How government and firms can pay workers double before Christmas

What you need to know:

  • In some cases, those who do not wish to have their salaries saved for them can opt out of the scheme.
  • In December, the employees are then paid double salary. That means there is enough money to take care of the Christmas festivities – and school fees in the New Year.
  • The truism that prices in a capitalist society shoot up easily but go down seldom reminds one of the adage that it is easy to go to Mombasa but exceedingly difficult to leave.

Every year without fail, the President of the republic winds up his Jamhuri Day speech by urging parents not to squander all their money during the long Christmas holidays.

Remember you need to pay school fees next year, is the call that has been issued year after year by Moi, through the Kibaki presidency and now by Kenyatta.

The heads of state are pointing to a genuine problem. Most Kenyans are not famous for saving their money and planning ahead.

The December holidays usually trigger panic with fathers especially scrambling to find enough money to treat their children and take their families on holiday.

It is not a uniquely African problem. But there is a solution which is applied by a number of countries in South America.  

Every year, governments and companies in a range of places from Brazil to Bolivia to Argentina pay their workers a double salary in December.

They accomplish this by dividing everyone’s salary by 13 months instead of 12. So, if for example, someone is on a salary of Sh50,000, meaning their annual salary is Sh600,000, their monthly pay is calculated by dividing by 13.

That means every month, they receive a salary of Sh46,154 and not Sh50,000, resulting in a monthly saving of about Sh3,800.

In December, the employees are then paid double salary. That means there is enough money to take care of the Christmas festivities – and school fees in the New Year.

The scheme has been adopted in a number of European countries, including Spain (which divides the months by 14 and pays a double salary in the middle of the year and at the end of the year) and in Belgium and Switzerland.

The advantage of offering this bonus is that it frees millions of dollars which offer a huge internal boost to the local tourism and retail industries, meaning that hotels and others don’t have to rely too much on foreign tourists.

OPT OUT OF THE SCHEME

In some cases, those who do not wish to have their salaries saved for them can opt out of the scheme.

The scheme has proved very popular in the countries in which it has been introduced and it also serves as a way of paying annual bonus because companies which have performed well can add an additional boost to the double salary paid in December.

In Bolivia, which is governed by the progressive socialist Evo Morales, his government has decided that as long as the economy grows at a rate of 4.5 per cent and above, it will pay three months’ salary in December, topping up each government employee’s pay by an extra one month’s pay. He invited private firms to do the same last year and attracted a lot of grumbling.

Even if companies do not pay an extra bonus, handing salaried employees a double salary in December would provide a timely stimulus to the economy – and would spare children the embarrassment of being kicked out of school because all the money went into buying chapati and kuku during Christmas.   

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The other day the BBC aired a story about how airlines are among the biggest winners of the sharp fall in oil prices.

Jet fuel easily accounts for the biggest expense of the companies, the report said, so the interviewer asked if airlines would lower their prices now that they were spending so little on fuel.
No, one executive said. They have been making low profits in recent years, he said, and the low prices were a time for them to recover.

The truism that prices in a capitalist society shoot up easily but go down seldom reminds one of the adage that it is easy to go to Mombasa but exceedingly difficult to leave.

The Energy Regulatory Commission is pulling Kenyans’ legs by claiming that it can’t reduce pump prices lower despite crude prices falling by 40 per cent.

It is true that crude is not the only factor that accounts for the pump price. Taxes and levies are the main component. But prices were sent shooting up by rising crude prices and the fact that now petrol at the pump has not dipped below Sh100 despite recent developments can only lead to the conclusion that the supposed regulator has been captured by industry players.