The National Treasury says that the government will establish an Unemployment Insurance Fund(UIF) to cushion workers in financial distress.
The proposal contained in the National Treasury post COVID-19 Economic Recovery Strategy 2020-2022 is expected to provide them with short-time relief when they become unemployed, are on unpaid leave or are unable to work because of illness.
“The amount of contribution to the fund with be two per cent which include one per cent paid by employees from remuneration paid and one per cent paid by the employers,” National Treasury said.
According to the latest statistics from the Kenya National Bureau of Statistics (KNBS), only 15.9 million Kenyans found in both the formal and informal sectors would be eligible for the tax with other Kenyans being unemployed or outside the labour force.
The proposal has set the stage for increased taxation for employed individuals who one percent of their pay will be matched up by employers towards the UIF that aims at generating at least sh23 billion anually on implementation.
Kenyans holding jobs could soon be obligated to pay a two percent tax from their incomes to cushion the unemployed as part of new government plans in the next two years.
The Planning Ministry along side its development partners is expected to sink in a total of Ksh.300 million to the fund across the next two fiscal years to June 2022.
The unemployment fund to be managed by the Social Protection Department under the Labour Ministry, mirrors that South Africa, which has so far disbursed huge amounts of money to support million of workers and businesses affected by the Covid- 19 pandemic.
The South African scheme also involves employees contributing one per cent of their pay which is matched up by employers.
Companies, which were already struggling with flagging sales since the beginning of the year, resorted to job cuts and unpaid leave when the Covid-induced shutdowns and restrictions were imposed on March 25.
About 1.72 million workers lost jobs in three months from March to June when Kenya imposed coronavirus containment measures that led to layoffs and pay cuts.
Now, the state seeks to offer a monthly stipend during periods of mass job cuts to ease the pain of loss of income and put money in people’s pockets to demand for firms’ goods and services.