Using an Employer of Record in Nigeria

Companies looking to engage and pay employees in Nigeria need to navigate local labor laws, payroll rules, tax obligations, and statutory benefits. Managing these requirements without local expertise can be time-consuming and challenging.

Using an Employer of Record (EOR) in Nigeria, like Payoneer Workforce Management, can streamline the process. An Employer of Record in Nigeria acts as the legal employer on your behalf, handling payroll, employment contracts, benefits administration, and labor law requirements, while you may control the day-to-day work of international talent.

Learn more about Payoneer Workforce Management, or keep reading to see how an Employer of Record in Nigeria can help your business. 

How to hire employees in Nigeria

Companies that engage and pay employees in Nigeria have three main options: 

1. Establish a local entity: This provides companies with great operational control but comes with significant setup costs and ongoing obligations. Businesses must manage payroll, taxes, and benefits locally.

2. Hire independent contractors: Suitable for short-term or project-based work, this option offers more flexibility. However, misclassifying an employee as a contractor can lead to penalties, including retroactive tax and benefit payments.

3. Use an Employer of Record: Engaging talent through an EOR in Nigeria allows businesses to legally access talent without setting up a local entity. The EOR assists with managing payroll, taxes, benefits, and labor law requirements.

Payoneer Workforce Management acts as an Employer of Record in Nigeria and can assist you in onboarding talent and mitigating risks related to contractor misclassification.

How to onboard employees in Nigeria

Onboarding employees in Nigeria involves issuing a compliant employment agreement, collecting employee documentation, setting up payroll, and enrolling employees in benefits where applicable.

The onboarding process typically includes:

• Payroll and benefits setup: Add newly engaged local employees to the payroll platform and confirm they are enrolled in benefits mandated by local labor regulations.
• Workstation provisioning: Provide local talent with the necessary equipment and tools, ensuring all devices are properly configured so they can start working without delay.
• First‑week orientation: Coordinate an introductory session during the employee’s initial week to walk them through company policies, onboarding milestones, and the responsibilities associated with their role.
• Team and organizational introductions: Arrange meetings and touchpoints that help the new employee connect with their direct team and build relationships with colleagues across the wider organization.

Payoneer Workforce Management enables companies to compliantly engage talent across borders through its technology platform.

Pay employees in Nigeria

Payroll in Nigeria must follow local rules around currency, pay schedules, statutory contributions, and employee benefits.

Payroll basics

Employers must pay employees in Nigerian naira (NGN) or US dollars (USD). Salaries are usually paid on the last day of the month. 

The minimum wage in Nigeria is NGN 70,000 per month. 

There is no mandatory annual bonus in Nigeria, but employees are entitled to an end-of-service benefit calculated based on their years of service and their most recent salary.

Income tax

Nigeria has a progressive income tax system with rates ranging from 7% to 24%, depending on income.

Payroll contributions

Employers are responsible for mandatory contributions when running payroll in Nigeria. They typically cover pension and disability, health insurance, and accidents.

Health insurance and social security

Public health insurance and life insurance are mandatory in Nigeria under the National Health Insurance Authority Act of 2022 (NHIA). Coverage is provided through the National Health Insurance Scheme (NHIS), which supports access to basic healthcare services nationwide.

Private health and life insurance are also mandatory. Employer-sponsored plans may cover employees only or employees and their families. 

Social security coverage includes pensions, disability benefits, health insurance, and workplace accident coverage.

An EOR, like Payoneer Workforce Management, offers a streamlined way to pay employees in Nigeria. Our unified, all-in-one platform gives you a single dashboard to manage a global workforce and enables you to pay contractors and employees in just a few clicks.

Employment laws in Nigeria

All employers operating in Nigeria must abide by local laws and regulations. Here are the details of key labor laws in Nigeria.

Working hours

The standard working hours in Nigeria are 40 hours per week.

Probation

There is no statutory probation period under Nigerian law. 

During probation, employers are required to provide notice based on tenure. Employees on probation must receive at least 2 weeks’ notice.

You can get support to stay compliant with local labor laws by using Payoneer Workforce Management’s infrastructure.

