Your guide to payroll in Nigeria

Running Nigeria payroll means paying the employees monthly, with salaries paid at the end of the month. Salaries must typically meet or exceed the national minimum wage of ₦70,000, and PAYE tax deductions must be remitted by the 10th of the following month. 

Further, you will have to plan for mandatory employer contributions toward pensions, health insurance, and employee compensation. 

Once you start managing payroll in Nigeria, you also have to look at pension math and state-level tax quirks. Whether you’re running payroll management in Nigeria in-house or through a partner like Payoneer Workforce Management, this guide covers the details that matter.

In this guide, let’s understand how to manage payroll in Nigeria. 

Nigeria payroll: Wages and other payments

Employers must follow legally required pay frequency rules, ensure wages meet the minimum wage, and may provide additional payments such as overtime and bonuses at their discretion. Here’s how each piece fits together:

Payroll cycle in Nigeria

The Labor Act requires wages to be paid at least once a month. 

In practice, most Nigerian employers run payroll on the last working day of the month.

The payout currency is Nigerian Naira (NGN), though some multinational arrangements involve USD for expat roles. 

Minimum wage in Nigeria

Employers have to legally pay a minimum wage of ₦70,000 per month in Nigeria. 

Overtime pay

The standard workweek is 40 hours. 

Moreover, there’s no statutory overtime multiplier written into the Act, unlike other African markets such as South Africa and Kenya, where the law sets specific premium rates. Nigerian law leaves the specifics to individual employment contracts. 

Maternity pay 

Employees get 12 weeks of paid maternity leave in Nigeria. Employees with six months’ tenure or more get at least 50% of their regular salary.

Sick pay

Employees get 12 days per year as paid sick leave. It requires a medical certificate from a registered practitioner.

Annual bonus and 13th-month pay

Nigerian law doesn’t mandate a 13th-month salary or annual bonus. However, employers may offer a year-end bonus around December, but it’s goodwill, not statutory.

Payroll in Nigeria: Contributions and deductions

The following employer taxes in Nigeria apply based on compulsory and voluntary social security programmes. Here’s the breakdown:

Salary tax in Nigeria 

Nigeria follows a PAYE (Pay As You Earn) system. The applicable salary tax in Nigeria is progressive from 7% to 24%.

Health insurance 

Health coverage in Nigeria is mandatory. Health insurance and Health Maintenance Organisation (HMO) plans are typically overseen by the National Health Insurance Scheme (NHIS).

Under the NHIA Act of 2022, NHIS must provide affordable health coverage to all Nigerians.

Employers with 5+ staff must register with the National Health Insurance Scheme. 

Total employment costs in Nigeria

Add it all up, and the employer’s share typically amounts to around 10% of an annual salary of USD 60,000. 

The exact figure depends on the salary structure and which components count toward each calculation base. You can use our employee cost calculator for a more precise estimate.

Other employee benefits

Beyond mandatory payroll deductions, Nigerian labor law mandates several leave and benefit entitlements. These show up on your payroll one way or another:

• Annual leave: Employees are entitled to 21 paid days after 12 months of continuous work. However, employees can carry over only 12 days of annual leave, and all accrued leave expires after 24 months.
• Public holidays: Nigeria observes about 13 public holidays each year, a mix of fixed dates (New Year’s, Independence Day, Christmas) and Islamic observances that shift annually.
• End-of-service benefit: Not mandated by statute, but commonly negotiated into employment contracts. It is calculated based on years of service and last salary.

For a full breakdown of leave entitlements, see our guide to leave policy in Nigeria. Similar frameworks apply across West Africa; check the Ghana EOR guide for a regional comparison.

Nigeria payroll compliance best practices

Payroll compliance in Nigeria requires ongoing attention. Tax rules can change, state authorities may conduct independent audits, and different agencies require separate payments on their own schedules. 

A few practices go a long way:

• Track remittance deadlines: Salary payments are due by the last day of the month. Employers are also required to make pension contributions within a few working days of salary payment as per the regulations. Late filings can attract penalties and interest.
• Separate contribution bases: Pension is typically calculated on basic + housing + transport. NHIS is on basic salary alone. Mixing these up inflates one contribution and shorts another.
• Keep pay slip records: There are no standard payslip requirements in Nigeria. However, it is recommended to document gross pay, each deduction, and net pay for every pay period.

Engaging contractors to replace payroll with contractor payments? For broader contractor compliance considerations, especially around misclassification risk, it’s worth reviewing the rules before you engage independent workers, alongside employees.

Your options for payroll services in Nigeria

To maintain payroll services in Nigeria, you have three options: 

• Run payroll in-house: This is a good option if you have a registered entity and an HR team familiar with Nigerian tax law. You handle PAYE, pension registration, NHIS, NSITF, and ITF yourself when you run an in-house payroll. It is more doable for large teams with local expertise. However, less practical for companies entering the market.
• Outsource to a local payroll provider: A local firm handles calculations and filings. You still need a legal entity in Nigeria, and you’re ultimately responsible for compliance. This option works when you want to offload admin but keep operational control.
• Use an Employer of Record (EOR): An EOR acts as the legal employer. They facilitate the payroll, the tax filings, and all the statutory contributions. You skip entity setup entirely and manage your team’s actual work. That’s how Payoneer Workforce Management operates across 160+ countries.

For contractor-dependent organizations, there’s also the Agent of Record model and the contractor management system. 

Talk to an expert to see how Payoneer Workforce Management can simplify payroll in Nigeria for your team.

Frequently asked questions (FAQs)