leading to high turnover at this level and consequently, the workforce in relation to the public service core functions and the distribution is skewed with heavy concentration in the suppott cadres relative to the technical, professional and managerial grades; (v) Wide pay differentials between public and private sector for professional employees with the same qualifications and experience, making the former less competitive in attracting and retaining requisite professional and managerial talent; (vi) Ad hoc and uncoordinated salary adjustments creating difficulties in the management of the Public Service wage bill which remained high relative to GDP and Government revenue; (vii) Remuneration structures which are too compressed and too low to 1 reward or motivate good performance compounded by annual increments awarded automatically, leaving little distinction between mediocrity and meritocracy; and Salaries and Remuneration Commission 1 Annual Repoft 12 (viii) Proliferation of allowances and other benefits being used to increase compensation reducing the rationality and transparency of the remuneration system with little direct relationship to job pedormance and productivity, negatively impacting on pension benefits since the benefits are calculated on the basis of the basic salary and not total monetary compensation.
Salaries and Remuneration Commission 1s Annual Report 13 Salaries and Remuneration Commission 1't Annual Report 14 CHAPTER TWO 2.O REMUNERATION ISSUES AFFECTING SERVICE DELIVERY IN THE PUBLIC SERVICE 2.L Preamble 10.

Following the swearing in of the Salaries and Remuneration Commission and as the Commission took office, a number of remuneration issues were presented as affecting service delivery among all the cadres serving in the public Sector.
These include: inequity in remuneration occasioned by disparities in the review cycles, disparities in percentage increases, disparities in availability of funds for review; politicization of salaries assent; lack of job evaluation to determine comparability; lack of market surveys to ascertain the market labour cost; and lack of productivity indices to measure productivity and performance.
The impact of the remuneration issues in service delivery and general performance however, have different manifestations that are specific to each sub-sector of the Public Service details some of which are discussed in the subsequent paragraphs.

2.2 Health Professionals 11.

Public Health Service is responsible for over 80 percent of health care service delivery in the entire country.
It also has the obligation of meeting majority of the Millennium Development Goals (MDGs) and implementation of the Vision 2030 health flagship projects on which the economic Arowth of the Country is pegged.

L2.

The sub-sector however, suffers from inadequate staffing due to high exodus of personnel to the private sector, regional and other international markets.
Resignation and deseftion account for a big percent of the total annual attrition of health personnel, leaving a staff strength far much below the recommended number of staff in each cadre.

The exodus has been attributed to the relatively low remuneration and poor working conditions within the sub-sector as compared to that obtaining irr the private sector.
This impacts adversely on service delivery across the country as the available staff are unable to cope with the increasing number of patients and resulting in inequitable distribution of health personnel especially in the rural and hard to reach areas Salaries and Remuneration Commission 1 Annual Repoft 15 13.
Public service health personnel like most of the civil servants were yet to have their salaries adjusted to the re-aligned salary levels which the Legal Officers in the Judiciary and State Law Office were earning.

This inequity in remuneration aggravated the disparities thus, increasing the turnover and industrial unrests.

L4.

Notwithstanding the payment of extraneous and emergency call allowances, the remuneration gap between the private and public sector health personnel still remains.
As a result, the public health care service delivery is likely to continue experiencing inadequate staffing occasioned by migration to the private sector due to remuneration gaps.

15.

Fufther, Medical Officers employed in the Public Service have been allowed to engage in part-time private practice as a means of extending their professional service to the larger population.
Lack of clear guidelines to facilitate proper management of the practice has however, led to the staff spending more time at the private clinics, compromising the availability, quality and efficiency of healthcare services in the public facilities.

The region based house allowance further acts as a "push factor" tO the health personnel especially in hardship and remote areas.
This is compounded by inadequate housing in such areas which affects deployment of staff thus, impacting negatively on service delivery 16.

The duties of health personnel also expose them to risks which increase each day due to the changing work environment.

Despite the request by the staff, the risk factor has not been appropriately covered.

2.3 Legal Professionals L7.


The Legal officers in the Public Service serve at the Judiciary, State Law Office, Directorate of Public Prosecutions, Parliamentary Service, Agenda Four Commissions and Constitutional Commissions, State Corporations and Government Ministries.
Whereas the requirements for recruitment to the entry positions is the same in most Public Service institutions that employ legal staff, the remuneration levels are diverse with some employees having negotiated remuneration levels that are more than 300 percent of the salary levels drawn by the legal personnel in State Law Office, Directorate of public Prosecutions and Ministry of Justice, National Cohesion and Constitutional Affairs.
In addition, some organizations within the legal sub-sector especially commissions and committees established under statutes or legal notices had independent legal instruments which allowed the organizations to recruit and determine remuneration for their Salaries and Remuneration Commission 1" Annual Report 16 staff.

This provision has been a cause of major disparities in remuneration within the sub-sector.

18.
The resultant disparities have made some of the institutions in the Public Service Legal Sub-sector outliers and are used as benchmark and source of agitation for other legal staff including public servants in the demand for higher pay, leading to discontent, low morale and high turnover and a state of inadequate stafflng in the major Government institutions which is not conducive to efficient and effective service delivery' The problem is compounded by grading disparities within the sub-sector including remunerative benefits which are due to the personnel within the legal sub-sector.
2.4 National Security Organs 19, The Government Since 2003 has made significant strides towards improvement of salaries and other terms of service for the Security Organs.

The reviews were aimed at improving the living standards of the officers and translate into higher efficiency in service delivery.

The Kenya Defence forces, National Intelligence and Police Seruices are the National Security Organs in the country responsible for enhancing national security, law and order.
In most cases, they contend that each should be accorded similar treatment in terms of remuneration in recognition for the demanding job and continuously compare their remuneration levels within themselves as they constitute the security arm of the Government.

Consequently, since the security organs are not unionisable and are not allowed to actively express their disquiet, piecemeal remuneration reviews not covering the entire security sector conducive for enhancement of the security of the country.

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20.

Due to lack of a comprehensive Job Evaluation exercise to determine comparable worth of the positions within the Security Organs, it has been a challenge establishing the exact wofth for purposes comparability and setting of remuneration.

As a result, each organ has been able when convenient to demand and get a salary increase.
As the reviews are not effected at the same time due to budgetary constraints, the Services are in perpetual competition and endless quest for salary review, a condition not conducive to service delivery 2L.

Retention of services of personnel deployed in the specialized units such as Aviation, Engineering and Instructing skills which are competitively sought for in the open market and whose commercial value is quite high is also a challenge.
Although the Government has made effofts to review the rates of allowances to give them a competitive economic value, it is difficult Salaries and Remuneration Commission l't Annual Report 17 to match the market rates as well as balance the rank in the Services which has led to high turnover and staff shortage.

22.

The number and quality of housing for the security Organs continues to present a major challenge.
Although the Government has made effofts in the provision and improvement of housing in the sector, the issue is still a major concern as the available housing facilities are not adequate.

It has also been established that the high level of stress and strained interpersonal relationships especially among the lower cadre officers is paftly attributed to the inadequate housing facilities.

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23.

Further, duties of Security Organs expose them to regular high risk with life threatening circumstances that are unpredictable which increases each day with emerging challenges in enhancing security, law and order.

While the Kenya Defence Forces has procured a Risk Cover for their staff, the other Disciplined Services are yet to be provided with a similar cover.

2.5 Teaching Service 24.


The Teaching Service constitutes the highest percentage of the Public Service with a population of about 243,000 teachers spread across the Country.

