The tax collected from bank workers hit a three-year high last year, propelled by a shift in which lenders are hiring higher-salaried skilled employees to support accelerated automation of services.
Data compiled by consultancy PricewaterhouseCoopers (PwC) on behalf of the Kenya Bankers Association shows that pay-as-you-earn (Paye) tax collections from employees of 38 banks hit Sh29.19 billion in 2021, up from Sh17.9 billion the previous year —the highest since 2019.
The data excludes four small struggling banks.
Paye is a tax charged on the payslips of resident and non-resident individuals in employment and remitted to the Kenya Revenue Authority (KRA).
“This represents a 22.57 percent increase and is the highest PAYE record by participating banks over a three-year period,” the PwC report stated.
But the report noted that the growth in the tax was despite a reduction in the workforce in the banking sector, between 2020 and 2021.
Highly qualified
The banks reported a reduction in the number of workers by 1,604 in 2021. The number of bank employees stood at 30,099 as of the end of 2021.
“This indicates that banks are moving away from employing large numbers of lower cadre staff and moving towards employing highly qualified staff with the differentiated skill set as the sector moves towards greater technology adoption,” the report stated.
In an attempt to boost efficiency and cut costs, most banks have adopted technology and digital services, reducing reliance on the traditional physical banking halls.
Banks have closed some physical branches and reduced their automated teller machines (ATMs).
Latest data show that the bank branches decreased from 1,502 in 2020 to 1,459 in 2021, 43 branches . ATMs declined by 46 to 2,366 in December 2021, from 2,412 in December 2020.
Technology adoption
It said this even as it observed that banks last year closed 43 branches in a move to accelerate technology adoption while Automated Teller Machines (ATMs) reduced from 2,412 in 2020 to 2,366 last December.
Nairobi registered the highest drop in branches, with 33 out of the 43 closed in the capital city.
With the shift, banks are now going after highly skilled workers to serve in the new technology-based service environment, meaning, they have to pay them huge salaries, which eventually translates to a surge in Paye tax.
