Nigeria Payroll Outsourcing, Payroll Software and Employer Of Record (EOR) services.
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NIGERIA
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Nigeria Payroll and Employer of Record: Employment Contracts
In Nigeria, there are four main categories of visas available:
Visa for business travel and tourism
Permit to Work Temporarily
Visa under Subject to Regularization (STR)
There are a few additional visas as well, such as those for diplomatic missions and transportation. All of these three-month-valid visas are given to permit entrance into Nigeria.
An STR visa must be obtained by foreign nationals who intend to work in Nigeria. However, the bearer of this visa does not have the authority to operate in Nigeria on its own. They will also require a CERPAC, or combined expatriate residence permit and aliens card, which is a document that allows them to live and work in Nigeria.
PAID TIME OFF
Annual Vacation
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A worker is entitled to at least six days of paid annual leave per year. For young workers (those under the age of sixteen), including apprentices, annual leave is increased to at least twelve working days. To be eligible for annual leave, a worker must have worked for at least twelve months.
Sick
INCOME
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Workers are entitled to a maximum of twelve working days of paid sick leave in the event of illness. The registered medical practitioner must certify the patient’s illness. Sick leave is fully paid leave that is calculated as the worker’s basic wage minus overtime pay and other allowances.
MEDICAL SUPPORT
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On the employer’s request, the worker is examined by a qualified medical practitioner nominated by the employer.
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Specialist consultations, hospitalization for up to 15 days per year, ophthalmological services, preventive care, maternity care for up to four live births, medicines, preventive dental care and pain relief, and some prostheses are among the medical benefits provided to insured workers.
SECURITY OF WORK
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During 12 days of paid sick leave, a worker’s job is secure. Except for the incapacity caused by the illness, the contract remains in effect, and the worker is required to perform his part of the contract.
Maternity
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The current civil service rule in Nigeria provides for four months of maternity leave for new mothers. Pregnant mothers are given a month before birth and three months after birth. In addition, until the baby is six months old, nursing mothers are permitted to close early upon resumption.
Paternity
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The law allows 14 days of Paternity Leave.
Family
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No Provision in the law for family responsibility.
National Holidays
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Public holidays are paid days off for religious or memorial purposes. The President decides on the number of paid public holidays, which must be at least eleven. The worker is entitled to the wages he or she would have earned if he or she had worked that day.
Other Paid Time Off
N/A
STATUTORY EMPLOYEE BENEFITS
Unemployment
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Nigeria is yet to enact an unemployment fund.
Workers Compensation
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Employers are mandated to pay a total of 1% of gross salary to the Employees Compensation Scheme
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The ECS provides adequate and timely compensation to employees who suffer injuries or diseases while on the job. Furthermore, it provides rehabilitation for injured workers on the job and compensation for the employer’s lost productivity.
Social Security
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Employers contribute 10% of the total emoluments of the employee to the National Contributory Pension Scheme.
Retirement
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Employers contribute 10% of the total emoluments of the employee to the National Contributory Pension Scheme.
Health
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Contributions to the NHF are payable by Nigerian employees earning a minimum of NGN 3,000 per year. Employees earning more than NGN 3,000 per year must have 2.5 percent of their basic salary deducted and remitted to the Federal Mortgage Bank of Nigeria within one month of the deduction.
PRIVATE EMPLOYEE BENEFITS
Workers Compensation
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No Private worker’s compensation available.
Retirement
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Private retirement schemes available.
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A defined contribution pension is the most common type of pension. On retirement, the amount your defined contribution pension is worth depends on how much money you’ve contributed and the performance of your investments. Most modern workplace and personal pensions are defined contribution pensions.
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A defined benefit pension (also called a ‘final salary’ pension) is a type of workplace pension that pays you a retirement income based on your salary and the number of years you’ve worked for the employer, rather than the amount of money you’ve contributed to the pension.
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Early retirement available at 55 for defined contribution schemes.
Health
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Private health insurance Mandatory
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Many private providers.
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You can claim for in-hospital care, as well as additional benefits like disease tests, day-to-day expenses like medicine or GP visits, and dental treatment, depending on your medical aid plan.
Insurance
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Life Insurance Mandatory
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Approved and unapproved insurance.
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Approved means premiums are tax deductible. Payout is taxable.
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Unapproved means premiums are taxed as income. Payout is not subject to tax.
PERSONAL INCOME TAX
Tax Year
The taxable year is the fiscal year, which runs from 1 January to 31 December.
Tax Tables
The local currency in Nigeria is NGN. The highest tax rate is 24% whilst the lowest is 7%.
Taxable Income | Rates of Taxes |
0 – 300 000 | 7% |
300 000 – 600 000 | 11% |
600 000 – 1 100 000 | 15% |
1 100 000 – 1 600 000 | 19% |
1 600 000 – 3 200 000 | 21% |
3 200 000+ | 24% |
Taxation Method
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Tax is calculated on an annual basis but applied each payroll period.
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A monthly employee’s tax is calculated by working out their annual tax year to date and applying tables. A credit is applied in the event the employee has paid too much tax.
Double Taxation
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Foreign tax paid on income earned in a country with which Nigeria has a DTT is allowed as a credit against tax paid on that income in Nigeria. To obtain treaty benefits, there is an administrative requirement.
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Nigeria has DTTs with Belgium, Canada, China, Czech Republic, France, the Netherlands, Pakistan, Philippines, Romania, Slovakia, Spain, Singapore, South Africa, and the United Kingdom.