Remuneration for teachers is determined through collective bargaining between; the Kenya National Union of Teachers (KNUT), Kenya Union of Post-Primary Education Teachers (KUPPET) and Teachers Service Commission (TSC).
The Unions however, view their role as that of negotiating for increase of salary levels in disregard to productivity and other Government policies.

This has created an atmosphere where the unions tend to reject Government reform initiatives and constantly urge its membership to participate in industrial unrests.

This in effect affects the quality of education.

25.

The Government's policy on recruitment of trained teachers on contract terms to address staff shortage in schools is a good initiative.
Despite these teachers having similar qualiflcations and work load as their colleagues who are on permanent terms, they are awarded a fixed level of salary which is not at par, contrary to the principle of equal pay for work of equal value.

The contract teachers therefore, end up being demotivated, less committed to work and exit with the earliest opportunity and management holds them accountable thus, affecting consistency and quality of seruice delivery.

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26.

Besides payment of Hardship Allowance, there is no specific policy to encourage staff deployment in hardship and hard to reach areas hence, Salaries and Remuneration Commission 1 Annual Repoft 18 making difficult to deploy teachers to schools located in such areas.

Teachers also resist deployment to such areas thus, leaving the residents of those areas without trained teachers or with inadequate teaching staff.
A study was undertaken to evaluate the levels of hardships in the areas designated as hardship with a view to harmonize the disparities in the areas and the allowances payable to all public servants deployed in those areas.

Implementation of the recommendations from the findings of the study was however, resisted by the teachers Unions.
The continued disparity in payment of the allowances is likely to be a source of discontent with a possibility of negative impact on deployment and service delivery when teachers are left out of implementation.

2.6 Local Authorities 27.

The Local Authorities have for a long time experienced various challenges that affect service delivery to the public at all levels.
Some of the challenges include: support of non-viable Local Authorities; highly politicized systems of operation; inefficiency in collection of revenue, settlement of debts and criteria for allocation; utilization of Local Authorities Trust Fund (|-ATF); and haphazard recruitment and management of staff.

These have had a negative impact on staff attraction and retention, quality and level of staff peformance and hence service delivery.

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28.

Remuneration for the employees in Local Authorities is negotiated centrally through the Kenya Local Government Workers Union (KLGWU) and covers all staff.

The negotiations however, do not take into account the ability to pay due to different financial capabilities of the Councils.

Some Councils therefore, pay the negotiated rates while others are not able to pay thus, creating disparities in remuneration within Local Authorities.
Salaries for top scales are lower than those obtained in equivalent positions in the Public Service.

Such salary levels make it difflcult to attract and retain the qualified level of staff who would streamline some of the management issues that impact on service delivery.

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29.

Reports from the various Studies undeftaken in the sub-sector indicate that the lack of funds in a number of Local Authorities have led to situations where the statutory deductions such as Naticnal Hospital Insurance Fund (NHIF) and National Social Security Fund (NSSF) from the employees as provided in law, are not remitted to the respective Fund Managers.

Consequently, employees who seek medical attention or terminal benefits are occasionally denied their benefits as the deductions are not remitted.
This in effect, coupled with ineffective management of the Salaries and Remuneration Commission 1 Annual Report 19 remuneration systems, affects the morale of the employees and contributes to poor service delivery.

2.7 Public Universities 30.

Teaching, research, innovations and community service constitute the core functions of a University.
With the expansion of higher education and the instrumental role of research and innovation in the global knowledge-based economy, demand and competition for highly qualified academics have intensified.

When terms and conditions of service of public university staff are poor, or perceived to be poor, the institution suffers in terms of: attraction and retention of high quality staff and experiences outward migration of qualified staff; low staff morale; and inability to concentrate on the core functions.
31.

Most university staff especially the teaching staff, because of the academic nature of their job being employed in institutions of higher learning perceive, their jobs to be of higher stature and not comparable with any in the Public Service.

Currently the grading structure is however, aligned to the rest of Public Service, a situation which has been contested by the trade unions.
The position has not been addressed either way due to lack of job evaluation exercise to determine/verify the job grading of the various cadres at the universities.

32.

Terms and conditions of service for public university staff are determined through a Collective Bargaining Process between the employer and trade unions.
There are three staff trade unions in each institution namely: Kenya Union of Domestic Hotels, Education, Institutions, Hospitals and Allied Workers (KUDHEIA), which represent the non-academic staff; University Non-teaching Staff Union (UNTESU), which represent the Academic equivalent staff; and University Academic Staff Union (UASU), representing the Academic staff.
The presence of the three trade unions in each institution is however, a challenge since the negotiations are not carried out at the same time and therefore, make collective bargaining cycles continuous and time consuming.

Further, existence of the three unions has created overlaps in salary scales between the various cadres in the public universities.

The resultant disparities have created grounds for agitation in some levels of staff, especially the academic staff.

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33.

The practice over the years has also revealed that although public universities unlike the teaching service have embraced performance contracting in the management system, the trade unions in public universities are not sensitive to the issues of affordability, The shoft term Salaries and Remuneration Commission 1 Annual Report 20 remuneration review cycle of two years makes the salary awards expensive and unaffordable.
This situation often leads to threats or strikes especially when the agreement cannot be paid within the cycle period hence increasing occasions of industrial unrest which negatively impact on service delivery.

2.8 Civil Seruice 34.

The lagging behind of remuneration levels in the Civil Service in relation to other Public Service sub-sectors, has created low morale, discontent, apathy and de-motivation among the employees.
This is mainly due to remuneration reviews which are undeftaken at varying intervals and awarded at different percentage increases, for different cadres.

35.

The policy of budgetary restraint without providing for fiscal space for implementation of Civil Service salary reviews; encourages ad hoc reviews which do not contribute to good fiscal or human resource management.
The lack of planning for civil servants remuneration reviews has led to the delays or piece meal release of budgetary provision whenever a review is due to.

Consequently, although the rest of the public service have adjusted their salaries to cost of living and inflation to the Re-aligned Harmonization Instrument, the Civil Service salaries remained un-realigned.

This has introduced gaps in the salary structure, disparities with other sub- sectors and inequity.

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36.

Lack of an institutionalized cycle for review, causes inequity between the Civil service and other Public Service that have got a review cycle and long delays in review of the Civil servant salaries.

In the pursuit of efficiency and improved service delivery in the Civil Seruice, the Government has been sourcing staff from the wider labour market.
These appointees from the private sector organizations negotiate and join the seruice with salaries payable to their previous jobs, on a 'salary to self' basis.

Introduction of higher salaries into the system for a job of comparable worth further creates gaps and inequity in remuneration, causing de-motivation among the professionals in the service who are performing similar jobs and earning lower pay.

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37.

Lack of a comprehensive job evaluation to determine comparability of jobs and lack of productivity indices to measure productivity and performance have also contributed to existing disparities among officers of the same grade.

This has demoralized employees in the civil service, resulting in poor service delivery.

21 2.9 State Corporations 38.

According to Sessional Paper No.


10 of 1965, the establishment of State Corporations was driven by national desire to: accelerate economic social development; redress regional economic imbalances; increase citizen participation in the economy; promote indigenous entrepreneurship; and promote foreign investments through joint ventures.
To facilitate effective and efficient management of State Corporations, State Corporation Advisory Committee (SCAC) in2004, developed Guidelines on terms and conditions of service for State Corporations.

The Guidelines classified the State Corporations into eight functional categories based on mandate and core functions.

