Payroll in Nigeria

Mercans is your trusted partner for premium payroll outsourcing (Managed & SaaS) services in Nigeria. Our dedication to providing exceptional payroll services in Nigeria is steadfast. With extensive experience in the payroll sector, Mercans guarantees precise and compliant payroll services in Nigeria, establishing us as the preferred option for businesses of every scale. Rely on Mercans for punctual and accurate payroll processing in Nigeria, coupled with the convenience of multi-currency payments within the Nigerian market. As your committed local payroll provider in Nigeria, we feature a team of in-country payroll experts well-versed in local regulations, delivering comprehensive assistance for a smooth and customized payroll experience tailored to your company’s requirements.

Everything you need to know before running payroll in Nigeria

Working Hours

In Nigeria, a typical workday consists of an 8-hour shift and a total of 40 hours per week. Additionally, all employees are guaranteed a minimum of six paid annual leave days, with overtime compensation provided as necessary.

Overtime

If an employee exceeds the standard working hours, it is classified as overtime. There are no specific regulations regarding the limit of overtime work or its compensation in statutory law. Instead, overtime pay is determined through mutual agreement in the employment contract, collective bargaining agreements, or directives from the industrial wages board.

Minimum Wages

The Nigerian government has inaugurated a committee to negotiate a new national minimum wage for government workers in the country. This marks the initial step towards changing the current minimum wage of N30,000, which has been in place since 2019.

This development comes exactly eight months after President Bola Tinubu pledged to increase the minimum wage when he announced the cessation of petroleum subsidy payments.

According to the Secretary to the Government of the Federation, George Akume, the committee will be chaired by Bukar Goni Aji, a former Head of Civil Service, and its members will represent federal and state governments, the private sector, and organized labor.

Key points to note include:

From the federal government’s side, members include Nkeiruka Onyejeocha, Minister of State for Labour and Employment; Wale Edun, Minister of Finance & Coordinating Minister of the Economy; Atiku Bagudu, Minister of Budget Economic Planning; and Yemi Esan, Head of Civil Service, among others.

13th Month Salary

There are no mandated obligations for 13th-month salary disbursements. However, bonuses are frequently granted at the employer’s discretion.

Payroll Cycle

In Nigeria, payroll frequency options include monthly, bi-weekly, or weekly. Salaries must be paid at least once per month.

Company Formation in Nigeria

In Nigeria, business registration is overseen by the Corporate Affairs Commission (CAC), established under the Companies and Allied Matters Act (CAMA). The CAC regulates the formation and operations of companies and businesses, handling registration and post-incorporation matters.

The recommended form of incorporation for starting a business in Nigeria is a private company limited by shares, especially for foreigners looking to invest in the country. Nigerian citizens can also register a business name (enterprise), which lacks a separate legal personality compared to a company.

Foreigners seeking to establish a business in Nigeria must register a company (LLC) with a minimum authorized share capital of NGN100,000,000. While there’s generally no requirement for locals to appoint local persons as shareholders or directors, certain sectors like oil and gas services, mining, and gaming have specific regulations.

Recent developments in business registration include the introduction of downloadable incorporation certificates and simplified requirements since 2021.

Requirements for registering a company in Nigeria include:

• Proposed company address, email, and phone number
• Identification documents of directors/shareholders
• Approval note for name reservation from CAC
• Details of company secretary (for foreign-owned entities)
• Incorporation certificate and company resolution (if another registered company is a shareholder)

• Submitting two desired company names for search
• Preparing incorporation documents
• Completing pre-registration forms and statement of share capital
• Paying stamp duty and filing fees
• Uploading relevant documents
• Submitting registration application online

Upon approval, CAC issues electronic incorporation certificates and other documents. For local persons registering a business name, similar requirements apply, with proprietors providing necessary documentation.

Registration must comply with authorized share capital requirements, which vary depending on the business type. Additionally, foreign-owned entities must obtain a business permit from the Federal Ministry of Interiors and register with the Nigerian Investment Promotion Commission (NIPC) before commencing business operations.

