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Compliance for Multinationals - Minimum Wage in Nigeria

Compliance for Multinationals – Minimum Wage in Nigeria

What Is Minimum Wage?

Minimum wage is the lowest amount of pay an employee can legally receive from his or her employer. In the United States, the current federal minimum wage is $7.25 per hour.

However, for Nigeria, the history of minimum wage is more complicated.  

History of the Minimum Wage in Nigeria 

The first minimum wage in Nigeria was declared in 1981. At the time, the minimum wage was set at N1,500 per month for public sector employees. This was later increased to N3,000 per month in 1991.

In 2000, the minimum wage in  Nigeria was increased to N5,500 per month. In 2011, the Nigerian government implemented a new minimum wage of N18,000 per month. This was an increase of over 500% from the previous minimum wage of N3,000 per month.

However, the 2011 minimum wage was revised to N18,500 in 2013. The government also increased the minimum wage to N30,000 per month in 2018. The 2018 minimum wage was met with some pushback from employers, who argued that it would hurt their profitability.

The government defended the move, arguing that it was necessary to help alleviate poverty and reduce inequality in the country.  

Federal And State Minimum Wage In Nigeria

A. Federal Minimum Wage

As already mentioned, the current minimum wage is ₦30,000 per month. This has been the mandated minimum wage since 2019 and is applicable to all workers across the country.

This wage is set by the National Minimum Wage Act and is the same for both public and private sector workers. It is important to note that this minimum wage does not include the 13th month salary or the cost of living allowance.  

B. State Minimum Wage

The minimum wage in each state of Nigeria is set by the respective state government. This is usually slightly higher than the federal minimum wage, as each state takes into account the cost of living and other factors when setting its minimum wage rate.

For example, in Lagos, the minimum wage is ₦35,000 per month, while in Kaduna it is ₦30,000. It is important to note that these rates can change from year to year, so it is important to check with the relevant state government for the most up-to-date minimum wage. 

Compliance With Minimum Wage Laws in Nigeria

Compliance With Minimum Wage Laws in Nigeria

As the world continues to become more interconnected, it is essential for global organizations to understand the importance of following labour laws in the countries in which they operate.

This is especially true in Nigeria, where the government has put in place regulations to ensure that workers are paid a minimum wage. 

Organizations that do not comply with these laws, may experience a range of problems. Some of these include >> 

Stiff Penalties

Non-compliance with laws on the minimum wage in Nigeria can result in fines and other penalties for the organization. The Nigerian government has put in place stiff penalties for employers who violate the minimum wage laws.  

These include fines, a ban on the organization from conducting any business with the government, and even jail time for the individuals responsible.

As a result, it is essential for organizations to ensure they are compliant with the minimum wage laws to avoid these penalties.  

Poor Brand Reputation

Non-compliance with the minimum wage in Nigeria can lead to a range of reputational issues.

Employees who are aware of being short-changed with respect to the minimum wage may decide to take action, leading to unfavourable publicity for the organisation.  

This can lead to a loss of trust in the organization and may even result in clients choosing to take their business elsewhere.

Employee Disengagement

Furthermore, not complying with the minimum wage in Nigeria can have an impact on employee morale. When employees feel they are being “used” they are more likely to become disillusioned and disgruntled.

This can lead to a decrease in productivity and motivation, and eventually resulting in a high turnover of employees.

Employee-Led Litigations 

Not enacting minimum wage in Nigeria laws can result in legal action from the employees.

Employees may decide to take the organization to court, claiming that their rights are being violated by the organization’s failure to comply with the minimum wage laws. 

This can lead to costly litigation fees for the organization whether or not they win the case. Besides, growing employee activism and labour laws could eventually result in the organizations being forced to settle employees with hefty sums. 

Partner With Workforce Africa 

Organisations looking to expand into the Nigerian market can avoid minimum wage compliance issues by partnering with a Nigeria Professional Employment Organisation (PEO) and Employer of Record (EOR) like Workforce Africa.

Workforce Africa will be responsible for handling the employment relationship between the organisation and its Nigerian workforce, including making sure the organisation is compliant with Nigeria’s minimum wage laws.

Workforce Africa will also provide benefits administration, payroll, tax compliance and other legal and compliance support services.

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