The categorization forms the basis of awarding salaries and other rem u nerative benefits.

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39.

The rates provided in the Guidelines for the Chief Executive Officers are used to guide the development of salary structures for the other staff below the Chief Executive.

Further, individual State Corporations have trade unions which negotiate for remuneration of their members through Collective Bargaining conducted after every 2 years.

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40.

Since the last guidelines in 2004, a number of State Corporations pursued enactment of legislations that gave remuneration determination mandate to the responsible Ministers.

As a result, the remuneration for Chief Executives has been revised without reference to SCAC thus, introducing disparities mainly arising from award of 'salaries to self' beyond rates in the Guidelines.

This has in effect increased demand for salaries beyond recommended rates within the sub-sector.
The variances from the Guidelines range from Kshs.100,000 to 700,000 above the flgures given in the Guidelines.

4L.

Whereas the salaries for most Chief Executive Officers have not been officially reviewed since 2004, the salary levels for staff below management are reviewed every 2 years through Collective Bargaining Agreements.

The frequent reviews have raised salaries to levels that are causing overlaps with salaries of management staff, almost surpassing those of the CEOs, leading to discontent.

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42.

The initial categorization of State Corporations was not strictly based on job evaluation but rather on sector and seruices provided.

Lack of clear categorization criteria created room for appeals by influential organizations for re-categorization to higher levels.
The categorization led to the perception that some key institutions in terms of service and scope are Salaries and Remuneration Commission 1 Annual Report 22 categorized at lower level thus, remuneration levels also low, impacting on service delivery.

43.
43.

Further, lack of institutionalized regular review of categorization as well as remuneration levels has also been a cause of concern as some State Corporations argue that their functions and scope have since changed or varied with the changing circumstances and emerging issues in the economy and therefore, should be categorized differently.

44.
44.

Grouping together State Corporations with different abilities and functions without considering the turnover and ability to pay, has had negative impact on the performance of some State Corporations, The Corporations that are unable to pay the salaries specified in their category, transfer the cost to consumers of their products making them costly and uncompetitive.

Some draw money from capital projects to pay remuneration leading to inadequate funding of capital projects.
Salaries and Remuneration Commission 1 Annual Repoft 23 Salaries and Remuneration Commission 1 Annual Report 24 CHAPTER THREE 3.0 AN OVERVIEW OF KENYA'S ECONOMIC PERFORMANCE AND THE COMMISSION'S FINANCIAT REPORT 3.1 Preamble 45.

An overview of the economic peformance of the country is impoftant as the remuneration levels in any country are largely determined by the performance of the economy.
The makers of the Constitution of Kenya were keenly aware of this and that is why under Article 230 (5a), the Salaries and Remuneration Commission being the sole Public Service body charged with management of the Public Service Remuneration is compelled '...to ensure that the total public compensation bill is fiscally sustainable...' 3.2 Economics of Remuneration 46.
The Salaries and Remuneration Commission was constituted at a time when Kenya's economy was experiencing continued recovery from the economic downturn encountered in 2008 when the Country recorded a low GDP growth rate of 1.5 percent down from 7.0 percent in 2007.

The GDP growth picked up from 2009, reaching 4,4 percent in 2011 with growth projected at over 5.6 percent for 20t2.

47.
47.

The Constitution also compels the Salaries and Remuneration Commission that in setting, reviewing or advising on remuneration and benefits, it ensures productivity and peformance for improving the living standards of Kenyans.

The population growth rate is currently relatively high, contributing to a contraction in per capita incomes.

Real per capital (adjusted for inflation) incomes grew by about 5 per cent between 2006 and 2010 when it stood at Kshs.
63,4L9 in 2010, the capita GDP at constant and market prices were Kshs.

38,970 and Kshs.

76,577, respectively.

This translates to constant prices earning of about Kshs.

3,248 per month, which is too low given prevailing inflation rate of 14.5 per cent.

The proportion of poor people is estimated to have increased to 48.8 percent in 2011 (IPPRA, 20L2) up from 45.9 percent recorded in 2005/06.

Salaries and Remuneration Commission 1s Annual Report 25 48.
Another challenge facing the country which remuneration levels of public servants impacts on is the low creation of quality jobs relative to the growth in the labour force, leading to unemployment and underemployment; high employment in the informal sector compared to the formal sector, and wage gaps.

Currently, the share of informal sector employment is close to 81 per cent between 2004 and 2011' The share of normal (wage) sector (both public and private combined) employment has remained about 19 percent.
The level of remuneration set by the Salaries and Remuneration Commission will determine the cost of employment, the expansion and establishment of industries and therefore, the employment creation rates in the country.

49.

To illustrate the above, the Private sector employment grew by 1.9 per cent (2008) down from 2.6 percent (2007).

Public sector wage employment grew by 1.6 per cent (200s) up from 3.3 per cent (2007).
Data available shows that formal sector employment shrunk from 287 percent of total employment in 2000 to 19 percent in 2011.

Along the same lines, there was a marked increase in the employment of casuals in the modern sector.

The proportion of casuals in wage employment grew from 17.9 percent in 2000 to 32.8 percent, depicting a 14.9 percent point increase in the level of casual workers over the period (Republic of Kenya, Various).
This has a direct relationship to the wage increases in the public sector over the same period.

3.3 Global Perspective 50.

According to the Global competitiveness Repoft (2010-11), Kenya was ranked 106 out of 139 countries in 2010 down from rank 98 out of 135 countries in 2009 indicating the country was sliding backwards in terms of competitiveness, Productivity as measured by the ratio of output to input in real terms registered accelerated growth over the years from 1 in 2001 to 2.26 in 2009.
The labour productivity index improved sequentially over the same period from 0.40 in 2001 to 0.84 in 2010 and the capital productivity index from 2001 to 0.46 in 2009.

51.
51.

The increase in the labour productivity index is attributed to an increase in employment numbers over the period unlike productivity e of available lobal standard as a The score of labour Salaries and Remuneration Commission 1 Annual Repoft 26 man hours used for productive work in Kenya is at 35 percent while the whole global standard is at 75 percent.

These are pointers that workers have not been able to change from their way they are doing things over time, public service not exempted.
The salaries and Remuneration commission in consultation with stakeholders would therefore, need to adopt and implement interactive productivity linked to pay across the Public Service and thus economy so that parity and equity in remuneration and benefits structure is realized.

This is because for the economy to grow and the country achieve the aspirations in the vision 2030 of a middle level economy, it will be impossible for any employer to pay more wages if productivity and performance is not enhanced.
3.4 Public-Private Sector Wage Levels 52.

Figure 1-1 shows the trends in public and private sector wages.

until 2008, the average annual earnings were higher in the private sector than in the public sector.

since then, the trend has reversed in favour of public sector and the gap is even getting wider.

In 2011, the average annual wage earning per employee in the public sector (Kshs.

427,99L) was higher than that for private sector (Kshs.

405,959).
405,959).

This has mainly been influenced by the wages set in some State Corporations and the Constitutional Commissions.

Figure 1.1: Annual average wage earnings per employee 450,000 400,000 3s0,000 300,000 250,OOO 200,000 150,000 100,oo0 50,000 2007 2008 2009 2010 2011 -Private_Wage -Public_wage Salaries and Remuneration Commission 1 Annual Report 27 3.5 Percentage of Government Revenue to Expenditure 53.
The total of Government revenue as a percentage of GDP increased from 21.2 in 2OO3l4 to 24.6 percent in 2010/11.

