Employment Laws in Nigeria: A Guide for US Companies Hiring Abroad
With its booming technology sector, Nigeria is a great place for US companies to expand their teams. We walked through the key employment laws to keep in mind when hiring there.
Published on July 1, 2022
The Nigerian Labour ActThe Nigerian Labour Act is the main law that governs employment relationships in Nigeria. The Act uses the term "workers" to describe an employee or “any person who has entered into or works under a contract with an employer.” The contract may be for manual or clerical work, a contract of service, or “a contract personally to execute any work or labour.”Not all persons employed are considered “workers,” however. Section 91 categorizes these employed individuals as “persons exercising administrative, executive, technical or professional functions as public officers or otherwise." These individuals are subject to the terms and conditions of their employment contract.There is some debate as to whether the Labour Act extends to categories of workers outside of manual or “unskilled” labor workers, but the Act typically remains the de facto law.“Freedom of contract” is another aspect of Nigerian law that binds employers and employees to their employment agreements.
Employment contracts 📑A written statement of the particulars of the contract of employment must be provided to an employee within three months of their tenure working for the same employer. In order for the contract to be binding, the worker must sign it to indicate that they accept the terms of employment. The written statement must include:
- The name of the employer
- The name of the worker’s address, the job position, and the start date
- The job description
- Whether the contract is for a fixed term, and if so, the date of the contract's expiration
- The notice period required in case either the employer or worker wishes to terminate the contract
- The worker’s salary or wages, as well as the way wages are calculated
- The frequency in which the worker is paid
- Terms and conditions, including working hours, holiday pay, sickness benefits, conditions of work-related illness or injury
- Leave allowances
- Any special terms of the contract of employment
Probationary periodA worker's contract of employment may include a probationary period. The duration of the probation period and the terms of the notice period for terminating the contract are subject to the employer’s agreement with the worker. Typically, a probation period lasts for three months. If an employer does not terminate the contract or confirm the permanent hire of the worker after the probationary period, the worker is considered permanent under “confirmation by conduct.”
Termination of an employment contractSection 11 of the Labour Act requires written notice in order to terminate a contract. Both an employer and a worker under a contract are responsible for providing notice to the other party if either intends to terminate the contract. The notice period for a termination of a contract varies according to how long the worker has been employed:
- a contract that has continued for three months or less requires one day of notice
- a contract that has continued for more than three months, but less than two years, requires one week of notice
- a contract that has continued for two years, but less than five years, requires two weeks of notice
- a contract that has continued for five years or more requires one month of notice
Employees Compensation Act 💰The Employees Compensation Act was enacted in 2010 to protect workers and their dependents from financial hardship in the case of a work-related illness, injury, or death. It establishes the Nigerian Social Insurance Trust Fund Board, which is the group that implements the Employee Compensation Fund.Under the Employees Compensation Act, all employers in the Federal Republic of Nigeria are required to withhold 1% of an worker’s monthly salary and remit it to the Employee Compensation Fund.Section 17 of the Act requires that compensation be paid to the dependents of an worker who suffered a work-related death. This compensation can range from 30% to 90% of the worker’s total monthly wages. However, it may be subject to change based on the needs of the worker’s dependents.Accepting compensation for a worker’s death also prohibits the deceased's dependents from taking further legal action against the employer for the employee's death.
Industrial Training ActThe Industrial Training Act promotes job training to indigenous workers to improve relevant work-related skills. The act also mandates that the Training Fund's Council may refund up to 50% of the amount an employer pays for training if the training program is deemed adequate.
Pension Reform Act 2014The Pension Reform Act 2014 establishes standards for administering payment to workers in the private and public sector. Private sector employers with 15 or more workers are required to provide a Contributory Pension Scheme, or a retirement plan for their workers once they retire.Under the Pensions Act, the minimum an employer must contribute to a pension plan is 10% of their monthly remuneration; an worker is required to contribute 8% of their monthly remuneration. The rate of the contribution may be changed with approval of the National Pension Commission.
Trade Unions Act and Trade Disputes Act 👷♀️The Trade Unions Act of 2004 defines trade unions as any group of temporary or permanent employers or employees that regulates the terms and conditions of workers through negotiations and collective bargaining agreements. The Nigerian law mandates that employers recognize trade unions, and it also secures the right for workers to strike and peacefully picket.When it comes to collective bargaining, trade unions are required to organize an electoral college to elect a trade union member to serve as a representative in collective bargaining negotiations.The Trade Disputes Act establishes regulations for dispute settlements between employers and trade unions, arbitration, and conciliation. Under this Act, the National Industrial Court of Nigeria (NICN) has jurisdiction over trade disputes.
Establishing a presence under the Companies and Allied Matters Act 🌍In order for a foreign employer to hire workers in Nigeria, that employer must be incorporated under the Companies and Allied Matters Act (CAMA). This Act bars foreign employers from owning a place of business before becoming incorporated.An employer abroad may begin the process for recruiting foreign workers in Nigeria before incorporation. However, a 12-month permit is required for foreign recruitment. The employer of an unincorporated business outside of Nigeria may instead hire an independent contractor to complete a specific task.
