Employer of Record in Nigeria

Hiring in Nigeria for the first time can be overwhelming, especially when navigating unfamiliar employment laws.  Whether you hire independent contractors, set up a legal entity, or use an EOR service, understanding the local employment landscape is crucial for success.  Playroll’s comprehensive guide can help you get started if you're hiring locally or relocating a team member.

Companies can hire employees in Nigeria in the following three ways:

• Setting up a local entity. Entity establishment reduces risk exposure and enables direct hiring, but can be costly and time-consuming – making it less practical for companies seeking quick and flexible solutions for hiring in Nigeria.
• Partnering with an Employer Of Record. An EOR, like Playroll, is a third-party entity that serves as the legal employer of your international workforce which hires, pays, and manages compliance with Nigeria’s labor laws and tax regulations.
• Hiring independent contractors. Hiring contractors gives companies a flexible, affordable alternative to hiring local employees, though it involves unique misclassification risks.

Businesses can only operate smoothly in Nigeria if they comply with local labor laws including drafting compliant employment contract agreements and meeting taxation and payroll obligations. Learn more about the employment laws and regulations in Nigeria below, to avoid any compliance issues.

Employment Contract Requirements

In Nigeria, it is mandatory for both employer and employee to sign a written employment agreement. To be legally compliant, employment agreements must include the following information:

• Names of the employer and employee
• Employees address
• Position title and description of work
• Beginning date of employment
• End date of employment, for a fixed-term contract
• Notice period for termination
• Salary, including frequency of payment
• Work hours
• Leave pay and conditions for incapacity due to illness or injury
• Any special conditions

Onboarding Process

We can help you get a new employee started in Nigeria quickly, with a minimum onboarding time of just 1-2 working days. The timeline starts once the employee submits all required information onto the Playroll platform and completes any necessary local authority registrations.

For non-nationals, the Right to Work assessment (if applicable) may add up to three extra days. Additional time may be needed for follow-ups on this assessment. Please note, payroll cut-off dates can impact the actual start date. Playroll's payroll cut-off date is the 10th of each month unless otherwise specified.

Working Hours in Nigeria

Normal full time working hours are 40 hours per week. However, the Labour Act does not specify general working hours rather these are fixed by the mutual agreement or collective bargaining within the enterprise or industry.

Overtime in Nigeria

Employers in Nigeria can require their employees to work overtime, but they must pay their employees overtime pay for any hours worked in excess of the standard 40-hour workweek. Overtime pay is calculated at 1.5 times the employee's normal hourly rate.

Probation Period in Nigeria

The probation period in Nigeria is typically 3 to 6 months. However, there is no specific legal requirement for a probation period in Nigeria. The length of the probation period is usually specified in the employee's employment contract.

Fiscal Year in Nigeria

1 January - 31 December is the 12-month accounting period that businesses in Nigeria use for financial and tax reporting purposes.

Payroll Cycle in Nigeria

The payroll cycle in Nigeria is usually monthly, with employees being paid at the end of the month.

Minimum Wage in Nigeria

The minimum wage for employees in Nigeria is typically ±437.50 NGN per hour, amounting to ~70,000 NGN per month for a typical 40 hour work week.

Bonus Payments in Nigeria

There are no statutory requirements for 13th-month salary payments. However, bonuses are common at the discretion of the employer.

Employer Tax Contributions

Employer payroll contributions are generally estimated at an additional 1% - 12% on top of the employee salary in Nigeria.

Employee Payroll Tax Contributions

In Nigeria , the typical estimation for employee payroll contributions cost is around 10.5%.

Individual Income Tax Contributions

Individual income tax in Nigeria is a progressive tax, meaning that the tax rate increases as the taxable income increases. it ranges from 7% to 24%

Pension in Nigeria

As per the Pension Reform Act 2014, employees must contribute a minimum of 8% of their basic salary, housing allowance, and transport allowance, while employers must contribute a minimum of 10% of the same sum.

Mandatory Leave Entitlement in Nigeria

The annual leave entitlement in Nigeria is 21 - 28 days for a full time worker. These can include public holidays on top of that or within those days, which would otherwise be unpaid.

Public Holidays In Nigeria

Nigeria has 11 public holidays in a calendar year, which are not included in the minimum paid leave entitlement and are taken in addition to annual leave. The following are national holidays in Nigeria:

Paid Time Off in Nigeria

Nigerian workers are entitled to annual leave of at least six working days with full salary, subject to the following details:

• The annual leave is increased to at least twelve working days for young workers (under sixteen) including apprentices.
• A worker must have worked for at least twelve months in order to qualify for annual leave

Maternity Leave In Nigeria

Maternity leave is provided under the Nigerian Labor Act. Provided that employees have worked for at least six months with their employer, they are entitled to six weeks before childbirth and six weeks afterwards. Additional details relating to Maternity Benefits in Nigeria include:

Paternity Leave In Nigeria

In 2021 the Federal Executive Council approved a paternity leave of 14 days for employees in the public sector. Paternity leave pay is negotiated in an employment contract.

Sick Leave In Nigeria

Nigerian employees are entitled to 12 days of paid sick leave. Employees may need to provide a medical certificate from a registered medical practitioner.

Parental Leave In Nigeria

Nigeria does not have a separate shared parental leave policy.

Bereavement Leave

Employees are entitled to three days of paid bereavement leave in the event of the death of a spouse, child, parent, sibling, or parent-in-law.

Study Leave

Employees may be entitled to paid or unpaid study leave, depending on their contract of employment

Termination Process in Nigeria

The termination process in Nigeria is governed by the Labour Act and the National Industrial Court Act. Under these laws, employers have the right to terminate employment contracts at any time, but they must give employees notice of termination or pay them salary in lieu of notice.

Notice Period in Nigeria

The notice period required depends on the employee's length of service, as follows:

• Up to 3 months: 1 day
• Up to 2 years: 1 week
• Up to 5 years: 2 weeks
• 5 years or more: 1 month

Severance in Nigeria

Severance pay in Nigeria is not mandatory by law, but it is often part of an agreement between the employer and employee, or is provided under sectoral (branch) collective agreements. The amount of severance pay paid to an employee typically depends on their length of service and last salary. There are two main types of severance pay in Nigeria:

• Redundancy pay: This is paid to employees who are laid off due to redundancy.
• Terminal benefit: This is paid to employees who are terminated for any other reason, such as poor performance, misconduct, or retirement.
• Terminal benefit: This is paid to employees who are terminated for any other reason, such as poor performance, misconduct, or retirement.