Effortless Hiring in Nigeria

Employment Laws

• Hiring in Nigeria is governed by the Labour Act, 2004, which outlines key regulations for employment relationships.
• The Labour Act applies to employees engaged in manual labor or clerical work but does not cover employees in administrative, executive, or professional roles.
• Employers are prohibited from discrimination based on gender, ethnicity, or religion.

Onboarding Process

Employers must comply with statutory requirements, including:

• Issuing a written employment contract for engagements longer than 3 months.
• Registering employees with:
• National Social Insurance Trust Fund (NSITF) for employee compensation.
• Pension schemes under the Pension Reform Act.
• National Health Insurance Scheme (NHIS) for healthcare benefits.

Types of Employment Contracts

1. Fixed-Term Contracts: For specific projects or durations.
2. Indefinite-Term Contracts: For ongoing employment without a specified end date.
3. Part-Time or Casual Contracts: For short-term or irregular work.

Probationary Periods

• Probationary periods are common in Nigeria and typically last between 3 to 6 months.
• Either party can terminate the contract during probation with minimal notice (usually 1 week).

Working Hours

• The standard working hours are typically set at 40 hours per week, distributed over five days (8 hours per day).
• Overtime is compensated at rates agreed upon in the employment contract or as stipulated in collective agreements.

How Cadana Simplifies Hiring in Nigeria

Cadana ensures compliant hiring in Nigeria by:

• Drafting employment contracts aligned with Nigerian labor laws.
• Streamlining onboarding for local employees, including statutory registrations.
• Managing payroll, benefits, and compliance to reduce administrative burden.

Payroll Frequency

Employers in Nigeria are required to pay their employees at least once per month. The most common pay periods are monthly, bi-weekly, and weekly.

Minimum Wage

• As of July 2024, the national minimum wage in Nigeria is set at ₦70,000 per month. This increase was approved by President Bola Tinubu to address the rising cost of living and inflation.
• The previous minimum wage was ₦30,000, which had become inadequate due to inflation and economic conditions. The new wage reflects ongoing negotiations between labor unions and the government.

Payroll Deductions

Employers are mandated to make specific deductions from employees' salaries, including:

1. Pay As You Earn (PAYE) Tax:

• A graduated income tax ranging from 7% to 24%, depending on the employee's income level.

2. National Housing Fund (NHF) Contribution:

• A 2.5% deduction from the employee's salary, used to fund the National Housing Fund.

3. Pension Contributions:

• Under the Pension Reform Act, both employers and employees are required to contribute a minimum of 10% (for employers) and 8% (for employees) of the employee's monthly emoluments to the pension fund.

How Cadana Simplifies Payroll in the Nigeria

Cadana helps businesses navigate complex payroll regulations by:

• Managing tax withholdings and overtime calculations.
• Offering centralized platforms for payroll data and secure management.
• Ensuring accurate and compliant payroll processing.

Employee Income Tax in Nigeria

Nigeria employs a Pay-As-You-Earn (PAYE) system for collecting personal income tax. The rates are progressive, based on income levels as follows:

• First ₦300,000: 7%
• Next ₦300,000: 11%
• Next ₦500,000: 15%
• Next ₦500,000: 19%
• Next ₦1,600,000: 21%
• Above ₦3,200,000: 24%

These rates are stipulated in the Personal Income Tax Act (PITA) and are current as of November 2024. Residents are entitled to personal reliefs that can reduce taxable income.

Employer Contributions

Employers in Nigeria are mandated to make several statutory contributions on behalf of their employees:

1. Pension Contributions:

• Employers contribute 10% of the employee’s monthly emoluments.
• Employees contribute 8% of their monthly emoluments.
• These contributions align with the Pension Reform Act 2014.

2. National Housing Fund (NHF):

• Employers deduct 2.5% of the employee’s basic salary for housing development, as mandated by the National Housing Fund Act.

3. Industrial Training Fund (ITF):

• Employers with five or more employees contribute 1% of their annual payroll to support employee training and development, in accordance with the Industrial Training Fund Act.