Residence Requirements
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The primary basis for tax liability under the PIT Act is residency. A person is considered a resident if he or she is physically present in Nigeria for at least 183 days (including leave and temporary absence) in any 12-month period, or if they serve as a Nigerian diplomat or diplomatic agent abroad.
Payroll Calendars
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There are no predetermined dates on which employees must be paid.
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Weekly, Bi-weekly, fortnightly and monthly payrolls are acceptable.
Rebates & Tax Credits
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Consolidated relief allowance
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Higher of NGN 200,000 or 1% of gross income plus 20% of gross income *
Health Insurance
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Employer-paid premiums for health insurance are exempt from federal income and payroll taxes. Additionally, the portion of premiums employees pay is typically excluded from taxable income.
Unemployment
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No provision in the law regarding unemployment benefits.
Social Security
Employee:
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8% of gross monthly earnings.
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Basic salary, housing allowances, and transportation allowances are all included in gross earnings.
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It is possible to make additional voluntary contributions of up to 33.3 percent of gross monthly earnings.
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There are no earnings limits that are used to calculate contributions.
PAYROLL ELEMENTS
Income
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Employers can pay or provide basic salaries, housing allowances, transportation allowances, utilities, lunch allowances, leave allowances, club subscriptions, clothing allowances, leave passage, insurance premiums, and certain reimbursements to their employees, among other things. Except for reimbursements supported by third-party invoices/receipts and reasonable relocation expenses, the entire list is fully taxable.
Bonuses
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Bonuses are added to the monthly income of the individual.
Allowances
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All allowances are taxable, however social security and other deductions are only calculated on gross emoluments.
Benefits in Kind
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Benefits or other perquisites allowed, given, or granted to an employee are taxed.
Investment Income
The following transactions or areas are covered by the withholding tax (WHT) deduction:
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Building, construction, and related services in all aspects.
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Other than the outright sale and purchase of goods and property in the ordinary course of business, all types of contracts and agency arrangements are prohibited.
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Consultancy, technical, and professional services are available.
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Services for management
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Commissions
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Royalty and Interest
Retirement Funding
Employee:
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8% of gross monthly earnings.
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Basic salary, housing allowances, and transportation allowances are all included in gross earnings.
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It is possible to make additional voluntary contributions of up to 33.3 percent of gross monthly earnings.
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There are no earnings limits that are used to calculate contributions.
Employer:
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10% of gross monthly payroll.
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Basic salary, housing allowances, and transportation allowances are all included in gross earnings.
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There are no earnings limits that are used to calculate contributions.
Health Insurance
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Employer Funded Health and Life insurance is mandatory for all employees in Nigeria.
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The life must be insured to the value of 3x the employee’s annual salary.
Risk Insurance
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Employer Funded Health and Life insurance is mandatory for all employees in Nigeria.
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The life must be insured to the value of 3x the employee’s annual salary.
Taxable Income
Examples of amounts an individual may receive, and from which the taxable income is determined, include;
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Remuneration (income from employment), such as, salaries, wages, bonuses, overtime pay, taxable (fringe) benefits, allowances and certain lump sum benefits
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Profits or losses from a business or trade
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Income or profits arising from an individual being a beneficiary of a trust
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Director’s fees
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Investment income, such as interest and foreign dividends
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Rental profit or losses
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Income from royalties
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Annuities
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Pension income
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Certain capital gains
Allowable Deductions
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NHF contributions, National Health Insurance Scheme contributions, life assurance premiums (not including deferred annuities), national pension scheme contributions, and gratuities are deductible.
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Consolidated relief allowance – Higher of NGN 200,000 or 1% of gross income plus 20% of gross income
PAYROLL TAXES AND EMPLOYER CONTRIBUTIONS
Payroll Taxes
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Industrial Training Fund Levy – 1% Contribution on total Payroll Value
Unemployment
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Currently there is no provision in law for unemployment insurance and benefits.
Social Security
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National Contributory Pension Scheme – 10% Contribution on Gross Emoluments
Workers Compensation
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Employees Compensation Scheme- 1% Contribution on Gross Emoluments
ADMINISTRATION
Income
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Income tax is filed monthly using the online FIRS E-Filing service.
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Payments are due by the 10th of the month. If the 10th falls on a weekend or public holiday then the payments are due on the prior working day.
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The late payment fixed penalty remains at 10% of the tax due, while the interest penalty is set to 15%.
Payroll Taxes
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Industrial Training Levy, Employees Compensation Scheme and National Contribution Pension Scheme contributions are paid over when paying over employee income tax.
Unemployment
N/A
Social Security
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National Contribution Pension Scheme contributions are paid over when paying over employee income tax.
Workers Compensation
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Employees Compensation Scheme contributions are paid over when paying over employee income tax.
Statutory Benefits
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Private health insurance Mandatory
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Many private providers.
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You can claim for in-hospital care, as well as additional benefits like disease tests, day-to-day expenses like medicine or GP visits, and dental treatment, depending on your medical aid plan.
-
Life Insurance Mandatory
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Approved and unapproved insurance.
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Approved means premiums are tax deductible. Pay-out is taxable.
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Unapproved means premiums are taxed as income. Pay-out is not subject to tax.
Employee Benefits
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Life Insurance, Medical Aid and Pension Benefits are available.
LEGISLATION
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The Labor Act, 2004
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The Employees Compensation Act, 2010
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The National Minimum Wage Act, 2011
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The Trade Disputes Act, 2004
STATUTORY BODIES
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The National Industrial Court, which has the authority to settle employment-related disputes in Nigeria, is the primary judicial body charged with this responsibility.
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The Ministry of Labour is also legally empowered to perform oversight functions on issues such as trade disputes, collective bargaining, and outsourcing.