Payroll Compliance in Nigeria

Statutory Filings and Contributions

In Nigeria, employers are obligated to submit the following statutory filings. Mercans assists you in completing the necessary filings as per the Nigerian local laws.

Government Requirements

Personal Income Tax (PIT)/Pay-As-You-Earn (PAYE)

• PIT, governed by the Personal Income Tax Act 2011, is levied on various income sources and residents at rates from 7% to 24%.
• Managed by State Internal Revenue Services, PIT filing is based on employee residence, with 38 tax authorities including the Federal Inland Revenue Service.

National Housing Fund (NHF)

• Aims to provide housing loans to Nigerians and is managed by the Federal Mortgage Bank of Nigeria (FMBN).
• Employers and employees must register with FMBN for loan access.

Employees’ Compensation Fund (ECF)

• Provides compensation for work-related injuries or death, managed by the Nigeria Social Insurance Trust Fund (NSITF).
• Employers must register and contribute monthly to the scheme.

Industrial Training Fund (ITF)

• Facilitates skill acquisition through training, administered by ITF.
• Employers with at least five staff or NGN50 million turnover annually must register and contribute annually.

National Health Insurance Scheme (NHIS)

• Provides social health insurance, regulating private health insurance through Health Maintenance Organizations (HMOs).
• Participants pay fixed amounts for medical benefits from a common pool of funds.

Tax Clearance Certificate (TCC) for Employees

• Issued by tax authorities, required for various purposes including government loans and property transactions.
• TCCs are issued based on employers’ tax returns over three years.

Ongoing Compliance Requirements

• PIT/PAYE taxes must be remitted monthly with penalties for non-payment.
• NHF contributions must be remitted monthly with fines for non-compliance.
• ECF and ITF contributions and filings must be done annually with penalties for non-compliance.

Pension Requirements

Contributory Pension Scheme (CPS)

• Mandatory for public and private sector employers with at least three employees.
• Administered by the National Pension Commission (PENCOM), employers and employees must register and contribute monthly.

Employment Obligations

• Guides rights, working conditions, minimum wage, and termination clauses.
• Employers must provide a safe environment, pay for work performed, and reimburse necessary expenses.

• Salaries payable monthly in legal tender, according to the Labor Act.

• Bank account holders must obtain a Bank Verification Number (BVN) to receive payments.

• Nigeria has tightened foreign exchange controls due to high demand.

Payroll Taxes in Nigeria

Statutory Contributions 1: National Housing Fund (NHF)

The NHF, established by Act 3 of 1992, aims to provide loans for housing development, purchase, or renovation to Nigerians. Employers must register employees with NHF, deduct 2.5% of employees’ monthly basic salary, and remit it to the Federal Mortgage Bank of Nigeria (FMBN) within one month. Late remittance incurs a penalty of ₦50,000. Exemptions apply for low-income earners and expatriates.

Statutory Contributions 2: National Health Insurance Scheme (NHIS)

NHIS, a Public-Private Partnership, offers accessible healthcare through contributions. Employers contribute 10% of an employee’s basic monthly salary, while employees contribute 5%. The scheme covers contributors, spouses, and up to four children under 18. Larger families can register additional dependents. NHIS covers medical expenses through Health Maintenance Organisations (HMOs), with employers mandated to contribute for employees.

Statutory Contributions 3: Personal Income Tax

Personal Income Tax is based on income and residency, with contributions going to the state of residence. Taxable income is calculated after deductions such as pension fund, NHF, and NHIS. Tax rates range from 7% to 24%, with a minimum tax for those earning below the National Minimum Wage. Employers must deduct and remit monthly PAYE within ten days of the following month.

Personal Income Tax Rates

Statutory Contributions 4: Pension Fund

The Pension Reform Act mandates employers and employees to contribute at least 10% and 8%, respectively, of the employee’s monthly compensation to a retirement savings account. Contributions must be remitted to an approved Pension Fund Administrator within seven working days after salary payments. Non-compliance incurs a penalty of at least 2% of the unpaid amount.

