An Employer of Record (EOR) in Nigeria is a company that takes on the responsibility of being the legal employer for a worker. This includes managing payroll, benefits, and other employment-related tasks on behalf of the worker's actual employer. An Employer of Record is also referred to as a Global PEO (Professional Employer Organization).
Discover the key considerations and essential details you should be aware of before opting for an Employer of Record (EOR) in Nigeria.
| Overview | |
| Continent | Africas |
| Country | Nigeria |
| Capital | Abuja |
| Time zone | UTC+01:00 (WAT) |
| Total Time zones | 1 |
| Working hours per week | 40 |
| Working week | Monday–Friday |
| Typical hours worked | 8 |
| Personal Tax filing deadline | Employer PAYE filings should be submitted by 31 January, while individual filings are required by 31 March. |
| Financial Year | 1st January to 31st December |
| Date format | dd/mm/yyyy |
| Currency | Nigerian Naira (NGN) |
| VAT | the standard rate is 7.5% |
Employment Contracts in Nigeria
In Nigeria, employment contracts serve as the cornerstone of the employer-employee relationship, delineating the rights, responsibilities, and obligations of both parties. Drawing from the sample employment contract provided:
- Agreement Foundation: The employment contract starts with an agreement between the employer and employee, clearly stating their respective roles and responsibilities.
- Scope of Employment: The contract specifies the nature of the business the employer is engaged in and where the employee will be working.
- Employee's Duties: The contract outlines the specific tasks and duties the employee is expected to perform, underlining the employer's authority to assign additional tasks as needed.
- Duration: A clear timeframe for the employment period is specified, though conditions for termination are also outlined.
- Compensation: The contract details the agreed-upon salary and additional benefits, including reimbursements for work-related expenses.
- Employee Loyalty: Employees are expected to dedicate their time and skills exclusively to the employer's business interests, with provisions ensuring confidentiality and non-compete clauses.
- Termination Conditions: The contract provides conditions under which either party can terminate the agreement, such as in the event of permanent disability or if the employer discontinues operations.
- Agreement Terms: The contract emphasizes that the written terms within it are the definitive agreement between both parties, with any modifications requiring written consent.
- Legal Governance: The contract specifies that it is governed by the laws of a particular state within Nigeria, ensuring legal clarity and compliance.
- Binding Nature: The agreement is binding and extends its stipulations to heirs, successors, and assigns of both parties.
It's crucial to understand that employment contracts in Nigeria, as with any jurisdiction, have nuances and specific legal considerations. Therefore, seeking professional legal advice before finalizing or signing any employment contract is paramount to ensure that both parties are adequately protected and compliant with Nigerian labor laws.
Employment Laws in Nigeria
Nigeria, as a prominent nation in West Africa, has established specific employment laws that govern the rights and obligations of both employers and employees. These regulations cover various aspects of the employment relationship, from wage structures to working conditions. Here's a comprehensive overview:
Minimum Wages
Effective as of December 29, 2023, the minimum wage in Nigeria stands at 65,000 Nigerian Naira (NGN) per month. This amount comprises two components:
- Base Minimum Wage: 30,000 NGN, which has been unchanged since 2019.
- Temporary Wage Supplement: 35,000 NGN, introduced by the government in September 2023 and set to last until March 2024.
It's essential to recognize that this minimum wage regulation primarily caters to formal sector workers, leaving out a substantial portion of the Nigerian workforce in the informal sector.
Payroll Cycle
The payroll cycle's structure in Nigeria varies based on several determinants, encompassing company size, industry, governmental rules, and mutual agreements. Common practices include:
- Frequency:
- Monthly: Predominantly practiced, with salaries disbursed at month-end.
- Fortnightly: Adopted by some public and large private entities.
- Weekly: Less frequent, especially in industries like construction.
- Timing:
- Specific Day: Employers usually designate a specific day for salary disbursement.
- Grace Period: Some flexibility exists, but timely payment is generally expected.
Probation Period
The probationary period's duration in Nigeria varies based on employer discretion, role specificity, and industry practices. Key considerations include:
- Contractual Agreements: Typically outlined in employment contracts, ranging from a few weeks to several months.
- Legal Framework: While the Nigerian Labour Act remains neutral on a standardized probation period, it guarantees specific employee rights during this phase.
- Industry Standards: Different sectors may have customary probation durations, with roles in sectors like banking or tech potentially undergoing longer evaluations.
Notice Period
The duration of the notice period in Nigeria is influenced by two primary factors: the terms of the employment contract and the stipulations of the Nigerian Labour Act.
Contractual Terms:
Your employment agreement may define a specific notice duration required for both parties to end the employment relationship. Depending on mutual agreement, this duration can span from a few weeks to several months.
Statutory Guidelines:
In the absence of explicit terms in your contract, the Nigerian Labour Act provides baseline notice durations based on tenure:
- For service less than 2 years: A one-month notice is mandated.
- For service of 2 years or more: A two-month notice is required.
Working Hours in Nigeria
Work hour regulations in Nigeria are shaped by statutory provisions, industry norms, and individual contracts:
- Formal Regulations: The Nigerian Labour Act sets a 40-hour weekly limit, excluding overtime.
- Daily Limit: A maximum of eight working hours daily, with a mandatory rest after four continuous hours.
Overtime Pay
Overtime compensation is pivotal in Nigeria's employment landscape:
- Legal Framework: Mandates overtime compensation at a rate at least 50% higher than regular pay.
13th Month Salary
While not legally mandated, the 13th month salary is occasionally observed in certain Nigerian industries:
- Legality: Not stipulated by the Nigerian Labour Act.
