Pension alone adds 18% to your labour cost — 10% from you, 8% from the employee, both capped. Then add NHF (National Housing Fund) at 2.5% of basic, housing, and transport allowance from the employee; NSITF (employees’ compensation) at 1% of monthly payroll from you; and ITF (Industrial Training Fund) at 1% of total payroll from you. Budget roughly 12–14% employer-side on top of gross for statutory contributions before PAYE.
Payroll and tax
PAYE applies to employment income. Bands are progressive: first NGN 300,000 at 7%, next NGN 300,000 at 11%, next NGN 500,000 at 15%, next NGN 500,000 at 19%, next NGN 1,600,000 at 21%, and above NGN 3,200,000 at 24%. Consolidated relief allowance (CRA) and other reliefs reduce taxable income. Monthly remittance to the state tax authority (FIRS for federal; states may have their own) is required. Late remittance attracts penalties and interest.
Pension contributions go to a licensed PFA (Pension Fund Administrator); the employee chooses the PFA. NSITF and ITF are remitted to the respective bodies. Keep records of all remittances; audits are increasing and back-dues can be hefty.
Employment law and the Labour Act
The Labour Act governs the relationship. Written contracts are required. Probation is common; maximum period is typically 6 months. Working hours: 8 hours per day, 40 per week (or 48 in some sectors with overtime). Overtime is paid at a premium. One rest day per week and annual leave (typically 6 days after one year, scaling up) are mandatory.
Termination can be by notice, payment in lieu, or for cause. Notice is often one month (or as contractually agreed). Summary dismissal is allowed for gross misconduct but you must follow a fair process and give the employee a chance to be heard. Wrongful dismissal claims can lead to damages; courts often award compensation based on what the employee would have earned during the notice period or longer.
Statutory benefits
Pension (18% total), NHF (2.5% employee), NSITF (1% employer), and ITF (1% employer) are the main statutory items. There is no universal statutory health insurance for private-sector employees; many employers offer private health cover as a benefit. Maternity leave is 12 weeks at 50% pay (or full pay if the employer offers it). Ensure your EOR remits on time; PENCOM and NSITF have stepped up enforcement.
EOR considerations
An EOR in Nigeria must be set up to remit PAYE, pension, NHF, NSITF, and ITF and to issue Labour Act–compliant contracts. Verify they use a licensed PFA and have valid NSITF and ITF registration. FX and banking can be messy; confirm salary payment in NGN and who bears bank charges and FX risk. Termination disputes often end up in court; the EOR should have local legal capacity and clear allocation of liability for employment claims.
Frequently Asked Questions
What are the main employer contributions in Nigeria? Pension 10%, NSITF 1%, ITF 1%. Employee pays pension 8% and NHF 2.5%. Total employer statutory add-on is about 12% before benefits.
Is pension mandatory? Yes. 18% total (10% employer, 8% employee), paid to a licensed PFA. Non-remittance can trigger PENCOM penalties and back-dues.
Can we fire someone without notice? Only for gross misconduct, and you must follow a fair process. Otherwise notice or payment in lieu is required; wrongful dismissal can lead to damages.
Who pays ITF and NSITF? Employer. ITF is 1% of total payroll; NSITF is 1% of monthly payroll. Both are separate from pension and PAYE.
Does an EOR need to be registered for pension and NSITF? Yes. The EOR is the employer of record and must be registered with PENCOM (via a PFA), NSITF, and ITF and remit on time. Confirm this before contracting.