How an Employer of Record Ensures Compliance with Nigerian Labor Laws

Expanding a business into Nigeria presents great opportunities, thanks to its large workforce, growing economy, and strategic position in Africa. However, engaging in hiring employees in Nigeria requires strict adherence to local labor laws, payroll regulations, and statutory contributions.

For companies unfamiliar with Nigeria’s labor laws, ensuring compliance can be complex and time-consuming. This is where an Employer of Record (EOR) provides a seamless solution, helping businesses hire employees in Nigeria legally while managing payroll, benefits, and tax compliance on their behalf.

This guide explores how an EOR ensures full compliance with Nigerian labor laws, allowing businesses to hire, pay, and manage employees without legal risks and building a responsible framework for ongoing hiring.

Understanding Nigerian Labor Laws

The Nigerian Labour Act (2004) governs employment in the country, covering:

Employment contracts and terms of service
Wages, overtime, and working conditions
Employee benefits and statutory entitlements
Termination, redundancy, and severance pay
Payroll taxes and statutory contributions

Employers must comply with both federal and state labor laws to avoid penalties, fines, or legal disputes, and therefore should keep compliance top-of-mind while hiring.

Key Compliance Challenges for Foreign Employers during Hiring:

Entity Registration Required – Companies must establish a legal entity before hiring employees.
Payroll Tax & Social Security Compliance – Employers must deduct taxes and benefits correctly to remain ethical as they hire.
Complex Hiring & Contract Laws – Employment contracts must comply with Nigerian labor laws.
Strict Termination & Severance Policies – Employers must follow legal termination procedures and account for these in hiring plans.

By using an EOR like Cadana, businesses eliminate compliance risks while expanding into Nigeria efficiently, ensuring all processes associated with hiring are both ethical and legal.

How an Employer of Record (EOR) Ensures Compliance for Legal Hiring

An Employer of Record (EOR) is a third-party service provider that acts as the legal employer on behalf of a company, handling all aspects of employment, payroll, and compliance.

With an EOR like Cadana, businesses can hire employees in Nigeria legally without establishing a local entity, ensuring full compliance with Nigerian labor laws, tax regulations, and employment standards. This provides peace of mind as you hire for team growth.

1. Legally Compliant Employment Contracts - Supporting Ethical Hiring

In Nigeria, all employment contracts must be in writing if the employment lasts more than three months. Contracts should outline:

Job responsibilities and compensation
Probation period and working hours
Leave entitlements and benefits
Termination and severance policies

How an EOR Ensures Contract Compliance, Protecting Your Investment as You Hire:

Drafts legally compliant contracts aligned with Nigerian labor laws.
Ensures clear terms of employment, salary structure, and benefits.
Protects businesses from contract disputes and labor violations.

With Cadana’s EOR services, companies can hire Nigerian employees with contracts fully compliant with local laws, setting the stage for responsible, legally sound team growth.

2. Payroll Management & Tax Compliance - Enabling Smooth Hiring

Employers in Nigeria must process payroll correctly, ensuring that salaries, taxes, and social security contributions are accurately deducted and paid to authorities. Ensuring compliance during the payroll phase impacts your ability to continue hiring smoothly.

Payroll Deductions & Contributions:

Pay As You Earn (PAYE) Tax – Progressive tax system ranging from 7% to 24%, deducted from employee salaries.
Pension Contributions – Employers contribute 10%, and employees contribute 8% to the National Pension Scheme.
National Housing Fund (NHF) – Employers must deduct 2.5% of employee monthly earnings for housing benefits.
Industrial Training Fund (ITF) – Employers contribute 1% of annual payroll for employee training.

How an EOR Ensures Payroll Compliance, Smoothing Out Your Hiring Strategy:

Accurately calculates salaries, tax deductions, and social contributions.
Handles salary disbursement in compliance with Nigerian banking laws.
Ensures timely payroll processing to avoid penalties, which supports your ongoing hiring efforts.

With Cadana’s EOR solution, businesses can pay employees on time and remain fully compliant with Nigerian tax laws, leading to less stress as you continue hiring.

3. Statutory Employee Benefits & Leave Compliance - Supporting Long-Term Hiring Goals

Nigerian labor laws require employers to provide statutory benefits to employees. These benefits must be included in employment contracts and factored into your plan when you hire.

Mandatory Employee Benefits in Nigeria:

Annual Leave – Employees are entitled to at least 6 days of paid leave per year, increasing with seniority (a factor in their appeal during the hiring process).
Sick Leave – Employees receive up to 12 days of paid sick leave per year, another factor that influences employee well-being and enhances your reputation as you hire.
Maternity Leave – Female employees get 12 to 16 weeks of maternity leave, with at least 50% pay (demonstrates commitment to a diverse workforce as you hire).
Pension Scheme – Employers must contribute 10% of an employee’s salary to Nigeria’s pension fund (long-term financial security impacting your hiring process).
Severance Pay – Employees must be compensated in cases of redundancy or unfair dismissal.