- Prevalence: Some firms, especially in finance or oil sectors, may offer this as a bonus or incentive.
- Alternatives: In the absence of a 13th month salary, other bonus structures like performance bonuses might be present.
Employer Payroll Contributions in Nigeria
| Employers | % of Gross Salary |
| Pension | 10% |
| National Provident Fund | 1% |
| Total Employment Cost | 11% |
In Nigeria, employers are responsible for making various payroll contributions as part of their total employment cost. These contributions play a crucial role in ensuring the financial security and well-being of employees. Here are the key employer payroll contributions in Nigeria and the respective percentages of gross salary:
- Pension: Employers are required to contribute 10% of an employee's gross salary towards the pension scheme. This contribution helps to secure retirement benefits for employees, ensuring they have a source of income during their post-employment years.
- National Provident Fund: Another contribution employers make is towards the National Provident Fund, which is set at 1% of an employee's gross salary. This fund aims to provide social security coverage and support for employees, particularly during times of financial need.
When calculating the total employment cost, employers need to consider these payroll contributions, which amount to 11% of the employee's gross salary. It is important for employers to comply with these contribution requirements to fulfill their obligations and provide their employees with essential benefits.
By adhering to these payroll contributions, employers demonstrate their commitment to the financial well-being and long-term security of their workforce in Nigeria.
Employee Payroll Contributions in Nigeria
| Employees | % of Gross Salary |
| Pension | 8% |
| Housing Fund | 2.5% |
| Total Employee Cost | 10.5% |
In Nigeria, employees are required to make certain payroll contributions as part of their total employee cost. These contributions are aimed at ensuring financial security and providing essential benefits to employees. Here are the key employee payroll contributions in Nigeria and the respective percentages of gross salary:
- Pension: Employees are responsible for contributing 8% of their gross salary towards the pension scheme. This contribution helps individuals build a retirement fund, ensuring financial stability during their post-employment years.
- Housing Fund: Another contribution that employees make is towards the Housing Fund, which is set at 2.5% of their gross salary. This fund aims to assist employees in accessing affordable housing options and promoting homeownership.
When calculating the total employee cost, employees need to consider these payroll contributions, which amount to 10.5% of their gross salary. It is important for employees to fulfill these contribution requirements to avail themselves of the associated benefits and secure their financial future.
By making these payroll contributions, employees demonstrate their commitment to long-term financial planning, retirement security, and housing opportunities in Nigeria. These contributions contribute to a more robust social security system and enable individuals to have a better quality of life.
Personal Income Tax in Nigeria
Personal income tax in Nigeria is structured progressively, with rates that vary based on different income brackets.
| Income Tax | |
| First 300,000 NGN | 7% |
| Next 300,000 NGN | 11% |
| Next 500,000 NGN | 15% |
| Next 500,000 NGN | 19% |
| Next 1.6 million NGN | 21% |
| Over 3.2 million NGN | 24% |
Employee Benefits in Nigeria
Employee benefits are integral to ensuring the well-being, satisfaction, and productivity of the workforce. In Nigeria, several statutory leave entitlements and additional benefits are designed to support employees in various aspects of their professional and personal lives.
Leave Entitlements:
- Paid Annual Leave: Employees in Nigeria are entitled to a minimum of 6 days of paid annual leave upon completing their first year of service. This entitlement grows progressively, peaking at 20 days after 20 years of service.
- Sick Leave: Recognizing the importance of health, employees are granted 12 days of paid sick leave annually. However, this requires valid medical certification to qualify for compensation.
- Public Holidays: Employees are granted paid leave on 11 public holidays as recognized by the Nigerian government, providing them with time to celebrate, rest, and rejuvenate.
- Maternity Leave: Female employees enjoy a generous 12-week paid maternity leave. If circumstances demand, this can be further extended by an additional 4 weeks of unpaid leave.
- Paternity Leave: Acknowledging the role of fathers in family care, new fathers are granted 5 days of paid paternity leave to support their partners post-childbirth.
Additional Benefits to Consider:
- Health Insurance: While the Nigerian social security system provides basic health coverage, offering a more comprehensive private health insurance scheme can significantly enhance an employee's benefits package.
- Pension Plans: Beyond the mandatory government pension scheme, employers can contribute to private pension plans. This dual approach ensures employees have a robust financial safety net upon retirement.
- Performance-Based Bonuses: Recognizing and rewarding outstanding performance with bonuses not only motivates employees but also fosters a culture of excellence and commitment.
- Remote Work Flexibility: With the changing dynamics of the global workplace, providing options for remote work can be a significant attraction for employees valuing work-life balance and flexibility.
- Training and Development: Continuous learning and development opportunities are crucial for career growth. Investing in training programs underscores an employer's dedication to enhancing the skills and capabilities of its workforce.
In conclusion, while statutory benefits provide a foundational framework, employers in Nigeria have the opportunity to differentiate themselves by offering enhanced and innovative benefits. Such initiatives not only attract top-tier talent but also contribute to creating a motivated, loyal, and high-performing workforce.
The decision to engage with an Employer of Record (EOR) in Nigeria is a pivotal strategy for firms eyeing international growth and presence. By entrusting pivotal tasks like understanding local employment standards, managing intricate payroll systems, and adhering to stringent compliance requirements to the EOR, organizations can seamlessly integrate into the Nigerian market without the challenges of establishing a legal entity. This synergistic alliance allows businesses to focus intently on their primary goals and expansion initiatives, ensuring that their operations in Nigeria align impeccably with local legislation. The EOR streamlines the complexities of international hiring in Nigeria and provides invaluable expertise for maneuvering through the nuanced domain of Nigerian employment regulations.