Personal Income Tax ActUnder this Act, employers are legally obligated to withhold and remit monthly taxes from their workers’ paychecks. A person who resides in Nigeria but is employed outside the country is taxed on their worldwide income.Non-resident workers in Nigeria can be taxed on their income if their work is performed partially or fully in Nigeria. There are some exceptions, however. If the duties the worker performs is on behalf of an employer outside of Nigeria, they will not be taxed. Furthermore, some non-residents may be exempt from paying taxes in Nigeria if their country and Nigeria have a double taxation treaty (DTT). Nigeria does not have a tax treaty with the United States at present, but it does have tax treaties with Canada, the United Kingdom, and China, among other countries.
Minimum wage 💸In 2011, the government responded to demands for an increase in the national minimum wage, and established a National Minimum Wage Committee through the Federal Executive Council. Currently, Nigeria's national minimum wage is 18,000 naira per month, or $1,543 per year. Under the Labour Act, an employer may not control when or how a worker spends their wages.
Working hours and overtime ⏰The Labour Act requires that normal working hours be established in a contract of employment, but does not specify daily working hours. Typically, working hours are established in a collective bargaining agreement or, if there is no collective agreement, an industrial wages board.Any work that is performed outside of an establishment's normal working hours is considered overtime. If an worker performs work outside of normal work hours, they may receive time off or extra payment. Overtime payment is calculated on an hourly basis and should be at least equal to the worker's hourly rate. Different job positions within a company may qualify for different overtime wages.There is no regulation for the maximum overtime hours an worker can work per month, as long as the worker is allowed their statutory periods of leave and rest.
Parental leave 🤰A woman's right to maternity leave in the private and public sector is protected under the Labour Act. In order to qualify for maternity leave, the female worker must obtain a medical certificate from a medical practitioner within six weeks of their due date.It is illegal to force a woman to work for six weeks after a child is born. The statutory maternity leave period must be at least six weeks before the child's due date, and six weeks after the child is born. Some companies may increase the amount of maternity leave, depending on the contract of employment.A mother is also entitled to breaks in order to nurse her child. Two half-hour breaks during the work day must be granted to a new mother.
Maternity leave pay calculationIf a female worker has been continuously employed by the same employer for six months before her maternity leave starts, she is entitled to at least 50% of her salary during her leave. The female worker may be granted more, or a mix of full pay and partial pay, if her contract stipulates it.
Paternity leave 👨👦The Labour Act does not indicate regulations for paternity leave. However, in September 2021, the Federal Executive Council approved 14 days of paternity leave for fathers of newborn children or newly adopted children. In the case of adoption, the adopted child must be under four months old for a father to qualify for paternity leave.Because the Labour Act does not indicate statutory leave for fathers, their pay must be outlined in their contract of employment.
Nigeria Data Protection Regulation 🔐While Nigeria does not have strict data protection laws, there are some laws that provide some privacy protection. The Nigeria Data Protection Regulation 2019 (NDPR), the Cybercrimes Act 2015, and the Freedom of Information Act 2011, are some of the laws that provide guidelines for handling sensitive data. It is a best practice for employers to provide information about their company's data protection in their employee handbooks and contracts.A worker does not necessarily receive notification if their data is being used, and an employer does not need the worker’s consent every time their data is used. Consent may be assumed if the worker signed an employee contract, or if there was a data clause indicating that the employer would not notify a worker when using their data.The NDPR considers the use of personal data lawful if the data is necessary for the worker to perform their professional functions, or if the worker has given their consent for the employer to use their data.According to the NDPR, an employer is allowed to transfer an worker’s data to a country outside of Nigeria if the worker has given their consent, or if the data's transfer is necessary to fulfill the duties in the worker’s contract. Data may be transferred abroad also if it's in the interest of performing a job for an employer and another entity.
The benefits of outsourcing HR 📈Navigating compliance and local labor laws amidst the other responsibilities of running a business can be quite challenging, and it can be difficult to do without some help. Many business owners find it prudent to outsource their HR teams to ensure that they are staying compliant.Pilot specializes in payroll, benefits, and compliance for remote teams. For US-based companies who want to grow globally, our international and fully distributed team has expert knowledge on the essentials of international hiring. We can help you manage the complexities of hiring abroad, from acquiring work permits to paying your contractors and employees.Contractors love our payments services, too: unlike other payment services, we don't mark up exchange rates, and we don't require that payees use an e-wallet to access their payments. Instead, funds go straight to the contractor's bank accounts. Even better, Pilot supports payments in over 240 countries around the world, so you can hire the best global talent no matter where they are.Interested in learning more about Pilot? Schedule a demo with one of our experts.
The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.
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