4. Employee Compensation Scheme (ECS):

• Employers contribute 1% of total payroll to cover work-related injuries or illnesses, as stipulated in the Employee Compensation Act.

Recent Developments

In October 2024, President Bola Tinubu submitted four new tax bills to the National Assembly aimed at overhauling Nigeria's tax system:

• The proposed reforms include simplifying tax laws, reducing the overall tax burden for low-income earners, and improving the efficiency of tax administration.
• The reforms also address VAT collection and distribution, aiming to centralize VAT under federal control while adjusting revenue-sharing formulas to benefit state and local governments more equitably.

Cadana ensures seamless compliance with Nigeria’s tax and payroll regulations, handling accurate calculations, automated remittances, and updates on evolving laws, so you can focus on growing your business.

Types of Leave in Nigeria

1. Annual Leave

• Employees are entitled to a minimum of 6 working days of paid annual leave after 12 months of continuous service.
• For workers under 16 years of age, the entitlement is at least 12 working days.
• Annual leave must be taken within 24 months of being earned; otherwise, it may be forfeited unless the employee's contract is terminated.
• Payment for unused annual leave is not permitted, except upon termination of employment.

2. Parental Leave

• Maternity Leave:

• Female employees with at least 6 months of service are entitled to 12 weeks (approximately 3 months) of maternity leave, with at least half of this period taken after childbirth.

• During maternity leave, employees must receive no less than 50% of their salary.

• Paternity Leave:

• While not legally mandated for private-sector employees, public-sector male civil servants are entitled to 14 days (2 weeks) of paternity leave as per government policy.

4. Sick Leave

• Employees are entitled to 12 working days of paid sick leave per year, provided they present a valid medical certificate from a registered medical practitioner.
• During sick leave, employees receive their full salary, excluding overtime and other allowances.

Federal Benefits

Mandatory benefits in Nigeria are regulated by law and include:

1. Pension Contributions:

• Employers contribute 10% and employees contribute 8% of the employee's monthly salary to the Retirement Savings Account (RSA) under the Pension Reform Act 2014. This ensures that employees have a secure retirement fund.

2. National Housing Fund (NHF):

• Employers deduct 2.5% of employees' monthly basic salary for the NHF, which supports housing finance. This fund is aimed at providing affordable housing for Nigerians.

3. Employee Compensation Scheme (ECS):

• Employers contribute 1% of the employee's total payroll to cover work-related injuries or illnesses under the Employee Compensation Act. This provides financial support to employees who suffer from work-related injuries.

Supplemental Benefits

Many employers offer additional benefits to attract and retain talent, such as:

1. Health Insurance:

• Private medical plans providing broader coverage beyond the mandatory National Health Insurance Scheme (NHIS), which may include outpatient services, dental care, and specialist consultations.

2. Transportation Allowances:

• Support for commuting costs, helping employees manage their travel expenses to and from work.

3. Life Insurance:

• Group life insurance schemes covering at least three times the employee's annual salary, providing financial security to employees' families in case of unforeseen events.

4. Professional Development:

• Funding for further education or training programs to enhance employees' skills and career growth.

5. Performance Bonuses:

• Additional financial incentives based on individual or company performance, often provided as a way to motivate employees and reward exceptional work.

6. Flexible Work Arrangements:

• Options for remote work or flexible hours to promote work-life balance.

Process

• Employers must provide a valid reason for termination, which can include misconduct, redundancy, or poor performance.
• A written notice of termination is required, stating the reason for dismissal and the termination date.
• In cases of redundancy, employers must consult with affected employees and provide payment of redundancy benefits as stipulated by law.

Notice Period

Notice periods depend on the length of employment, as stipulated in the Labour Act:

• One day: For employees with less than three months of service.
• Two weeks: For employees with three months to two years of service.
• One month: For employees with two or more years of service.
• Employers may provide payment in lieu of notice, which includes all wages and benefits the employee would have received during the notice period.

Severance Pay

• There is no statutory requirement for severance pay unless specified in the employment contract.
• For redundancy cases, severance pay is typically agreed upon through collective bargaining agreements or company policies.