Nigeria

Registrations and Establishing an Entity

The company is required to have a legal entity established in order to process a payroll. There are various entities available, including:

• Private or Public Limited Liability Company
• Unlimited Liability Company
• Company Limited by Guarantee
• Foreign Company (branch or subsidiary of a foreign company)
• Partnership/Firm
• Sole Proprietorship
• Incorporated Trustees
• Representative Office

Company Incorporation Process:

• Taking instruction from the promoters/clients
• Preparing the incorporation documents
• Stamping incorporation documents
• Filing the incorporation documents with the Corporate Affairs Commission (CAC) and obtaining the certificate of incorporation

Mandatory Registrations:

• Federal Inland Revenue Service (FIRS)
• State Tax Authorities (e.g., LIRS for Lagos)
• National Pension Commission (PenCom)
• Nigeria Social Insurance Trust Fund (NSITF)
• National Housing Fund (NHF)
• Industrial Training Fund (ITF) – mandatory for companies with ≥5 employees or ₦50M turnover

Note: Some registrations overlap in timing. FIRS registration is required before registering with LIRS.

Additional Requirement:

• Some State IRS (e.g., Lagos) require all employees to register on its e-tax portal for individual Tax Payer IDs.

Working Hours & Workweek

• Monday to Friday
• Typical office hours: 08:00 to 17:00
• Lunch breaks: 30 minutes to 1 hour

Minimum Wage

• As of May 2024, the national minimum wage is ₦75,000/month. Previous rate was ₦30,000.

Employment Laws

The Nigerian Labour Act governs employment and sets statutory leave entitlements:

• Annual Leave: Minimum 6 days paid leave after 12 months of continuous service
• Sick Leave: Up to 12 paid working days per calendar year with medical certificate
• Maternity Leave: 3 months; minimum of 50% of salary. Employer may extend based on circumstances
• National Service: NYSC – 1-year compulsory service for Nigerian graduates. Employee remains on payroll

Additional Leave (non-statutory but common in contracts):

• Study leave, family leave, paternity leave, compassionate leave, relief leave, casual leave

Pension Requirements

• Applicable to employers with ≥15 employees
• Contributions: Employee 8%, Employer 10% of Basic + Housing + Transport allowances

Tax Year: Calendar Year (Jan 1 – Dec 31)

Income Tax (PAYE)

• ₦0 – 300,000: 7%
• ₦300,001 – 600,000: 11%
• ₦600,001 – 1,110,000: 15%
• ₦1,110,001 – 1,600,000: 19%
• ₦1,600,001 – 3,200,000: 21%
• Above ₦3,200,000: 24%

Includes consolidated tax-free allowance of ₦200,000 or 1% of gross income (whichever is higher) plus 20% of gross income.

PAYE Deadline: By 10th day of the month following payment of salaries

Statutory Registrations:

• Employees must be registered with state revenue authority for tax compliance

Social Security Contributions

• Approved provident/pension funds
• Employee: 8% of Basic + Housing + Transport
• Employer: 10% of same
• Joint Tax Board-approved schemes

Reporting

• Annual returns (Form H1) due Jan 31 of the following year
• Penalties for late filing: ₦50,000 (individual), ₦500,000 (corporate)
• Monthly PAYE and pension remittances required

Audit

• State tax authorities empowered to audit employers and apply penalties with interest for discrepancies

Payroll Operations Payroll

• Monthly salary payments and PAYE deductions
• Online payslips accepted

Reports

• Monthly PAYE and statutory contributions
• Annual returns filed by January 31 of the following year
• Payroll records must be retained for 6 years

Hiring and Termination New Employees

• Must be registered for PAYE, pension, and other social schemes
• Employer submits RTI file with new starter details
• Self-employed persons register directly

Leavers

• Employer issues P45 equivalent
• Notify tax authorities of employee departure
• Severance and benefits paid per contract

Compensation and Benefits Employee Benefits

• Pension schemes
• Health insurance (company-specific)
• Performance bonuses and allowances

Termination

• Must comply with contract terms and Labour Act
• Notice or payment in lieu required
• Improper termination may lead to redress at National Industrial Court

Employee Benefits

Expenses Amounts allowed are now limited to expenses incurred in performance of duties and from which it is not intended that the employee should make any gain or profit. Employers must consider what qualifies as expenses incurred in performing employment duties as distinct from activities which are the personal responsibilities of the employee. Cost of passage, medical reimbursement etc. may no longer qualify.

Expenses

• Allowable business expenses: travel, fuel, accommodation, medical reimbursement
• All expenses must relate to job performance; personal expenses not permitted

To work in Nigeria, all business visitors must obtain a visa. The application should be made prior to travelling to Nigeria. Applicants should make their request for visa to the Nigerian embassy within their country of origin or current residence. A visa may not be required by citizens of countries that have specific arrangements with Nigeria.

Visa and Work Permits Visas Required for foreign nationals. Types include:

• Short Visit Visa
• Subject to Regularisation (STR) Visa
• Temporary Work Permit (TWP)
• Visa on Arrival (VOA)

There are two main types of visa:

• Ordinary Visa
• Gratis Courtesy Visa

Ordinary Visa The Ordinary Visa is further divided as follows:

• Transit
• Single Journey

Transit This type of visa is issued to applicants who wish to pass through Nigeria to a further destination. It may be obtained at a Nigerian mission and is given for a period not exceeding seven days without reference to the Comptroller-General of Immigration. A transit visa may also be given at the port of entry on the specific approval of the Comptroller-General of Immigration.

Work Permits

• STR Visa: for employment over 6 months
• TWP: for short-term technical work (2–6 months)
• Residence permit issued post-arrival for long-term employment

Location Specific Considerations

• Recent increase in national minimum wage to ₦70,000
• Employers must comply with PAYE deadlines to avoid penalties
• Tax audit and reporting standards enforced by state and federal authorities
• Holiday calendars vary across states

National Minimum Wage The national minimum wage in Nigeria ₦30,000 per month (full time)

Key updates for 2024/2025 

The National Minimum Wage Act 2019, which was the previous law governing remuneration of workers in Nigeria, had set the national minimum wage at #30,000 (Thirty Thousand Naira). The Amendment Act has now increased the minimum wage rate to #70,000 (Seventy Thousand Naira). This represents a 12.9% increase from the previous minimum wage rate. 

All Employers are required to pay the new Minimum Wage to all workers as described above. The following employers are, however, exempted from complying with the Amendment Act: 

• establishments where workers are employed on a part time basis and paid on commission or piece-rate (paid according to the quantity produced regardless of time); 

• establishments with less than 25 employees; 

• workers in seasonal employment such as agriculture, construction, tourism, etc; 

• workers employed in vessels or aircrafts to which merchant shipping or civil aviation laws apply. 

Failure to comply constitutes an offense and is punishable by both conviction and payment of a fine not exceeding 5% of the employer's monthly wages and of all outstanding arrears of the workers' wage.  

Additionally, the Employer will be liable to pay a penalty, which is not less than the prevailing Central Bank of Nigeria lending rate on the wages owed for each month of continuing violation. 

Further Information For more information, or assistance with Nigeria tax enquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.