Payroll & Employment Guide: Nigeria

Employment Contract

Employment contracts in Nigeria may be:

• Full-time or part-time
• Permanent or fixed-term
• Remote or onsite

All contracts must be issued in writing no later than three months after the employee begins work. Contracts must include:

• Working hours and schedule
• Base salary and pay cycle
• Allowances (housing, transport, utility, etc.)
• Annual and sick leave entitlements
• Pension contributions
• Statutory deductions
• Notice period
• Termination conditions

Nigeria allows flexible compensation structures, but transparency in contracts is legally required.

Notice Periods

The statutory notice period ranges from:

• 1 week: employees with less than 2 years of service
• 2 weeks: 2 to 5 years of service
• 1 month: 5 years or more

Employers may offer longer notice periods based on role and seniority.

Termination of Employment

Employment may be terminated due to:

• Contract expiry
• Redundancy or reorganisation
• Incompetence or misconduct
• Mutually agreed separation
• Failure to meet performance expectations

Redundancy requires severance compensation. Termination must be documented and communicated in writing.

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Employee Benefits

Employees in Nigeria receive certain statutory benefits, while many employers offer additional perks to enhance competitiveness.

Mandatory Benefits

• Paid annual leave
• Public holiday entitlement (12 days)
• 12 days of sick leave
• 12 weeks maternity leave
• Pension contributions
• National Health Insurance Scheme (NHIS) coverage (basic)
• Employee Compensation Scheme (workplace injury insurance)

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Leave Policies

Annual Leave:

Minimum 6 days for employees with 12 months of service; most employers offer 10–20 days depending on seniority.

Sick Leave:

Up to 12 days of paid sick leave per year.

Parental Leave:

• Maternity leave: 12 weeks at minimum 50% pay (private sector); many companies offer full pay.
• Paternity leave: 2–3 weeks, depending on state; Lagos and Enugu states mandate paternity leave.

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Healthcare

Nigeria operates a hybrid healthcare model:

• NHIS (basic public health coverage)
• Private HMO plans are widely used by employers

Most companies provide private healthcare insurance to remain competitive.

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Taxes in Nigeria

Nigeria uses a Pay-As-You-Earn (PAYE) system administered at the state level.

Personal Income Tax Rates (2026 Reference):

Progressive bands from 7% to 24% after applying consolidated relief allowances.

Tax Allowances & Reliefs Include:

• Consolidated Relief Allowance (CRA)
• Pension contributions
• National Housing Fund contributions
• Life insurance premium deductions

Employers must calculate and remit PAYE tax monthly to state tax agencies.

Payroll in Nigeria

Payroll in Nigeria must follow statutory requirements for taxes, pensions, and allowances. Approved payroll structures typically include:

• Base Salary
• Housing Allowance
• Transport Allowance
• Utility Allowance
• Meal Allowances
• Other taxable and non-taxable components

Base Salary

Varies significantly by industry, region, and skill level. Must meet the statutory minimum wage standards.

Payment Schedule

• Typically monthly
• Payments made via local bank transfer

Additional Payments

• Optional bonus
• Performance rewards
• 13th-month salary (common in banking and finance sectors)

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Taxes & Statutory Contributions

Pension Scheme (Contributory Pension Scheme – CPS)

• Employer: 10%
• Employee: 8%

Employee Compensation Fund (ECF – NSITF)

Employer-funded insurance for workplace injuries.

PAYE Tax

Withheld monthly.

National Housing Fund (NHF)

Employee: 2.5% (mandatory for certain salary groups)

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Payroll Declarations

Monthly:

• PAYE to state authorities
• Pension to PFAs
• NHF (where applicable)

Annual:

• Annual employer tax summary
• Annual employee tax certificates (Form G)

Payroll Currency: NGN

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Legal Regulations

Nigeria’s labour framework is governed by:

• Labour Act
• Pension Reform Act
• Personal Income Tax Act
• Employee Compensation Act

Total Employment Cost:

Employer cost typically adds 10–20% on top of gross salary.

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Work Permits & Visas for Nigeria

Foreign nationals must obtain:

• STR Visa (Subject to Regularisation)
• CERPAC (Combined Expatriate Residence Permit and Alien Card)
• Work authorization through employer sponsorship

Processing may take several weeks and requires documentation.

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Employer of Record (EOR) in Nigeria

EOR services in Nigeria allow companies to hire employees legally without establishing a local entity. The EOR acts as the legal employer while you retain control over day-to-day work and performance. This ensures full compliance with Nigerian labor, tax, and employment regulations.

Your EOR manages:

• Compliant employment contracts aligned with Nigerian labor laws
• Monthly payroll processing and payslip management
• PAYE tax deductions and statutory filings
• Pension contributions and mandatory benefits
• Employee onboarding and offboarding processes
• HR documentation and compliance management

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PEO Services in Nigeria

PEO services in Nigeria support companies with a local entity by managing HR, payroll, and compliance functions. This helps employers streamline operations while maintaining direct control over their workforce. Local expertise ensures adherence to Nigerian labor and tax regulations.

PEO solutions assist with:

• HR administration and employee record management
• Payroll management and statutory deductions
• Benefits administration and pension support
• Compliance with Nigerian labor and tax laws
• Drafting and management of employment contracts

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