Employer of Record in Nigeria | Employment Law

Employment Law in Nigeria

Contracts

In Nigeria, employment contracts can be fixed-term or indefinite, governed by the Labour Act (2004). Permanent contracts must include benefits such as pension contributions, paid leave, and health insurance (NHIS coverage). Fixed-term employees gain equal rights after six months of continuous service.

Termination and notice periods

In Nigeria, labor laws require employers to provide written notice of termination or pay in lieu of notice, with a minimum of one week for employees who have completed at least three consecutive months of continuous employment. In most cases, terminated employees are entitled to a fair process. Just cause for dismissal includes theft, insubordination, habitual negligence of duty, lack of capability, serious misconduct, prolonged illness, or redundancy.

There are no mandatory severance payments in Nigeria; however, additional compensation may be provided based on employment contracts or collective agreements. As your employer of record (EOR) in Nigeria, we can assist you in managing employee terminations by providing legal guidance and a personalized process to ensure compliance with national labor standards and minimize legal risks.

Probation periods

In Nigeria, probation periods are not mandated by law; however, they are commonly established through employment contracts and typically range from three to six months.

Working hours and overtime

In Nigeria, the standard workweek is Monday through Friday, with eight hours per day, totaling 40 hours per week. Employees are prohibited from working for more than eight hours a day without appropriate compensation.

Any work beyond eight hours a day is considered overtime, and employees are entitled to additional compensation, typically at a rate of 150% over their regular hourly rate, as stipulated in employment contracts or collective agreements.

Taxes

Employers in Nigeria must adhere to various taxation and regulatory compliance requirements to operate legally and avoid penalties.

• Corporate tax: Domestic companies are taxed at 30% on their worldwide income. However, companies with annual turnover between 25 million NGN and 100 million NGN are taxed at 20%, and those with turnover below 25 million NGN are exempt.
• Value added tax (VAT): VAT applies to businesses with an annual turnover exceeding 25 million NGN. Employers must register, file monthly returns, and pay VAT at a standard rate of 7.5% on applicable goods/services.
• Withholding tax (WHT): Employers must deduct WHT from employee salaries, vendor payments, and contractor fees. WHT must be deposited by the 21st of the following month, and relevant returns must be filed.
• Income tax returns (ITR): ITRs are filed annually based on company profits. Companies must also file annual financial statements with the Federal Inland Revenue Service (FIRS) and comply with electronic filing requirements.

Employer payroll contributions

Nigeria’s social security system requires employer contributions that are dependent on the total number of employees, and these contributions cover pensions, medical care, disability insurance, and gratuity payments. In addition, workers’ compensation is financed by contributions from state governments, employers, and employees.