Minimum wage in Nigeria

The minimum wage in Nigeria is NGN 70,000 per month. It’s important to check government websites and resources regularly for updates on the minimum wage.

Employment contracts in Nigeria

Employment contracts in Nigeria are legally binding and must include key terms and conditions. These usually include the following information:

• Company and employee information
• Start date and term of employment (e.g., permanent, fixed term)
• Job title and description
• Base salary and benefits
• Working hours, overtime pay, and leave entitlements
• Probationary period details
• Termination details

Payoneer Workforce Management allows you to onboard talent quickly and securely with localized contracts and payroll.

Leave policy in Nigeria

Employers in Nigeria must provide statutory leave entitlements covering public holidays, vacation time, sick leave, and maternity leave.

Public holidays and vacation time

Nigeria observes 13 public holidays each year.

Employees are entitled to 21 days of paid annual vacation time.

Up to 12 days of unused vacation may be carried forward from one year to the next. All accrued vacation must be taken within 24 months of being earned.

Maternity leave & paternity leave

Employees are entitled to a minimum of 12 weeks of maternity leave, at 100% pay for the first 4 weeks, followed by 50% pay for the remaining 8 weeks.

The pregnant employees have employment protections. Employers cannot terminate pregnant employees and recent mothers.

There is no statutory entitlement to paternity leave, although some employers may choose to offer it as an additional benefit.

Sick leave

Employees are entitled to up to 12 days of paid sick leave per year.

Work permit in Nigeria

The rules for work permits in Nigeria vary depending on the employee’s country of origin and the role being performed. Employers engaging foreign workers in Nigeria should consult government resources for details relevant to their circumstances.

Background check in Nigeria

Employers may want to conduct background checks before engaging an employee in Nigeria. These may include criminal record checks, employment history verification, education verification, and social media checks, depending on applicable regulations. 

Employers typically need the employee’s consent and must disclose the nature of the checks being performed. It’s important to check local regulations before running any background checks.

Employment termination in Nigeria

Employment termination in Nigeria must be based on valid grounds. Termination without just cause may be considered unfair dismissal and can result in legal consequences. 

Valid termination scenarios

Employment in Nigeria may end due to the following reasons:

• Employee resignation
• Mutual agreement between the employee and the employer
• Termination during probationary period
• Termination by the employer due to misconduct, performance issues, absence without leave, etc

Notice period

The minimum notice period is 1 day, and increases with the length of employment as follows:

Company registration in Nigeria

Companies may choose to register a business in Nigeria to establish a permanent presence, access local markets, or meet long-term strategic goals. Details on registration requirements are available through government resources.

However, for many businesses, using an Employer of Record in Nigeria is a streamlined and simpler way to engage talent.

Payoneer Workforce Management enables compliant onboarding and engagement of talent in 160+ countries without having to set up a legal entity.

PEO in Nigeria

A Professional Employer Organization (PEO) in Nigeria can support HR and payroll functions, but requires you to have a legal entity in-country. 

On the other hand, an Employer of Record in Nigeria does not require a legal entity and instead serves as the legal employer for the local team. This often makes it the better choice for companies new to the Nigerian market.

Payoneer Workforce Management’s Employer of Record services in Nigeria

Payoneer Workforce Management helps growing companies onboard, pay, and manage employees in Nigeria without setting up a local entity. 

As your EOR in Nigeria, we offer assistance with employment contracts, benefits administration, taxes, payroll, timesheets, and more.

Book a demo to learn more about Payoneer Workforce Management.

FAQs

1) What is an Employer of Record in Nigeria?

An Employer of Record in Nigeria is a third-party organization that legally employs workers on your behalf and manages payroll, taxes, and employment contracts, so you can engage international talent without a local entity.

2) How much does it cost to hire talent in Nigeria?

The employer cost of engaging employees in Nigeria is approximately 10% on an annual salary of USD 60,000, but this can vary depending on the employee’s salary and other local factors. Use our employee cost calculator for an employment cost estimate.

3) Why should you hire talent with an EOR in Nigeria?

Working with an EOR in Nigeria can help streamline the onboarding process. Payoneer Workforce Management allows you to pay independent contractors and employees across the globe in 70+ currencies.