Statutory Contributions 5: Industrial Training Fund (ITF)

Organizations with five or more employees or an annual turnover of ₦50 million must contribute 1% of their annual payroll cost to ITF. Employers can claim a refund of up to 50% if employees receive appropriate training. Returns must be filed within three months from the end of the year, with a penalty for late payment.

Statutory Contributions 6: Nigeria Social Insurance Trust Fund (NSITF)

NSITF provides compensation for workplace-related injuries or disabilities. Employers contribute 1% of employees’ monthly payroll. Contributions are made before the 16th day of the succeeding month after salary payment. Employers face a penalty of 10% for late or unremitted payments.

Employee Benefits in Nigeria

With the rise of remote work, employees in Nigeria are increasingly drawn to the flexibility, convenience, and freedom from commuting stress that these roles offer. Remote jobs are in high demand and show no signs of decline, as employers can tap into a broader talent pool without geographical constraints.

As the competition for remote talent intensifies, employers must consider whether flexibility alone is sufficient to attract and retain top talent. To stand out in this competitive landscape, it’s essential to provide tailored benefits that address the unique challenges of remote work and make employees feel valued and supported.

Here are the top 5 benefits for remote employees in Nigeria:

Home Office Upgrade

• Remote work often lacks the tools and equipment available in traditional office settings. Providing a home office setup or stipend allows employees to create a conducive work environment, boosting productivity and motivation.

Co-working Space Allowance

• Recognizing that some remote workers prefer co-working spaces for focus and reduced distractions, offering an allowance for co-working spaces ensures employees can choose a productive work environment without financial constraints.

Household Perks

• To minimize household distractions, employers can offer perks like laundry, house cleaning, and car wash services. This enables employees to focus on work and enhances their overall work experience.

Food and Groceries

• Providing food and grocery benefits brings the camaraderie of company lunches to remote teams. Options include monthly essential groceries delivery, topping up food delivery app wallets, or providing food and grocery vouchers for added convenience.

Comprehensive Wellness Benefits

• In addition to health insurance, consider expanding wellness benefits to include gym memberships, maternity care, dental care, mental health support, and skincare. This demonstrates a commitment to employee well-being and fosters a positive work culture.

Leave Benefits in Nigeria

Paid Time Off (PTO) in Nigeria

Vacation Leave Entitlement

Employees in Nigeria are entitled to a minimum of 6 days of paid vacation per year, with those under 16 years old qualifying for 12 days. Full-time employees accrue vacation days after completing a full year (12 months) of service. Some employers offer 7 or more vacation days from the start of employment. Public holidays do not count towards vacation entitlement.

Carry Over

Acceptable with employer confirmation. Employees may carry over unused vacation days to the following year, with a requirement to use them within 2 years.

Payout

Employees receive their regular salary during vacation, excluding allowances or overtime payments. Employers cannot compensate employees for unused vacation days but must pay out unused days upon contract termination.

Sick Leave in Nigeria

Allowance: 12 days

Employees in Nigeria are entitled to up to 12 days of paid sick leave, provided they present a medical certificate within 2 days of leave commencement.

Payout

Employers pay sick leave, with employees receiving their full salary during absence. If employers fail to provide sick pay, employees can claim it from the national insurance fund.

Maternity and Paternity Leave

Maternity Leave

Duration: 12 weeks

Pregnant employees receive 12 weeks of partially paid maternity leave, split into 6 weeks prenatal and 6 weeks postnatal. To qualify, employees need at least 6 months of service and must provide a pregnancy certificate.

Payout

Employees receive 50% of their regular salary during maternity leave, paid by the employer.

Paternity Leave

Not mandated by law, but 14 days were approved by the Cabinet in 2021. Public sector employees in Lagos and Enugu states are entitled to 2 weeks of paid paternity leave.

Parental Leave

Not specified by law.

Bereavement Leave, Jury Duty Leave, Military Leave, and Voting Leave

Not mandated by law.

Public Holidays in Nigeria for 2024

10 official public holidays, including New Year’s Day, Good Friday, Easter Monday, Eid al-Fitr, International Labor Day, Democracy Day, Eid al-Adha, Independence Day, Christmas, and Boxing Day.