Central Government revenue including grants increased from 22.5 percent to 23 percent during the same period.

On the other hand, total expenditure as a percentage of GDP increased from 24,8 percent to 29.1 percent in 2010.

Total recurrent spending was 22.1 percent in 200314 and 21.1 percent in 2010/11.
This trend can be associated with the increase in development spending from 3.1 percent of GDP in 2OO3l4 to 8.9 percent of GDP in 2008/9 (GOK, 2010).

54.

The total wage bill for the entire public service including military and local authorities, in absolute terms, increased from Kshs.

166 billion in 2004 to 291.5 billion in 2010/2011.

Central Government wage bill as percentage of GDP increased from 9.2 percent in 200718 to 11.7 percent in 2010/2011.
The wage bill to GDP ratio is an indicator of the public service personnel cost share of the total economy.

Public wage bill increased by 7.3 percent in 2005, and 11 percent in 2008 before declining by 7 percent in 2010 and finally increasing to 9.6 percent in 2011 and 10.8 percent as of June 2012 .
The changes in public wage bill are fufther, expected to be on an upward trend owing the various reforms in Government including implementation of the Constitution of Kenya, 2010 and envisaged decentralization structures.
Figure 1.2: Changes in public wage bill and GDP growth rate (o/o) (200s-2011) a,o6 E o oa l4 12 ..-- 10 5 4- 2- o- 2N4/Os 2m,s/O6 2006/07 2@7/08 2OO8/O9 ?OO9/|O 20LO/tL Central Government Public wage bill aso/o of GDP' in public waSe bil (o/ol" R€al GDP Srowth ratet' - -Growth - Salaries and Remuneration Commission 1 Annual Report 28 55.

According to Figure 1.2, growth in the wage bill remained high above growth in GDP, a situation of concern.
It should follow that a rise in growth of GDP may be accompanied by a rise in growth of public wage bill and vice versa.

A wage bill of 11.7 percent in 2011 is too high for an economy like Kenya and should be reduced to a level of no more than 10 percent.

An international comparison shows Malaysia (5 percent), Egypt (7.1) percent and Mauritius (5 percent) have a wage bill to GDP ratio below 10 percent.
There may be urgent need to stimulate economic growth and similarly reduce.the wage bill in order to accommodate the process of devolution, 3.6 Salaries and Remuneration Commission Financial Report for Year ending 30th lune 2OL2 56.

The Commission was constituted in the middle of the financial year 20LL120t2.

It could therefore not be allocated its vote without constraining the activities of operationalizing it.
Consequently, to fast-tract its operationalization, the financial operations were initially through Ministry of State for Public Service (MSPS) Vote R03 and Vote Head number 025 in the 20LLl20l2 Financial Year (FY) up to 30th June, 20L2, belonging to the defunct Permanent Public Service Remuneration Review Board (PPSRRB).
The Commission was allocated an independent Vote R208 to be operational with effect from l't July, 2Ot2 in the FY 2Ol2l2Ol3, in line with the Constitution Afticle 249 (3) requiring a separate vote for each Commission and Independent Offlce.

57.

The review has shown that the SRC spent its resources well through the MSPS and focused on its core mandate as defined in the Constitution and the Act.

The expenditure was about 78.27o/o of the total allocation.
Most of the unspent amount was for office partition, which did not take off as at 30th June, 2012 although the procurement process had been completed.

This was due to late approval of Supplementary Estimates leading to delayed procurement of a contractor and the works was carried forward to the current FY 2012/13.
Other activities planned for the period included stakeholders consultations on the Draft Study Report on Public-Private sector wage differentials, the completion of design of the website and Salaries and Remuneration Commission 1* Annual Report 29 unveiling of the Commission's Logo.

These have been carried forward to the fY 2012120t3.

Salaries and Remuneration Commission 1s Annual Report 30 CHAPTER FOUR 4.O ISSUES THAT REQUIRE URGENT ATTENTION 4.L Preamble 58.
An efficient public sector human resource management is critical for effective and equitable service delivery and sustainable development.

The achievement of Vision 2030 and the implementation of the provisions of the Constitution of Kenya, 2010 require a public service that is citizen focused, result oriented and abler to serve a rapidly growing economy and society.

A skilled, motivated, well and equitably remunerated public service is a prerequisite to the attainment of national policy objectives.
As the Salaries and Remuneration Commission settled to work, the following issues were presented inform of memorandum or requests as needing urgent attention to work towards a public seruice that would play the important facilitative role.

4.2 Restoration/Attaining Equity and Fairness in Salaries and Remuneration 59.
Due to disparities caused by selective salary reviews especially those awarded after achievement of full Banding salary levels, the restoration of equity and fairness in remuneration among comparable cadres in the Public Service performing work of equal value regardless of the respective public service institutions they are work for was recommended.
The Commission was urged to identify areas of inequity and unfairness, quantifying the same and make plans for harmonization including budgetary provision for implementation.
This included: (i) Requesting Ministry of Finance to make necessary budgetary provisions for adjustment of salaries of the staff whose salaries had not been adjusted to the cost of living/ inflation as part of harmonization (ii) Freezing the remuneration for the sub-sectors whose salaries are beyond the Re-aligned harmonization levels to avoid further distortions for purposes of fairness and equity; Salaries and Remuneration Commission 1" Annual Repoft 31 (iii) Identifying remuneration recommendations that have been paftially implemented and advise the affected organizations to strategically plan for funding and full implementation; and (iv) Re-negotiating remuneration levels of persons on special salaries 'personal to self', on expiry of their contracts, to the levels obtaining in the Public Service for equivalent grades.
4.3 Institutionalization of Remuneration Reviews and Harmonization of Review Cycles 60.
The implementation of remuneration reviews across all sub-sectors needed to be undertaken in a systematic manner without leaving behind some sub-sectors for purposes of ensuring equity in remuneration The Commission was therefore urged to harmonize the remuneration cycle and institutionalize the reviews to facilitate management of the wage bill, regulate and predict remuneration reviews as well as reduce remuneration disparities, in the Public Seruice.
This included: (i) Releasing of a policy harmonizing reviews cycles to four year period for all sub-sectors of the public service; (ii) The harmonized review cycles take effect after full implementation of the Realigned Harmonization; and (iii) The policy to allow for in between review consideration to be made for purposes of compensating inflation whenever there is significant change in the cost of living or other peculiarities of attraction and retention in employment.
4.4 Seruice Wide Iob Evaluation Exercise 61.

The disparities were recognized to be a result of lack of objective criteria for determining the worth of the job positions in the Publics Seruice.

The Commission was therefore urged to adopt objective criteria in determining the job worth for each position in the Public Service and adopt the principle of equal pay for work of equal value.
A comprehensive job evaluation exercise in the Public Service as a matter of priority that would facilitate clear job classification and grading to form a basis for setting appropriate and equitable remuneration levels was recommended to be undertaken Salaries and Remuneration Commission 1 Annual Report 32 4.5 Attraction and Retention of Personnel with Requisite Skills 62.
The Commission was informed that despite improvement of remuneration in the Public Service, attraction and retention of some critical skills required for attainment of key Vision 2030 goals for example, medical and legal professionals, still remained a challenge.

