Across Kenya’s economic landscape, a troubling trend is emerging where businesses are laying off their staff despite the fact that they are profitable enough to maintain them. In normal economic cycles, layoffs are associated with financial collapse. However, Kenya is breaking this trend. Companies across sectors such as retail and manufacturing are making strategic decisions to lay off staff even as they strive to maintain their operations. These firms are not failing, they’re adapting to survive in a turbulent market. According to the Central Bank of Kenya’s CEOs Survey, disclosures made by listed firms and private enterprises show that rising operational costs and declining consumer purchasing power have combined to create a situation which has pushed Kenyan employers to make difficult decisions such as laying off of their workers. Rather than wait for a total collapse, firms are proactively slimming their workforce to ensure continuity. While this may preserve the business, it often comes at the cost of household livelihoods and aggregate demand in the wider economy.
Key drivers that can be attributed to this wave of strategic layoffs include reduced consumer demand. The average Kenyan household is grappling with high food prices, elevated fuel costs, increased taxation, and stagnating income. With declining revenue, staff reduction becomes the quickest cost-saving lever. Second, increased operational costs. High inflation, energy prices, and supply chain disruptions have made it expensive to do business. Some companies are reducing their employee headcount while others are suspending their annual recruitment programs and merging departments to reduce overhead. Third, technological and digital advancements. Many roles such as clerical tasks are gradually being replaced with Artificial Intelligence. This evolution is especially visible in banking, telecoms, and logistics, where fewer employees are now expected to handle broader responsibilities.
While companies may achieve short-term stability, the wider economic impact is corrosive. Layoffs reduce household incomes, which further dampens consumption. Moreover, there’s also a mental health toll. Insecurity at the workplace, fear of job loss, and financial instability are creating emotional burnout across the labour force. As work becomes more transactional and less secure, long-term employee loyalty, morale, and productivity are also at risk.
Strategies that can be employed to respond to this worrying trend is employers should explore flexible work models such as part-time roles and remote work. Invest in multi-skilling employees which will enable them to take on broader roles rather than making departments redundant. Moreover, the government should offer temporary tax relief and payroll support for firms retaining workers during downturns. Second, expansion of SME financing and cash flow support will help small businesses survive without cutting jobs. Labour unions should employ strategies such as labour protection policies that will allow phased downsizing with safety nets.
Kenyan companies are being forced into these difficult decisions by a tough macroeconomic climate. However, layoffs must not become the default mode of crisis response. By balancing cost-efficiency with inclusive employment strategies, Kenya can build a business environment that is not only resilient but fair, innovative and future-ready.