How an EOR Manages Employee Benefits, Helping Optimize Your Approach to Hiring:

Ensures all employees receive statutory benefits as per labor laws, improving your employee value proposition.
Handles pension registrations and contributions to ensure compliance, ensuring you have no issues with tax law as you continue hiring new workers.
Manages paid leave, sick leave, and maternity benefits, allowing you to provide an excellent and supportive experience as you hire new workers.

With Cadana’s EOR services, companies can offer competitive benefits while ensuring full compliance with Nigerian labor laws, maximizing their potential with new hires.

4. Termination & Severance Compliance - Minimizing Risk When Hiring

Nigerian labor laws protect employees from unfair dismissal, requiring businesses to follow strict termination procedures. Adhering to these practices and laws during this process influences your ability to hire candidates in the future.

Termination & Severance Requirements Influencing How You Approach Hiring:

Probationary Periods – Employees under probation can be terminated without severance.
Notice Periods – Employers must give notice based on tenure:1 week notice for employees under 3 months of service1 month notice for employees with 3+ months of service
Severance Pay for Redundancy – Employees dismissed due to redundancy must receive severance pay.
Fair Dismissal Procedures – Employers must document valid reasons for termination to avoid legal action.

How an EOR Ensures Compliance in Termination, Helping Streamline Ongoing Hiring Processes:

Handles employee terminations following Nigerian labor laws, helping you make sound long-term decisions.
Manages severance pay calculations and legal documentation, reducing risks associated with talent management as you hire.
Prevents wrongful termination disputes and fines, maintaining a positive business reputation to help further improve your hiring process.

With Cadana’s EOR, businesses can terminate employees legally and ethically, avoiding legal risks and building a strong foundation for ethical hiring practices.

5. Fast-Track Business Expansion Without Compliance Risks – Improving the Speed of Hiring

Expanding into Nigeria is simpler and more efficient with an EOR, as companies can hire employees immediately without setting up a local entity, improving the speed with which you can hire.

How an EOR Supports Business Expansion in Nigeria as You Scale Up Hiring:

No need for business registration – Hire employees without setting up a subsidiary, removing time-consuming first steps as you hire.
Faster onboarding – Employees can start working within days, allowing you to get your team up and running far faster than before as you look to hire.
Reduced legal risks – Avoid fines, labor disputes, and non-compliance penalties, protecting your operations as you hire.
Cost savings – No need to maintain an in-house HR or payroll department, saving on resources and enabling more focused talent acquisition.

With Cadana’s EOR solution, businesses can enter the Nigerian market seamlessly while focusing on growth and making strategic decisions about when to hire.

Why Use an Employer of Record (EOR) for Hiring in Nigeria?

📌 No need for local entity registration – The EOR acts as the legal employer, so businesses can hire employees immediately, removing unnecessary administrative steps.

📌 Full payroll & tax compliance – The EOR handles salary payments, deductions, and government filings, giving you confidence as you hire new team members.

📌 Legal protection & labor law compliance – Avoid legal disputes and labor law violations, ensuring you're following ethical and fair practice when making hiring decisions.

📌 Scalable & cost-effective – Hire and expand teams without administrative burdens, streamlining your hiring process and maximizing efficiency.

📌 Faster hiring & onboarding – Start operations in Nigeria in days instead of months, enabling you to rapidly assemble a strong and competent team by making use of smart hiring strategies.

Expand into Nigeria with Cadana’s EOR Services

Nigeria is a high-potential market for business expansion, but navigating employment laws, payroll, and compliance can be challenging.

Cadana’s EOR services provide a turnkey solution for companies looking to hire employees in Nigeria efficiently while ensuring full compliance, providing streamlined and effective hiring services that can help you take your company to the next level.

With Cadana’s EOR, businesses can:

Hire employees in Nigeria quickly and legally, optimizing your team for success from the moment of hiring.
Manage payroll, taxes, and statutory benefits effortlessly, streamlining HR and ensuring compliance with every decision that you make as you hire.
Ensure full compliance with Nigerian labor laws, giving you peace of mind and a foundation for responsible team building during hiring periods.
Scale teams efficiently with reduced administrative costs, helping free up capital for further investment in your business and supporting smart talent management decisions during your hiring.

Ready to expand into Nigeria? Partner with Cadana today and start hiring with confidence!