It was recommended that appropriate measures be taken to ensure that the Service not only attracts the requisite skills but also retains these critical skills needed to realize the Vision 2030.
Consequently: (i) Establishment of criteria for determining critical Seruices based on prevailing country's developmental needs was recommended; (ii) The unique aspects of the critical cadres needed to be identified to facilitate development of parameters that could be used to design specific incentives including flexible wage structure to attract and retain the requisite cadres that are in short supply; (iii) Development of special retention scheme to attract the staff to the hard to reach and remote areas to ensure service is provided where required and the planned national development objectives are achieved; (iv) A research to be undertaken to identiff all types of disability in the Public Service and classification of those requiring assistance with remunerative implications to peform their duties consequent to which a policy be developed to guide the entire Public service on how to facilitate persons with disability to deliver services in areas of Public service deployment; (v) A suruey to determine actual private public sector wage differentials and its impact on the service delivery in terms of salary distortions and staff turnover be undeftaken.
4.6 Productivity Measurement 63.

Performance/productivity based pay is the most equitable way of remunerating employees.

Its implementation in the Public Service had however, been hampered by lack of accurate measurement tools that identifies the quantifiable aspects of service against which assessment can be made.
The Constitution of Kenya, 2010 also recognizes productivity and performance as key ingredient in determination of remuneration to ensure Salaries and Remuneration Commission 1 Annual Report 33 that the Government gets value for money.
The Commission was therefore urged to pursue: (i) Development of national policy on productivity to provide indices and measurements to form the basis for peformance based pay; ( ii) The Productivity Centre of Kenya and other specialized Institutions like Universities to develop sectoral productivity indices and identify measurable and quantifiable components and job attributes that can form the basis of development of a credible and reliable productivity measurement system for the Public Service; and Inculcating a productivity mindset within the public service to enable public seruants appreciate the linkage between pay and performance.
(iii) 4.7 Pensions Review 64.

Although the Government introduced Contributory Pension schemes in the Public Service, not all sub-sectors adopted the scheme.

Fufther, the proportions of employee-employer contributions for those on contributory schemes vary significantly creating disparities in the terminal benefits.
Despite the fact that pensioners are similarly affected by changes in the cost of living and inflation which in effect erodes their purchasing power and status in the society, pension benefits have in the past not been reviewed alongside remuneration reviews of serving public seruants due to fiscal sustiinability.
It was recommended that the commission follow up with public organizations to ensure that: (i) All public servants became members of contributory pension schemes; (ii) The employee-employer propoftions for the contributory pension schemes in the public service is harmonized for purposes of fairness and equity in the schemes; and (iii) A provision be introduced in the Pension Act for pensions of pensioners on non-contributory pensions to be reviewed regularly to cushion them against economic distoftions and subsequent erosions of purchasing Power.
Salaries and Remuneration Commission 1 Annual Repoft 34 4.8 Collective Bargaining 65.

Collective Bargaining process in some sub-sectors of the Public Service in the past resulted in agreements that at times are beyond the available funds thus, putting pressure on the wage bill.

This was paftially attributed to lack of training of public servants participating in the negotiations.
Further, the time frame for many Collective Bargaining Agreements (CBAs) is every two years which has not provided enough time for growth and development of the economy to warrant succeeding negotiations for salary adjustments.
the recommendations included that: (i) The life cycle of the Collective Bargaining Agreements be harmonized and changed from two (2) years to four (4) years and the relevant Guidelines issued to the Industrial Court and the Service; and (ii) Public servants participating in negotiations to be equipped with skills and knowledge necessary for effective participation in the process.

4.9 Review and Development of Public Seruice Remuneration and Benefits Management Policy 66.
The Pay Policy for the Public Service had been used to guide remuneration management in the public service since 2006.

The implementation of the provisions of the Constitution of Kenya 2010 requires that determination of remuneration in the Public Service be guided by the principles of: fiscal sustainability of the public compensation bill; ability to attract and retain requisite staff; recognition of productivity and performance; and transparency and fairness.
The Board finalized the Report on Principles for Pay Determination that highlights the best practice used to determine remuneration that can be applicable to the Kenyan Public Service.

It was recommended that the Commission identifies global remuneration principles necessary for the implementation of the Constitutional principles and development of the remuneration and benefits policy and the subsequent enforcement legislation.

4.10 Housing Policy 67.


Since the last review of house allowance in 2001, the cost of accessing housing has increased creating pressure from public servants to have the allowances revised to reflect increase in cost of housing.

The policy of pegging house allowance on regions though based on prevailing market Salaries and Remuneration Commission 1 Annual Report 35 rates is creating deployment challenges especially for professional cadres thus, affecting service delivery in rural and hard to reach areas.
There is also disparity in terms of the rates payable and the number of levels of regions with the Civil Service paying the allowance based on four regions, the Teaching Service two regions and Some sub-sectors basing the allowance on job group only irrespective of work station.

The introduction of the county governments and subsequent deployment of more public servants to the counties is expected to further aggravate the shortage of housing.
The Commission was therefore urged to: (i) Analyze the findings of the study on prevailing house rents by the Kenya National Bureau of Statistics to guide revision of Housing Policy for the Public service; and (ii) Analyze the fiscal sustainability and advice on the harmonization of the rates and levels of payment of House Allowance for purposes of equity and parity of treatment of all public servants.

4.LL Harmonization of Cross-cutting Allowances/Benefits 68.
Rates for cross cutting allowances/benefits such as Commuter Allowance, Medical Cover and Hardship Allowance payable in the various sub-sectors of the Public Service vary significantly within and between the sub-sectors.

Further, whereas some cadres/sub-sectors are enjoying these benefits, there are Some who are not in recipient of such allowances/benefits.
The varying rates and circumstances has been a cause of discontent and low morale arising from perceived unfairness among the affected public servants thus, impacting on service delivery.
It was recommended that the Co0mmission follow up to ensure: (i) (ii) (iii) All public servants be put under a harmonized and comprehensive medical cover for purposes of equity and a productive public service; Commuter Allowance be paid to all eligible Public Servants at harmonized rates to address the current disparities; and Implementation of harmonization of Hardship Areas and Allowances as approved for all Public Servants.
Salaries and Remuneration Commission ld Annual Report 36 CHAPTER FIVE 5.0 REMUNERATION STRUCTURES IN THE PUBTIC SERVICE AS AT JUNE, 2OL2 5.1 Preamble 69.

In 2004, the Government adopted the Harmonization Instrument salary structure to facilitate harmonization of remuneration in the Public Service.
Consequently, remuneration of public servants was harmonized and due to budgetary constraints, adjusted every financial year beginning from 2004/05 to 20l0l20LL As the phased approach took a number of years to implement, some Public Service sub-sectors including sections of the Civil Service had their salaries beyond the Harmonization levels in Instrument between financial years 200712008 and 20I0l20Lt to compensate for rise in cost of living.
The reviews were selective and uncoordinated thus, re-introduced disparities and inequity in the Public Service.

70.

To restore harmony and ensure parity of treatment, an instrument was developed in 2007 to Re-align and harmonize the salary levels in the Public service.

