County governments could be forced to review their workforce, suspend fresh recruitment and tighten payroll controls as the Commission on Revenue Allocation warns that rising salary expenses are eating into funds needed to finance development and deliver public services.
The commission's latest assessment of county finances has called for firm action against excessive recurrent spending, including measures to reduce or reorganise staff numbers in administrations that have exceeded the legal wage bill limit.
“Counties exceeding the statutory limit should implement expenditure rationalisation and workforce management measures to contain recurrent expenditure within sustainable levels,” the commission said.
The proposed changes could put county employees under pressure, particularly if governors adopt staff reductions as part of efforts to bring spending within the limits set by law.
The report indicates that some counties have already suggested cutting or reorganising their workforce, auditing payrolls, automating payment systems and halting recruitment as ways to slow the growth of salary expenses.
“Counties proposed measures such as staff rationalisation, payroll audits, automation, hiring freezes and performance-based management to contain wage growth,” the report states.
The commission's concerns follow an examination of county spending plans that revealed widespread failure to comply with the statutory requirement governing expenditure on salaries and employee benefits.
Salary spending exceeds legal limit in 42 counties
During the 2024-25 financial year, 42 counties spent more than the permitted 35 per cent of their total revenue on personnel costs, leaving only four within the prescribed limit.
“Personnel emoluments emerged as a major concern, with only four counties meeting the legal threshold requiring wage bills to remain below 35 per cent of total revenue,” the report states.
Siaya, Tana River, Kilifi and Narok were the only counties that kept their wage bills within the legal ceiling during the period.
Taita Taveta recorded the highest proportion of revenue spent on salaries and employee benefits, at 64 per cent. Its allocation was almost twice the permitted limit, highlighting the extent of the financial pressure facing some devolved governments.
The findings appear in the CRA's review of County Fiscal Strategy Papers for the 2026-27 financial year. The assessment considered spending patterns, expected revenue, pending bills and compliance with the principles that guide responsible management of public funds.
Led by CRA chairperson Mary Chebukati, the commission warned that the growing cost of employing county workers was placing the financial stability of devolved governments at risk.
With a large share of revenue committed to salaries and other recurring obligations, counties have less room to finance infrastructure, expand public services and meet other development needs.
The commission's review suggests that the problem may continue in the current financial year, as several administrations have projected personnel spending above the statutory threshold.
“Many counties projected wage expenditures above the threshold in FY 2026-27, raising concerns about fiscal sustainability,” the report states.
Embu projects highest wage allocation
The financial plans submitted by counties show that compliance with the wage bill ceiling remains a challenge beyond the 2024-25 period.
Only four counties projected personnel expenditure within the legal threshold in their 2026-27 fiscal strategy papers. Kilifi expects to spend 31 per cent of its revenue on salaries and employee benefits, while Migori, Kwale and Tana River have each projected an allocation of 35 per cent.
A further 33 counties have planned to spend more than the permitted share of their revenue on personnel costs. Embu recorded the highest projected allocation, at 56 per cent.
Another 10 counties did not provide wage bill projections, making it difficult to establish how their expected salary expenses compare with the statutory requirement.
To address the problem, the CRA has proposed a range of measures aimed at improving payroll management and reducing pressure on county budgets.
These include staff rationalisation, regular payroll audits, recruitment freezes and the removal of ghost workers from government payrolls.
County administrations have also suggested adopting biometric systems to confirm the identity of employees, limiting new appointments to essential positions and linking remuneration to productivity.
Such measures could change recruitment and staff management practices across county governments, particularly those struggling to keep their wage bills within the required limits.
The recommendations come at a time when counties must balance their obligations to employees with the need to finance operations and development projects from limited public resources.
Recurrent costs leave little for development
The CRA assessment also found that heavy spending on routine government operations has restricted the amount available for development in several counties.
Nairobi recorded the highest proportion of recurrent expenditure in 2024-25, with the costs of running the county accounting for 88 per cent of its total expenditure.
“Further, it is of great concern that recurrent expenditure in Nairobi stood at 88 per cent, leaving only 12 per cent for development expenditure,” CRA states.
Machakos was next, spending 84 per cent of its total expenditure on recurrent costs. Kisumu recorded 83 per cent, while Kajiado and Kiambu each spent 82 per cent.
The figures point to a spending pattern in which routine obligations consume most of the available budget, leaving a smaller share for projects intended to improve infrastructure and public services.
Nairobi's development spending also fell short of the legal requirement during the three financial years covered by the review.
The commission found that the capital allocated an average of 25 per cent of its budget to development over the period, below the statutory minimum of 30 per cent.
The findings add to concerns about whether county governments can maintain adequate services and deliver development programmes while meeting their salary obligations.
Through its recommendations, the CRA is calling for tighter control of personnel costs and other recurrent expenses to ensure that county finances remain sustainable and a greater share of public money can be directed towards development.