Benefits of Payroll Outsourcing in Nigeria

• Compliance with Complex Regulations: Outsourcing payroll services in Nigeria guarantees meticulous adherence to intricate labor laws and regulations. Seasoned professionals adeptly navigate these complexities, minimizing the risk of errors or penalties due to non-compliance, providing peace of mind for businesses.
• Scalability and Flexibility: Payroll outsourcing offers unparalleled scalability and flexibility to meet the evolving needs of businesses. Whether expanding its workforce or adapting to changes in employment regulations, outsourcing providers seamlessly adjust their services to meet these demands.
• Access to Advanced Technologies and Expertise: By leveraging cutting-edge software solutions, outsourcing providers streamline processes, enhance data security, and improve efficiency in payroll management. Additionally, professionals possess extensive knowledge of tax regulations, deductions, and reporting requirements, ensuring accurate and timely processing.
• Cost Savings and Competitive Pricing: Outsourcing payroll leads to significant cost savings by eliminating the need to hire and train in-house staff. Furthermore, providers often offer competitive pricing models tailored to the specific needs of businesses, optimizing cost-effectiveness while maintaining quality service.
• Supporting Business Growth: Overall, outsourcing payroll services in Nigeria enables businesses to focus on core objectives while benefiting from accurate, compliant, and cost-effective management. With specialized expertise, advanced technologies, and scalability, providers play a crucial role in supporting the growth and success of businesses.
• High Safety Standards: Incorporating industry-leading security measures to safeguard sensitive data, along with ISO 27001 and ISAE3402 certifications, ensures stringent adherence to information security protocols.
• Adequate and Sustainable Performance: Ensuring consistent and sustainable performance that meets the dynamic demands of payroll services.
• Flexibility and Scalability: Offering flexibility and scalability to accommodate evolving client needs and adapt to changing business environments.
• Collaborative Cloud Tool: Utilizing a Cloud-based platform that facilitates collaborative work, promoting efficiency and accessibility across teams. These certifications signify a commitment to the highest standards of information security and operational integrity.

Payroll Solutions in Nigeria

Maximize the efficiency of payroll processing in Nigeria with Mercans’ Global Payroll Solutions. Our adaptable models ensure local compliance, facilitate multi-currency transactions, and seamlessly integrate with global Human Capital Management (HCM) and Enterprise Resource Planning (ERP) systems, making accurate payments effortless.

Explore Our Flexible Models:

• SaaS (Software as a Service): Designed for enterprise businesses managing payroll across multiple countries with diverse data points, locations, currencies, and languages. Our SaaS model streamlines operations for optimal efficiency.
• Managed Services: Customized for mid-sized and large enterprise businesses handling multi-country payroll, our Managed Services model offers on-demand HR expertise, guaranteeing security, reliability, and compliance.
• HRMS (Human Resource Management System): Tailored for mid to large businesses in expansion mode, our HRMS model offers a comprehensive suite of functionalities, including payroll and benefits. Companies can select the specific features they need, ensuring a personalized and efficient solution.

Streamline Payroll with Mercans’ Technology and Integrations

• Technology: Explore the forefront of innovation with Mercans’ cutting-edge technology that powers our global payroll solutions. Learn more about our technological prowess here
• Integration: Seamlessly integrate your Human Capital Management (HCM) systems with Mercans’ solutions, enhancing efficiency and connectivity. Discover the power of integration here.
• Recognitions: Join a partner recognized for excellence. Mercans has earned accolades for its commitment to delivering exceptional payroll services. Explore our awards and recognitions here.

Outsource to Payroll Company in Nigeria

In the bustling and dynamic business landscape of Nigeria, Mercans emerges as the premier ally for navigating the intricacies of local operations. Our steadfast commitment to 100% compliance with Nigerian regulations, extensive understanding of Nigerian labor laws, and comprehensive range of services position us as the ideal partner for businesses aiming to flourish in Nigeria. By teaming up with Mercans, businesses can harness our expertise to ensure smooth operations, adherence to statutory requirements, and a solid foundation for expansion in this vibrant market. With Mercans at your side, embark on a journey of success and growth in the heart of Africa.