Due to budgetary constraints, the Re-alignment and Harmonization as at 30th June, 2Ot2 had not been wholly implemented in the public service, The Realigned and Harmonized salary scales are shown in Table 1.
Salaries and Remuneration Commission 1 Annual Repoft 37 Table 1: Harmonization and Re-aligned Harmonization Instrument (Kshs.

p.m.) Re-aligned and llarmonization Instrument, 2007 HarmonizaUon 2004 Ban d (r) D c Bz B1 A3 Az A1 tlc Eouiv.
(21 A B c D E F G H J K L M N P o R s T2 T1 U v Minimum Salarv (3) 6,450 7,ttl 7,840 8,644 9,530 10,506 t3,733 16,692 2L,304 26,323 30.472 35,275 40,835 63,782 77,527 94,23s 100.620 t27,980 t27,980 1s2,060 Maximum Salarv (4) 7,Ltl 7,840 8,644 9,s30 11.032 L2,L62 t6,692 20,289 25,89s 30,472 35,275 42,877 49,636 8r,404 98,947 t20,270 t27,980 200,s00 200.500 302,980 300,100 531,660 Minimum Salary (s) 7,719 8,259 8,819 9,72t tt,7L7 tt,8l7 t6,692 t9,323 24,662 30,472 35,275 40,835 47,272 77,527 89,748 109,089 L20,270 Maximum Salary (6) 8,2s9 9,257 10,207 Lt,254 13,055 L5,222 21.304 24,662 29,9t8 40,835 45,021 54,743 63,492 103,894 t20,270 L44,298 180,660 1s2,060 213,640 399,440 302,980 423,280 715,080 5.2 Sub-sectoral AnalYsis 7L.
The following is the status of the implementation of the re-aligned/ harmonization salary as at 30th June, 2012.

(i) State Law Office (Lega!

Staff): Re-aligned and Harmonized.

(ii) Core Civil Service: Not Re-aligned (iii) National Youth Service: Not Re-aligned (iv) Prisons Services: Re-aligned and Harmonized.

(v) National Security Organs: Re-aligned and Harmonized.

(vi) TSC Secretariat Staff: Re-aligned and Harmonization.

(vii) Teaching Service: Not Re-aligned.


The adoption of Realigned Harmonization Instrument salary structure will have to be Salaries and Remuneration Commission 1 Annual Report 38 subjected to Collective Bargaining Agreement after the implementation of the 2009 CBA.

Judiciary (Lega!

Staff): Re-aligned and Harmonized.

Judiciary (Paralega!

and non-legal Staff): Not Re-aligned Parliamentary Seruice Staff: Re-aligned, Harmonized and adjusted beyond the scale.
Local Authorities: Generally Re-aligned except those local authorities that do not have ability to pay.

Public Universities: Re-aligned and Harmonized and beyond the re-aligned and harmonized levels due to implementation of CBAs.

(viii) (ix) (x) (xi) (xii) 72.

The sub-sectors with strong unions and which have been able to negotiate Collective Bargaining Agreements have surpassed the salary levels of the Re-aligned Harmonization Instrument.
This is because the current practice of Collective Bargaining in Kenya is to award increases in every negotiation cycle which is currently two years.

5.3 Agenda Four and Constitutional Commissions 73.
The Agenda Four Commissions have had their salaries set outside the existing salary structures including the provisions in the Constitutional Offices Remuneration Act Cap, 423 of 2009. similarly, most of the Constitutional Commissions as they were established prior to the constitution of the Salaries and Remuneration Commission, adopted the Agenda Four Commission's remuneration and benefits levels or negotiated for remuneration and beneflts above those existing in the Agenda Four Commissions.
5.4 State Corporations 74.

Remuneration for the Chief Executive Officers of State Corporations are guided by the Guidelines on Terms and Conditions of Service for State Corporations, 2004.

The Guidelines classify the State Corporations into eight categories taking into account the nature, size and scope of business and provides salary and allowances bands (minimum and maximum levels) for Chief Executive Officers for each of the categories of State Corporations.
A number of State Corporations have abided by the provisions in the Guidelines however, there are some which have not.

Consequently, a number of Chief Executive Officers are currently receiving 'salaries to self' Salaries and Remuneration Commission 1* Annual Report 39 negotiated beyond the rates in the guidelines causing disparities within the categories.

Table 2 shows prevailing basic salaries for sampled Corporations by category.
Table 2: Current Basic Salaries for Sampled State Corporations by Category Category Sample Institution Guidelines Basic Salaly p.m. Actual Basic Salary p.m. BA Financial Institutions 8B-Financial Corporations BC-Financial Corporations 7B-Financial Corporations 7C-Financial Corporations 64-Regulatory Corporations 6C- Regulatory Corporations Kenya Revenue Authority Kenya Roads Board Industrial & Comm Dev Corp National Housing Corporation KICC SACCO Society Reg Authority NGO Co-ordination 5-Public Universities Egerton University 5-Public Universities Moi University 4B-Training and Research 48- Training and Research 3A-Service Corporations 3-Seruice Corporations KESREF KEMRI Higher Educ.
Loans Board National Aids Control Council 420,000- 620,ooo 400,000- 560,000 210,000- 400,000 210,000- 400,000 180,000- 340,000 260,000- 460,000 110,000- 270,000 260,000- 460,000 260,000- 460,000 180,000- 340,000 180,000- 340,000 210,000- 360,000 180,000- 340,000 Consolidated 1.5M 400,000-560,000 210,000-400,000 3OO,0OO- 540,0oo 27O,OOO- 48O,0O0 4OO,0OO- 560,OOO 18O,OO0- 34O,0O0 260,000-460,000 343,850- 529,00O 180,000-280,000 180,000-340,000 210,000-360,000 28O,OOO- 399,OOO 2-Regional Dev Authorities Tana Athi Dev Authority 2-Regional Dev Authorities 1-Tertiary& Training Inst.
1- Tertiary& Training Inst Kerio Valley Dev Authority Kenya Water Institute Co-operative College 90,000-250,000 90,000-250,000 90,000-250,000 go,o00-250,000 50,000-150,000 274,296 50,000-150,000 too,620-L27,980 NB: Bold in the Table reflects the institutions that are paying beyond the maximum stipulated in the guidelines.

40 CHAPTER SIX 6.0 ACTIVITIES OF THE SALARIES AND REMUNERATION COMMISSION 75.
The Members of the salaries and Remuneration commission were appointed on 16th December, 2011 and sworn in on 10th January, ZOLZ.

Activities undertaken by the Commission to fulfill its mandate since it was sworn in office up to June,20L2 are listed here under.

6.1 Induction Workshop 76. soon after the swearing in, the commission organized an Induction workshop from 6th to 7th February, zoL2.
This was in compriance with the Government's policy which provides for induction and orientation for all persons joining or transferred to Public Service, to help familiarize with the Government regulations and procedures, work environment and requirements.

It also provided the commissioners with an oppoftunity to understand the mandate and magnitude of the issues that it is required to address.
Key resource persons were invited to lead the discussions during the workshop in which the Commission was able to identify the critical issues that needed to be undeftaken immediately and draw a plan of action to guide the Commission's work.

I.EISURE LOITGE RNSONT f .. , 1. orrirrE commissioners in a t'f,y-';::":ffii;:;,'ilitr'" workshop hetd in Salaries and Remuneration Commission 1 Annual Repoft 41 6.2 Establishing the Identity of the Commission 77.
This included labeling the current office premises being occupied by the Commission, getting a postal address, designing logo and website.

The current premises was correctly labeled, a postal address for the Commission acquired and the Commission's logo which is reflected on the cover of the Repoft designed.

6.3 Drafting Regulations for submission of Proposals and Determining and Advising on Remuneration and Benefits 78.
By the time the Commission was sworn in a number of Public Seruice organizations wanted to review their remuneration levels, while some public servants' unions had threatened industrial unrest or called for strike.

A number of Constitutional Commissions and Independent Offices had also been set and given interim remuneration packages.

