Nigeria PEO/EOR

Doing Business With a Nigeria PEO/EOR

Nigeria is an economy known for its young and skilled workforce, vibrant business culture, business, and employment-friendly regulations, and government support for business expansion. These factors have made Nigeria an ideal destination for business expansion and employment.

While Nigeria holds immense potential for foreign investors, establishing a business here requires careful planning and knowledge of the country’s laws and regulations. Also, fulfilling the administrative procedures and documentation needs while setting up business in Nigeria can take considerably longer than planned. Unexpected delays might escalate costs and cause revenue losses. This is further complicated by Nigeria’s commercial and employment rules that differ regionally.

However, a well-reputed global Nigeria PEO like Multiplier can assist you in streamlining your company’s growth. Our in-house experts can handle employee onboarding and payroll management while ensuring compliance with the country’s rules.

Why Use a Nigeria PEO?

Nigeria is one of the largest African economies (the world’s 21st largest) that boasts of a resurgent industrial sector, with contributions from the tourism, petroleum, oil and natural gas exports, mining, and agriculture industries. These industries in Nigeria have contributed to the Nigerian GDP and brought out one of the most skilled and educated workforces.

Due to an extensive employment contribution and growth in these industries, businesses must keep track of the changing regulations and comply with the relevant laws, such as the Nigerian labor and corporate laws.

Therefore, if your business is looking to expand its operations or hire employees from Nigeria, it is mandatory to establish a legal entity such as a subsidiary or branch office. This process isn’t always ideal since establishing a legal entity can be time-consuming and costly. Instead, hiring and expanding the business operations through a Nigerian PEO (Professional Employer Organisation) or Nigerian EOR (Employer of Record) can be more cost-efficient.

Nigeria PEO Costs

The cost of a PEO Nigeria varies according to the services provided. You can discuss the rates with your Nigeria PEO partner during initial negotiations.

For instance, Multiplier has a simple costing structure with predetermined rates for each contract or employment system it runs. Moreover, the rate remains fixed irrespective of an increase in your employee’s salary or bonus. Thus, you can plan your budget without worrying about unforeseen PEO expenses.

When working with an EOR Nigeria firm like Multiplier, everything is transparent with no hidden fees.

How to Hire In Nigeria?

Hiring Nigerian employees require employers to be aware of the Nigerian labor laws. The employment laws capture various aspects of the hiring process and the statutory requirements that must be complied with once the employees have joined your team.

However, you can employ Nigerian talent by conducting a formal interview to ensure that you discuss the company policies and further steps in the hiring process.

Once you have selected your ideal candidate, it is mandatory to offer employment contracts to selected candidates within three months of joining.

Here are a few core fundamentals to remember before hiring employees in Nigeria.

Employment laws

The Constitution of the Federal Republic of Nigeria (1999), and the Labor Act of the Laws of the Federation of Nigeria (2004), are the two most important sources of employment compliance legislation. In addition, employment ties are governed by all federal legislation passed by the National Assembly and state laws passed by the House of Assembly.

In Nigeria, employees are divided into two groups:

  • People who undertake physical or clerical work
  • People who work in administrative, executive, technical, or professional capacities.

Note: The Labor Act only covers employees engaged in physical or clerical labor. Employment contracts usually control non-workers.

Employment contract

When hiring employees covered under Nigeria’s Labor Act regulations, including manual laborers and clerical professionals, you must prepare a formal written employment contract.

The contract should include the following information:

  • Identification details of employers and employees
  • Employment commencement date
  • Employment duration for temporary contracts
  • Workplace
  • Employment type, job description, and responsibilities
  • Salary and other benefits
  • Payment cycle
  • Regulations on working hours and overtime
  • The total number of vacation days
  • Termination terms and notice period

It is important to mention the salary and other compensation amounts in the country’s local currency, the Nigerian Naira. You must also ensure that the employment contracts are drafted in the employees’ native tongue.

Nigerian law permits both fixed and indefinite employment contracts; hence, you have several options for hiring talent here.

Minimum wages

The national minimum wage that an employer must comply with is currently at NGN 30,000 monthly.

You must ensure that you fairly compensate your employees based on the skills, education, and expertise they bring to a particular role.

Probation period

Nigeria has no strict mandates on the length of probation or trial period. Thus, employers can determine the probation duration as they deem fit after discussing it with employees. However, the industry standard is usually three to six months.

Working Hours

The standard working hours in Nigeria are forty hours a week over a five-day workweek. Employees can work for a maximum of eight hours per day.

Any additional hours requested by the employers are considered overtime and must be compensated accordingly.

The standard workweek in Nigeria is from Monday to Friday; however, it can be additionally outlined through an employment contract.

Overtime

Any additional work hours more than the standard work hours must be compensated, alternatively known as overtime pay. Overtime pay in Nigeria is regulated through an employment contract or collective bargaining agreements.

Leaves

You must give a day off to your employees for all the 11 national holidays. Plus, employees are entitled to six days of paid annual leave after working for your company for a year.

