Payroll in Nigeria

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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 8 hours and a standard workweek is generally around 40 hours. Employees are entitled to annual leave in accordance with the Labour Act, typically after completing a year of service.

Overtime

Overtime is work performed beyond normal working hours. Nigerian law does not prescribe fixed overtime rates, and compensation is usually determined by employment contracts, collective agreements, or internal company policies.

Minimum Wages

Nigeria’s minimum wage framework is subject to periodic review by the government. Employers must apply the latest officially enacted national minimum wage as determined by law and government directives.

13th Month Salary

There are no mandated obligations for 13th-month salary disbursements. Bonuses may be granted at the employer’s discretion.

Payroll Cycle

In Nigeria, payroll frequency may be monthly, bi-weekly, or weekly, but salaries must be paid at least once per month in compliance with labor regulations.

Company Formation in Nigeria

In Nigeria, business registration is overseen by the Corporate Affairs Commission (CAC) under the Companies and Allied Matters Act (CAMA).

Private company limited by shares is the most common structure.
Foreign-owned entities must meet minimum share capital requirements and obtain additional approvals.
Registration includes name reservation, document submission, and issuance of incorporation certificates.

Payroll Compliance in Nigeria

Statutory Filings and Contributions

Authority	Report / Declaration	Frequency	Due Date	Purpose	Notes
State Internal Revenue Service (via PAYE)	H2 (PAYE Monthly Return)	Monthly	By 10th of following month	Report and remit employee income tax	Mandatory PAYE system
State Internal Revenue Service	H1 (Annual Employer Return)	Annual	By 31 January (following year)	Annual summary of employee income & taxes	Required for tax clearance
National Pension Commission (PenCom)	Pension Contribution Schedule	Monthly	Submission: within 7 working days after salary payment; Payment: by 20th of following month	Retirement contributions	Employer + employee mandatory
Nigeria Social Insurance Trust Fund (NSITF)	Employee Compensation Scheme (ECS)	Monthly	Within 7 days after salary payment	Workplace injury insurance	Employer-funded scheme
Federal Mortgage Bank of Nigeria (FMBN)	NHF Contribution Report	Monthly	Within 1 month after deduction	Housing fund contributions	Employee deduction
Group Life Insurance Provider	Group Life Policy Reporting	Annual / On change	Upon policy update	Life insurance compliance	Mandatory for employers under Pension Act
Industrial Training Fund (ITF)	Form 5 (Annual Return)	Annual	By 1 April (following year)	Training contribution reporting (1% payroll)	Applies to qualifying employers

Government Requirements

Personal Income Tax (PIT)/PAYE

Employers must deduct PAYE tax and remit it to the relevant State Internal Revenue Service.

National Housing Fund (NHF)

Mandatory contributions for eligible employees to support housing schemes.

Employees’ Compensation Fund (ECF)

Provides compensation for workplace injuries, managed by NSITF.

Industrial Training Fund (ITF)

Applies to employers meeting workforce or revenue thresholds.

National Health Insurance

Employers contribute to employee healthcare schemes in accordance with regulations.

Ongoing Compliance Requirements

Monthly PAYE remittance.
Monthly or annual statutory contributions depending on scheme.

Pension Requirements

Mandatory pension contributions under the Contributory Pension Scheme (CPS).

Payroll Taxes in Nigeria

Statutory Contributions

National Housing Fund (NHF)
National Health Insurance Scheme
Employees’ Compensation Fund
Industrial Training Fund
Pension contributions

Personal Income Tax

Progressive tax rates apply under the PAYE system.
Employers must deduct and remit taxes monthly.

Personal Income Tax Rates

Taxable Income (₦)	Tax Rate (%)
Up to 800,000	0%
800,001 – 3,000,000	15%
3,000,001 – 12,000,000	18%
12,000,001 – 25,000,000	21%
25,000,001 – 50,000,000	23%
Above 50,000,000	25%

Employee Benefits in Nigeria

Statutory leave entitlements including annual and sick leave.
Pension and social security participation.
Optional benefits such as health insurance and bonuses.

Leave Benefits in Nigeria

Annual Leave

Employees are entitled to paid annual leave after completing one year of service.

Sick Leave

Employees are entitled to sick leave with medical certification.

Maternity Leave

Female employees are entitled to maternity leave in accordance with statutory provisions.

Paternity Leave

Not universally mandated but may be provided under company policy or local regulations.

Benefits of Payroll Outsourcing in Nigeria

Ensures compliance with complex labor regulations.
Provides scalability and operational efficiency.
Offers access to payroll expertise and technology.
Reduces administrative burden and compliance risk.

Payroll Solutions in Nigeria

SaaS: Multi-country payroll platform.
Managed Services: End-to-end payroll outsourcing.

Streamline Payroll with Mercans’ Technology and Integrations

Technology: Learn more here
Integration: Discover integration options here
Recognitions: Explore achievements here

Outsource to Payroll Company in Nigeria

Mercans supports businesses in Nigeria with compliant, efficient, and scalable payroll solutions, ensuring adherence to local regulations and enabling sustainable growth.

This document was prepared for informational purposes only. As local laws & regulations keeps on changing. Please consult your tax & legal advisors as well.

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FAQs

How do you ensure compliance with Nigeria’s pension and social security (PENCOM, NHF, and NSITF) requirements?

Mercans ensures compliance with Nigeria’s pension and social security requirements by accurately calculating and remitting employer and employee contributions to the National Pension Commission (PENCOM), National Housing Fund (NHF), and National Social Insurance Trust Fund (NSITF) within the prescribed timelines.

What strategies do you employ to manage Nigeria’s payroll tax structure, including Pay As You Earn (PAYE)?

We utilize automated payroll systems and in-country expertise to navigate Nigeria’s progressive income tax rates and mandatory contributions, ensuring accurate withholding and timely filings in full compliance with local regulations.

How do you handle payroll for remote or international employees in Nigeria?

Mercans manages payroll for remote and international employees in Nigeria by ensuring compliance with local tax laws and social security contributions, while maintaining alignment with global payroll standards.

What challenges have you encountered when integrating payroll data from various departments and international offices, and how did you overcome them?

We address integration challenges by centralizing payroll data within a unified platform that streamlines reporting and ensures consistent payroll workflows across departments and international offices.

How do you manage currency conversions and fluctuations in global payroll processing in Nigeria?

Mercans utilizes real-time exchange rates and multi-currency payroll capabilities to manage currency conversions and mitigate the impact of fluctuations, ensuring accurate and timely payments to employees.

What payroll software or systems do you recommend for managing compliance in Nigeria?

We recommend using HR Blizz, Mercans’ global payroll platform, which is fully compliant with Nigerian tax laws and social insurance regulations, ensuring accurate and timely payroll processing.