All these stakeholders had been told to wait for the constitution of Salaries and Remuneration Commission to look at remuneration packages and streamline the process.
To enable the Commission to effectively handle the cases that were on hold, it was important that a structured way that would be seen as fair and objective be designed.

79.

The commission with the assistance of Kenya Law Reform Commission developed Draft Regulations and Guidelines on the procedure for: submission of salaries and remuneration benefits proposals to the Commission; remuneration determination and review for State officers; and advice on remuneration for other public officers.
The Regulations were finalized and presented to the Minister for Finance for tabling in Parliament.

6.4 Interpretation of Government Structure as Provided in the Constitution for Purposes of Setting Remuneration Packages 80.

The Constitution of Kenya, 2010 has restructured the Government to the extent that although a position may be holding a similar name as under the old Constitution, the job content has been redefined.

Further, new positions have also been created.


The Commission could not therefore, assume that the positions were the same and award remuneration package using the old structures without first analyzing such positions.

Salaries and Remuneration Commission 1 Annual Report 42 81.
Consequently, it became pertinent that with the new positions created in Government by the Constitution, there was need for alignment of the general Government structure and placing positions into perspective taking into account the level of authority, responsibilities and accountability as provided by the Constitution and subsequent legislations.

82.
82.

The Commission with the assistance of legal expefts and scholars including the Kenya Law Reform Commission and lawyers and persons who had been involved in the drafting of the Constitution of Kenya, 20L0, developed a draft structure for Government for purposes of setting remuneration and benefits taking cognizance of the constitutional description of the functions and responsibilities of various offices established under the Constitution.
The structure was subjected to stakeholders' consultation and the structure incorporating the comments of stakeholders is ready for subjection to Job Evaluatlon.

6.5 Market Suruey on Private Public Sector Wage Differentials 83.

One of the principles provided in the Constitution that the Commission is expected to take into account in the determination of remuneration is to ensure that the public service is able to attract and retain the requisite skills to provide the services.
One of the issues presented to the Commission as requiring urgent attention was a comparative study to determine wage levels in the Kenyan labour market specifically the public- private public sector wage differentials.

84.

The Commission identified KIPPRA to undertake the study.

KIPPRA subsequently, embarked on and completed the exercise and the Draft final Repoft is ready for stakeholder consultation.

6.6 Database for Analysis and Review/Determination of Remuneration Levels 85.
When the Commission took office in January,20t0, there was no data on existing remuneration especially for Constitutional Offices that had been awarded interim remuneration and benefits.

The Commission embarked on having this data to assist analysis and establish an objective basis for setting and reviewing the interim remuneration and benefits for all State officers as listed under Afticle 260 of the Constitution of Kenya, 2010.

Salaries and Remuneration Commission 1 Annual Report 43 86.
The information has been received and has been used to guide setting of remuneration and benefits of Constitutional Commission conStituted after the conStitution of the Salaries and Remuneration Commission to avoid disparities and ensure fiscal sustainability' 6.7 Job Evaluation Exercise 87.

The inequities and disparities in remuneration had been as a result of setting up or reviewing salaries without objective criteria.
As a result, persons doing work of equal value were paid disparate remuneration packages simply because of the manner of appointment or organization of deployment.

One of the Commission's mandate is to establish equity in remuneration and benefits in the Public Service.
Fufther, one of the issues that was presented to the Commission as a prerequisite to objective remuneration setting was the conducting of job Evaluation Exercise to ensure objectivity and transparency in remuneration setting and as a means of addressing the existing disparities and equities.

88.

The Salaries and Remuneration Commission commissioned Price water House Coopers to undertake a comprehensive Job Evaluation exercise for State Offices and other Officers in the Constitution.
The exercise is underway and is expected to end before December, 2012.

Mrs. Sarah Serem exchange copies of the contract with PWC to carry out iob evaluation exercise for State Officers and other offices in the Constitution Salaries and Remuneration Commission 1 Annual Report 44 6.8 Harmonizing and Restoring Equity in Remuneration cycle 89.

Another aspect that brought disparities and inequity was the varied review cycle existing in the Public Service.
The Salaries and Remuneration commission following presentations received and analysis done as proposed in the Regulations and adopted as interim a harmonized review cycle of four years to create parity of treatment.

6.9 Recruitment of the Secretary/Chief Executive 90.
In recognition of the provisions of the Constitution and the Salaries and Remuneration commission Act, 20LL, for competitive recruitment of the secretary and chief Executive of the commission, the commission adveftised and recruited the secretary and chief Executive by March, zoLz.

6.10 Adequate Secretariat Staff for Commission,s Functions 91.

The commission recruited the Deputy commission secretary and absorbed the Secretariat staff from the former Permanent Public Service Remuneration Review Board.
The staff were skeleton and the commission with the assistance of the Ministry of public Service, analyzed the staff requirements, developed an organization structure, staff establishment, job descriptions and specifications for the interim staff establishment.

The key staff positions were advertised and as soon as the given period of the advert is over, will be recruited to the Commission.
For the rest of the staff process of recruitment will be initiated in the financial year 20L2120L3 6.11 Office Accommodation 92.

The commission's current office premises are those that had been used by the Permanent Public service Remuneration Review Board.

The capacity is 5,000 square feet.

The commission requires about 15,000 square feet to accommodate staff and functions of the commission.

NHIF does not have room for expansion.


The commission therefore, sought and with the assistance of Ministry of Housing identified accommodation at williamson House off Ngong Road.

The contract has been signed with the Landlord.


The lease documents are being prepared by the Ministry of Housing and procurement process for partitioning is completed and partitioning will take place at the beginning of the next financial year Salaries and Remuneration Commission 1 Annual Report 45 6.L2 Cases of setting and Harmonization Handled by the Commission 93.
The Commission has not conducted Job evaluation as a result, the cases that have been brought to the Commission and decisions or advice given have been on interim basis.
The Commission has handled the following cases for setting interim remuneration: (i) Interim remuneration for commissioners of the Independent Electoral and Boundaries Commission (ii) Interim remuneration for Judges and Magistrates Vetting Board (iii) Remuneration Levels for Witness Protection Agency (iv) Interim remuneration and Sitting Allowance for Commissioners of the National Gender and Equality Commission 94.
The commission has also provided advice on following cases : (i) Remuneration for secretariat Staff of Judges and Magistrates Vetting Board (ii) Appeal on remuneration Levels for Secretariat Staff of the Witness Protection AgencY (iii) Review of remuneration Levels for National Youth service, uniformed Personnel (iv) Remuneration for chairman and Members of the Standards Tribunal (v) salary structure for the National Environment Trust Fund (vi) Guidelines on Categorization of Permanent Boa rd s/ Co m m i ssi o n s/ Co m m ittees/Co u n ci I s/Tri b u n a I s (vii) Management of Exit for Permanent Secretaries (viii) Extraneous Allowance for staff attached to the Kenya Informal Settlement improvement Programme (ix) Extraneous Allowance for staff attached to Programme for Rural Outreach of Financial Innovation and Technologies (x) Allowances for sportspersons and oflicials Pafticipating in International Games (xi) Payment of Extraneous Allowance to Police Prosecutors Salaries and Remuneration Commission 1 't Annual Report 46 (xii) Payment of Extraneous Allowance to Immigration Officers Deployed in the Airports (xiii) Payment of Extraneous Allowance to secretariat of the African Ministerial Conference on Housing and urban development (xiv) Payment of Allowances to Members of the National water Towers Management Committee (xv) Payment of Allowances to Staff Seconded to the Office of Controller of Budget 6.13 Stakeholders Consultations Fora 95.
The constitution of Kenya, 2010 Article 230 (2b and c) provided that the nominating bodies would identify persons that were neither their members nor employees.

consequently, majority of the persons appointed as members of the commission did not have public service background.
To enable the Commission effectively appreciate the Public Service, understand the inteface of their mandate and areas of operation with their stakeholders, the commission organized couftesy meetings and fora with key Public Service Organizations and other stakeholders.

