Employment Taxes

6.1: Employment in the banking sector

Employment taxes (PAYE, employer and employee NSSF contributions and employee NHIF contributions) contributed by the sector in 2017 and 2018 amounted to KES 20.1bn and KES 20.8bn respectively. This represented a modest growth of 3.5% year on year. The largest component of employment taxes is PAYE

6.2: PAYE increased despite decline in employee numbers

The number of employees employed by the study participants reduced from 29,058 in 2017 to 28,352 in 2018. This represents a marginal reduction of 2.4%. The decrease in employment numbers was due to restructuring activities within the industry over the period due to the challenges banks have been facing since the introduction of the interest rate regime as well as migration by banks to digital distribution channels away from the traditional ‘brick and mortar’ channels. The reduction in employee numbers is in tandem with overall reduction in operating expenses of banks by 4% over the period 2017 to 2018.[1]

Despite the decline in employee numbers, the amount of PAYE collected by participating banks grew from KES 18.7bn in 2017 to KES 19.2bn in 2018. This trend is due to the increase in wages paid to higher cadre employees in the sector and the continued replacement of lower cadre jobs within banks as the sector increasingly adopts technology.

6.3: Banking sector’s PAYE per capita is five times higher than the PAYE per capita in the country

Over the two-year period, the banking sector’s PAYE per capita was KES 660k. This is five times higher than the country’s PAYE per capita. The high PAYE per capita is reflective of the high compliance levels by banks which operate in a highly regulated industry as well as the relatively higher wages of bank employees compared to other sectors.

In 2017, banks contributed 6% of all PAYE receipts collected in Kenya. This compares to 5% in 2018. Despite the decline in employee numbers, the amount of PAYE collected by participating banks grew.