Navigating the complex labour laws governing employment practices is essential when running Nigeria payroll. However, building an in-house compliance team may not be the most efficient way to manage your remote team’s payroll in Nigeria.

Regardless of size, global companies need help to secure in-country expertise for localised payroll service. This is where a partner like Workforce Africa provides significant value in supporting global firms to maintain compliance when handling payroll in Nigeria, addressing every intricate detail, including;

• Salary computation requirements,
• Taxation legislation specifics (social security, employee income tax, corporate tax, VAT and other employee deductions.
• Benefits administration, and more (health insurance, pension, paid leaves, holiday compensation.

Workforce Africa simplifies hiring and payroll compliance for offshore talent management in Nigeria. No need for a subsidiary or entity setup. From contracts and onboarding to taxes, payroll, and admin tasks, partnering with us – a payroll firm in Nigeria will help you focus on growth for greater levels of success.

Nigeria Country Overview

The Republic of Nigeria lies in West Africa. It is predominantly an English-speaking country. Two critical cities in Nigeria are Abuja, the capital, and Lagos, the economic hub. These urban centres act as transit points to ecotourism destinations and beach resorts. With a population exceeding 218.5 million people, Nigeria boasts a significant demographic presence.

In recent years, key industries experiencing growth include petroleum production, food processing, and cocoa. Nigeria boasts a market-based, diversified economy comprising oil and gas, timber, aluminium, agriculture, mining, and services. Considerations such as the low labour cost and abundant natural resources make Nigeria attractive for businesses seeking expansion opportunities.

Although Nigeria possesses a highly skilled workforce, hiring and establishing a team can be time-consuming and challenging. However, partnering with an Employer of Record (EOR) or Professional Employer Organisation (PEO) in Nigeria facilitates swift market entry. It manages all legal complexities associated with operations in the country.

Payroll Processing in Nigeria

Local labour laws in Nigeria govern payroll processing, with each employee’s salary potentially calculated differently. Due to compliance concerns, processing payroll at scale can become complex, cumbersome, and risky. Here are the phases of payroll processes global businesses should understand:

• Pre-payroll Phase: Your organisation’s unique approach to payroll compliance shapes its policies and processes, including payroll preparation. Global firms must prioritise essential business elements in the pre-payroll phase, such as accurate business profile documentation and tailored work location policies, which is crucial. Customise leave and work policies to align with local standards in Nigeria to ensure compliance and transparency while collaborating closely with compliance teams or partners to help adhere to statutory requirements throughout the payroll management process for your remote team. In this phase also, standardising compensation packages to conform with local payment norms, such as payment cycles, which enhance compliance and meet employee expectations, is necessary.
• Payroll Calculation Phase: Streamlining input collection and validation processes ensures accurate wage calculations in this phase of payroll processing. This phase involves the actual calculation of wages, with a primary focus on this task. Utilising software automation and digital document submission tools makes payroll calculations efficient and reduces the risk of human error in this process.
• Post-payroll Phase: This stage involves sending an invoice to the bank or payment processor to initiate salary disbursement. The post-payroll phase primarily focuses on salary payments, although accounting and reporting are also vital for related purposes. Payroll accounting internally tracks all wages disbursed, representing a significant company expense. Reporting all payments and deductions to an external authority ensures compliance with regulations, as governing bodies often demand various supporting documents like tax forms related to payroll.

Payroll Components in Nigeria

Ensuring compliance with local labour laws while running payroll in Nigeria necessitates understanding the essential components that require careful consideration.

Here are some aspects comprehensively needed to navigate Nigeria’s payroll compliance:

• Salary/Wages
• Overtime benefits
• Social security contribution
• Paid leaves
• Paid holidays
• Payroll taxes
• Other laws

Navigating Nigeria Payroll Compliance

Nigeria’s employment regulation primarily revolves around Labour Law Act 2004, along with pertinent sections of other laws and acts.

The Labor Law outlines critical aspects of payroll processing and compliance with crucial employment practices:

• Salary/ Minimum Wage: The current minimum wage set in 2019 was NGN 30,000.
• Overtime Benefits: A workday in Nigeria is a standard 8 hours shift (excluding 1 hour lunch break) and 40 hours a week. Regular hours and overtime pay rates are set in the employment contracts or collective bargaining agreements.
• Social Security Contribution: In Nigeria, there isn’t a traditional social security system like some other countries. However, there are mandatory contributions made by both employers and employees towards benefits like pensions, healthcare, and housing. Here’s a breakdown:
• Pension Contributions:
  • The Pension Reform Act of 2014 established a mandatory contributory pension scheme (CPS) for both public and private sectors.
  • Employers contribute a minimum of 10% of the employee’s basic, housing, and transport allowances.
  • Employees contribute a minimum of 8% of basic, housing, and transport allowances.
  • Some employers may choose to cover the entire contribution (18%) or more.
• National Health Insurance Scheme (NHIS):
  • This scheme provides access to healthcare services for employees.
  • Contribution varies depending on the employer type:
  • Federal Government: Employer – 3.25%, Employee – 1.75%
  • Private Sector: Employers with 5 or more employees contribute – The exact rate may vary, but it’s mandatory.
• National Housing Fund (NHF):
• • This scheme helps Nigerians access mortgages for affordable housing.
  • Applies to Nigerian employees earning N30,000 per year or more (minimum wage as of 2019).
  • Contribution: 2.5% of the employee’s monthly income deducted by the employer and remitted to the Federal Mortgage Bank of Nigeria. (Note: As of June 3, 2024, minimum wage negotiations are ongoing).
  • Private sector compliance with NHF is currently optional.

Payroll Taxes

• Rest Hours: In every period of 7 days’ work, employees are entitled to at least a day off. Also, if an employee works for more than 6 hours a day, he/she must be given 1 hour of interval on that day.
• Sick Leave: Employees are entitled to 12 days’ sick leave for a temporary illness that must be certified by a medical practitioner.
• Holidays: An employee after 12 months of continuous service, is entitled to a holiday with full pay of at least 6 working days (this is exclusive of all public holidays).
• Maternity and Paternity Leave: All female staff are entitled to a minimum of 12 weeks maternity leave with full pay. Paternity leave is optional as the Nigerian Labour Act does not recognise paternity leave and makes no such provisions.

In Nigeria, employees can be granted compassionate/ special leaves on some family events. Such leave shall be paid within the limits and deadlines specified.

• Paid Public Holidays: In Nigeria, the paid holidays are as follows:
  • January 1: New Year’s Day
  • Good Friday: The Friday before Easter
  • Easter Monday: The Monday after Easter
  • May 1: Workers’ day
  • Eid al-Fitr: date varies
  • Eid al-Malud: date varies
  • Eid al-Adha: date varies
  • June 12: Democracy day
  • October 1: Independence Day
  • December 25: Christmas day
  • December 26: Boxing day

Payroll in Nigeria also encompasses termination and probationary periods law. Probation typically spans six months, extending to eight months for managerial roles. Termination notices hinge on employee work classification and tenure. For instance, workers in specific sectors with over five years of service necessitate three to four months’ notice.

Payroll Outsourcing in Nigeria

Payroll outsourcing in Nigeria primarily helps global companies in the country file tax returns on time, ease the pressure of work, reduce the burden of processing payment for their workforce in Africa with 100% accuracy and within timelines – Companies want to avoid errors in employee salaries, as salary is one of the critical reasons for attrition.

Collaborate with an Africa employer of record and payroll solutions provider such as Workforce Africa to strategically outsource your payroll operations while ensuring compliance with local labour regulations. Additionally, leverage our flexible service offerings to expand your international teams as needed.