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I **a -\ \{ * \ F -t L ta ,L, , a a a o O. o -q -l -t o0 I I t ,t a al ao a The commission held several stakeholders meeting during the period under review' - Salaries and Remuneration Commission 1 Annual Report 47 The fora were used to understand the mandate and scope of work of the various institutions vis a viz the Commissiont Constitutional mandate and identify prospects of enhancing a harmonious and cordial relationships between the institutions and the Commission.
The visitations were carried out in the months of April and May, 20L2.
The organizations visited include: (i) Ministry of Finance; (ii) Ministry of State for Public Service; (iii) Ministry of Local Government ; (iv) Ministry of Labour; (v) Industrial Coutt of KenYa; (vi) The Police Commissioner; (vii) Kenya National Human Rights and Equality Commission; (viii) Independent Electoral and Boundaries Commission; (ix) Public Service Commission; (x) Teachers Service Commission; (xi) Controller of Budget; (xii) State Corporation Advisory Committee; (xiii) Parliamentary Service Commission; and (xiv) Commission on the Implementation of the Constitution.
6.L4 BenchmarkingVisits 96.

The Members of the Commission having been drawn from various institutions and background, needed to have wide perspective of remuneration systems in the public and private sector.

This was envisaged could be achieved through benchmarking with countries and organizations with best practice.

The Commission therefore, identified the Independent Commission for the Remuneration of Public Office Bearers and other relevant institution in the Republic of South Africa.
These Bodies had developed remuneration policies, systems, structures, legislations, and regulations which were operational.

The visit was carried out in the month of May 20L2.

Salaries and Remuneration Commission 1* Annual Report 48 Members of the Salaries Commission in a meeting with Independent Commission for the Remuneration of Public Office Bearers of South Africa during the benchmark study tour in May, 2012 6.15 Challenges Experienced by the Commission 97.
The remuneration package disparities and inequities which is one of the major causes of unrest are as a result of many years of omission and commission including injustices, There are issues that are deeply embedded in remuneration that cannot be effectively resolved by quick fixes.

Their resolution requires analysis, thorough study and coming up with systems and structures which would offer lasting solutions.
The commission however, came in at a time when public seruants patience had run out and they want quick fixes.

Fufther, ideally the commission shourd have been constituted ahead of other Commissions and Independent offices and when a job evaluation had been carried out, to guide in the fixing of remunerations.

All these did not happen.

As a result, the commission has inherited not only old problems but new ones created by the manner remuneration has been set for the new offices.
Commission's challenges therefore, include: (i) Historical injustices with complexity and magnitude requires time to draw appropriate strategies and modes of approach and ailocation of funds to address the same; Salaries and Remuneration Commission 1* Annual Report 49 (ii) Discontent public seruants as a result of inequities and growing number of demands for remuneration reviews by Public Servants; ( iii) Partial/non-implementation of previous remuneration recommendations, which is creating unrest in some sections of the Public Sector due to accruing inequity and unfairness, side by side with rising cost of living and inflation which has eroded the purchasing power of many public servants; Determining remuneration without the beneflt of a comprehensive job evaluation for the entire Public Service which is not only expensive but also time consuming; Inadequate/obsolete equipment and vehicles.
The Commission has only one running vehicle inherited from the PPSRRB, one other vehicle has been grounded for the last eight months.
The equipments, including computers inherited by the Commission were purchased in 2004; (iv) (v) (vi) Accommodation - current offices are too small to accommodate more staff yet the Commission must of essence recruit more staff to effectively carry out its mandate; (vii) Time constraint especially at the initial stage given that the Commission's terms of seruice is part time; and (viii) Inadequate staffing.

Salaries and Remuneration Commission 1* Annual Repoft 50 t fr i' E. I I i I *.
I t, fi fdfi J { i t\ \ ili Remuneration disparities and inequities leading to industrial unrests is one of the major challenges the Commission is grappling with Resolution of remuneration inequities require analysis, thorough study and coming up with structures for long lasting solutions Salaries and Remuneration Commission 1 Annual Report 51 a Salaries and Remuneration Commission 1 Annual Repoft 52 CHAPTER SEVEN 7.O WAY FORWARD 7.L Managing Remuneration Applying Universally Accepted Principles 98.
Historically, management of Public Service remuneration has not strictly adhered to the universally accepted principles for remuneration and benefits determination.

For the Salaries and Remuneration Commission to comply with the provisions of Afticle 230 (5) of the constitution of Kenya and Section 12 of the Salaries and Remuneration Commission Act,2011, the commission will of essence apply the universally accepted principles in the setting, review and advice.
This is the only way it will be able to address the historical injustices and the current disparities and inequities in the Public service.

The commission has therefore, purposed to undertake a number of activities which will be analyzed and planned for in the Strategic plan to be developed.
(i) Ensuring Harmonization, Equity and Fairness; (ii) Setting and advising on competitive remuneration that will ensure that the Public Service attracts, and retains requisite skills for delivery of its services; (iii) Ensuring that there is transparency and participation in remuneration setting by conducting regular job evaluation exercises starting with State offices positions in July, 2072 ; (iv) productivity and performance based remuneration by liaising with relevant institutions to develop productivity indices and measurement tools; (v) Objectivity and impaftiality in remuneration setting by applying principles of pay determination and carrying out market surveys; (vi) Adequacy of remuneration reflecting the cost of living by introducing economic adjustments to remuneration and benefits reviews; (vii) Ensuring that remuneration structure is Consistent with national strategic objectives by linking the realization of Vision 2030 and implementation of the Constitution to remuneration setting and review; Salaries and Remuneration Commission 1 Annual Report 53 (viii) Ensuring Legal compliance and direction management by developing remuneration management policy and legislation; and in remuneration and benefits (ix) Affordability and fiscal sustainability in public compensation Bill by linking remuneration and benefits levels to economic performance and the country's Gross Domestic Product.
99.

The Commission will therefore, ensure that policies and legislations are made to guide the implementation and achievement of the above stated positions.

This process will have to staft with the Commission developing its Strategic Plan and with various strategies to address the various components of remuneration and benefits management.
The Commission will however require the support of all stakeholders in bringing discipline in the management of remuneration and benefits and consequently achieving the adherence to the universal principles.

7.2 Conclusion 1OO.

The Commission appreciates the suppoft it has received from the various stakeholders that has enabled it within the shortest time to operationalize and undertake its functions.
Although the period is too shott for the Commission to be fully operationalized we are banking on our various stakeholders for continued support.

This is more so as the next face of the operationalization of the Commission is likely to raise issues that may not favour every public servant but will seek to establish equity and fairness.

We therefore, call for understanding and forbearance.
Salaries and Remuneration Commission 1 Annual Report 54 I I ), tt I l Swearing in of the Commissioners on 10th January,2012 hF Salaries & Remuneration Commission Rewa.Jlig producti v i ty Salartcr & Romuncratlon commlsslon P.O.BOX43126 - 00100 ilAtROBt EilAlL: src@kenya.go.ke l.-:.