Effects of Factory Labour Costs on Annual Returns to Tea Growers: A Case Study of KTDA Managed Factories in Kenya

The study sought to determine the effects of factory labour costs on annual returns to tea growers in Kenya. A case study design was adopted and data was collected through questionnaires. The research was conducted between September 2013 and March 2014. Descriptive and inferential statistics as well as multiple regression analysis was used to analyze the data. The study targeted a sample size of 89 respondents from which 74 was achieved. The sampling frame did consist of employees working in all departments and sections of the KTDA region 6 office and factories. The respondents were drawn from management, directors and external auditors of the 6 KTDA managed factories and stratified random sampling was applied. 52.5% of the respondents were male whereas 47.3% were female. 87.8% of the respondents had attained diploma and degree certificates while 87% of the respondents had served the organization for a period of ≥5 years. 97% of the respondents concurred with labour cost as the deciding factor of profitability. Regression results signpost to a variation of 56.50 on annual returns to tea growers was due to changes in factory labour costs. There was a strong positive relationship between factory labour costs and annual tea growers’ returns at 0.885. The study established that tea growers under KTDA are paid a monthly first payment; known as initial green leaf payment at a fixed rate of Kshs14 per kilogram of green leaf delivered to the factory but the second and annual return made after closure of financial period vary by factories depending on revenues received and costs incurred. Factory labour was identified in the study as one of the key factors that is negatively affecting annual returns to tea growers. Correspondingly, the collective bargaining agreements (CBA) negotiated by KTDA has led to above average seasonal labour payments.