Female employees enjoy a 12-weeks maternity leave period at 50% of their regular wage. Because Nigeria is divided into states, maternity and paternity leave policies vary from one state to the next. For example, Lagos and Enugu allow two and three weeks of paid paternity leave, respectively. However, other Nigerian states do not provide paid paternity leave.

Benefits

Taxation and social contributions

Both employers and employees contribute to relevant provident funds. In exceptional circumstances, employees do not contribute to pension schemes. Employees’ criteria for contributing to pension, retirement, or gratuity plans vary according to their job role. The taxation terms are included in employment contracts.

The Joint Tax Board approves social security plans, which you must renew yearly.

  • Employees must contribute a minimum of 8% of their salary
  • At the end of each fiscal year, employees must report their taxes
  • Employees must file their annual returns by January 31 of the following year. The penalties for non-compliance by individuals or corporate organizations are N50,000 and N500,000, respectively.

Payroll

Employers in Nigeria must deduct income tax and social security contributions from their employees’ paychecks as part of the payroll process. They can use the PAYE (Pay As You Earn) model to process tax and social security contributions, which are then reported to the appropriate state Internal Revenue Service.

Income tax deductions are made progressively across income levels in Nigeria. The income tax rate varies between 7% and 24%. The personal income taxes in Nigeria include:

Taxable Income (NGN)Income Tax Rates (%)
First 300,000 NGN7%
Next 300,000 NGN11%
Next 500,000 NGN15%
Next 500,000 NGN19%
Next 1.6 million NGN21%
Above 3.2 million NGN24%

In Nigeria, social security payments cover retirement, disability, sickness, and maternity benefits. While employees must contribute a minimum of 8% of their salary to the various benefit programs, employers must contribute nearly 10%. The social contributions that both parties must contribute include:

Social Security FundsEmployer ContributionsEmployee Contributions
Pension

10%

Mandatory for employers with a headcount of more than 15 employees

8% of the gross salary
National Social Insurance Trust Fund (NSITF)1%Contributed by the employer
Industrial Training Fund (ITF)

1%

Applies to all employers with

  • A minimum of five employees and/or
  • Annual revenue of NGN 50 million
Contributed by the employer
Housing FundContributed by the employee

2.50%

Applies to employees with an annual gross income more than NGN 3,000.

Employers must offer payslips (usually delivered online) and payroll reports to employees at the end of each pay cycle.

Employment benefits

When creating your Nigeria benefits management plan, start with the guaranteed benefits mandated by law.

Employee Compensation Act, 2010

The Nigerian law mandates employers to create a healthy and safe working environment for their employees. Thus, employers must make adequate safety equipment provisions, especially for high-risk jobs. The government also offers actionable remedies against the employer for specific injuries or diseases incurred in the workplace (during the employment period).

Termination

According to section 11 of the Labor Act, employers must give a minimum notice period to all employees:

  • One day for three months of service
  • One week for two years of service
  • Two weeks for five years of service
  • One month for more than five years of service

However, both parties can mutually decide to extend the notice period in the employment contracts. Section 11 (9) and (6) of the Labor Act permits either party to terminate the agreement by paying the other party’s salary in lieu of notice.

Severance Pay

There is no obligation as per the labor act of Nigeria to severance pay. It completely depends on the employer and employee agreement.

Why Multiplier?

If you’re planning to expand your business to Nigeria, Multiplier can assist you with your onboarding and payroll needs. Our Nigeria PEO experts can help streamline your hiring process by preparing legally compliant employment contracts in Nigeria.

Personnel onboarding, payroll, and foreign employee administration are all possible with Multiplier as your global employment partner. Additionally, our experts can seamlessly manage work contracts, social contributions, pensions, and other benefits per Nigeria’s employment rules.

Our Nigeria PEO Simplifies Your Expansion

You can expect a hassle-free business expansion process by using our one-stop Nigeria PEO services:

  • Our Professional Employer Organization acts as a co-employer, assisting your company with onboarding, payroll, compensation and benefits policy development, and other critical HR services.
  • Multiplier’s EOR solution acts as the principal employer, allowing you to engage in full-time employee onboarding without needing to set up a business in Nigeria.
  • Our global payroll processing system incorporates an all-in-one payment solution to manage all payroll-related difficulties easily.
  • Our PEO Nigeria helps cater to your employees’ demands by developing a global-standard, comprehensive, and inclusive benefits plan. A well-structured compensation plan helps attract and retain talent.
  • Our pricing options are cost-effective and transparent, with no hidden charges.

Get in touch with our PEO experts if you want to know about our services and solutions.

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Frequently Asked Questions

It requires all employers to contribute 1% of the total monthly payroll to the compensation fund. It gives all employees the right to file a claim for occupational diseases and injuries sustained in the workplace or while working.

Any pay, wages, fees, allowances, or other gains or profits from work, including bonuses, premiums, benefits, or other perks allowed, given, or granted to an employee, are subject to taxation under the PITA.

The most important benefit of outsourcing HR operations is that you can focus on the pivotal aspects of your business. Because it operates as the primary employer on paper, an Employer of Record Nigeria can help you start business operations without setting up a subsidiary in Nigeria. Furthermore, PEO Nigeria specialists always stay updated on the country’s laws, ensuring full compliance.

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