Court rules SRC has say on parastatals pay

The Court of Appeal has affirmed that the Salaries and Remuneration Commission (SRC) has the constitutional authority to regulate the salaries and benefits of public officers in trustee corporations.

Judges Asike Makhandia, Agnes Murgor and Sankale ole Kantai overturned a decision made by the Employment and Labour Relations Court, which had limited SRC's oversight at the National Social Security Fund (NSSF).

The case revolves around a long-standing dispute between the SRC, NSSF, the Kenya Union of Commercial Food and Allied Workers (KUCFAW), and the Attorney General.

The issue began in 2016 when the SRC issued a circular to regulate salary negotiations between NSSF and the union.

In response, NSSF and KUCFAW challenged the SRC’s authority, arguing that it had no jurisdiction over the salaries of employees at public trustee corporations like NSSF.

In its defense, SRC emphasised that its role, as outlined in the Constitution, extends to overseeing the remuneration of all public officers, including those employed by state corporations.

The Employment and Labour Relations Court sided with the union, ruling that the SRC’s circular was inapplicable to NSSF.

However, the commission appealed the decision, asserting that its constitutional duty to manage public sector salaries could not be undermined.

And the Court of Appeal concluded that NSSF employees are public officers under the Constitution and, therefore, fall within the SRC’s mandate.

The judges noted that the Labour Court had misinterpreted the Constitution and its provisions relating to public sector remuneration.

"In reaching the conclusion that the employees of NSSF are not subject to the requirements of the SRC Act and regulations, we find that the Employment and Labour Relations Court misapprehended the Constitution and the law, and in so doing, arrived at the wrong decision. It is necessary, therefore, to interfere with that decision," the ruled.

Justice Makhandia-led Bench said as long as a corporation’s salary budget is approved by the Parliament or derived from government funds, the SRC has the jurisdiction to determine the remuneration of its employees.

The ruling clarified that state corporations, including NSSF, must comply with the SRC’s regulations concerning salaries, benefits and remuneration.

The judges emphasised that public entities drawing funds from the Treasury must adhere to the compensation guidelines set by the SRC, regardless of whether they are national or county government bodies.

“Any corporation that derives its salaries from parliamentary appropriations or funds retained by the State corporation for the purposes of defraying expenses as empowered by an Act of Parliament, must have its remuneration and benefits determined by the SRC.” 

The court further reinforced the SRC's crucial advisory role.

“The SRC has a constitutional duty to advise the national and county governments, as well as other public entities, on matters related to remuneration. This duty includes ensuring that all public officers, regardless of whether they are employed by the national government or state corporations, are compensated fairly,” the ruling stated. [Nancy Gitonga]

In addition to overseeing salary matters for government employees, the SRC is empowered to issue advice to public trustee corporations regarding their employees' compensation, as part of its constitutional mandate.

The ruling also reinforced the role of the Auditor General, clarifying that the office is responsible for auditing financial statements of state organs and public entities, submitting annual reports to Parliament and relevant county assemblies to ensure transparency and accountability.

In its appeal, the SRC had argued that limiting its powers over public sector remuneration would result in an erosion of its constitutional mandate and weaken its ability to uphold fairness and consistency in salary matters across government entities.