Nigeria Labor Law Guide for Hiring Employees and Contractors
Nigeria, Africa’s largest economy, had an estimated GDP of $477 billion in 2023. The economy is diverse, with significant contributions from sectors such as oil and gas, agriculture, telecommunications, and services.
The oil sector remains the backbone of Nigeria’s economy, accounting for a substantial portion of government revenue and foreign exchange earnings. However, the non-oil sectors, particularly agriculture and telecommunications, have been driving growth and diversification efforts.
The country’s currency is the Nigerian Naira (NGN).
Minimum Wage
NGN 70,000 per month
Overtime Wage
1.5 times the regular hourly rate
Meal Breaks
1-hour unpaid meal break
Rest Breaks
15 minutes
Working hours
8 hours per day, 48 hours per week
Salary Payment Cycle
Monthly
Payroll Taxes
PAYE, NHF, NSITF, Pension Contributions
Paid Vacation
6 days after 12 months of service
Overtime Hours
More than 48 hours per week
Night Shift Hours
1.25 times the regular hourly rate
Holidays
13
No Work Days
Sunday (in most sectors)
Businesses looking to hire employees in Nigeria must be registered locally. This includes setting up a legal entity or registering as a foreign company.
The process of setting up a business entity in Nigeria can take anywhere from 28 to 42 days, depending on the complexity of the business structure and legal requirements. The cost varies based on the type of business, with fees required for registration, legal services, and incorporation.
Employment contracts in Nigeria must be in writing and should include key terms such as job description, salary, work hours, leave entitlements, and termination conditions. Contracts must also contain clauses related to non-disclosure, confidentiality, and dispute resolution.
Nigerian labor laws differentiate between employees and contractors, with employees entitled to more comprehensive protections, including mandatory benefits, while contractors are usually governed by the terms of their contract.
Nigeria has a statutory minimum wage, which as of 2024, is set at NGN 70,000 per month. The minimum wage is a federal standard, and it applies to all employees except those specifically exempted by law, such as domestic workers in certain states or workers in small businesses with fewer than 25 employees.
Some states in Nigeria may have higher minimum wage requirements, but these cannot be lower than the federal standard. Employers are required to pay regular wages during public holidays, but there is no additional holiday pay mandated beyond this.
Standard working hours in Nigeria are 8 hours per day and 48 hours per week. Any work beyond these hours qualifies as overtime and must be compensated at 1.5 times the regular hourly rate. Night shifts, defined as work performed between 10 p.m. and 5 a.m., are compensated at 1.25 times the regular hourly rate.
The legal minimum age for employment in Nigeria is 15 years, and the country has strict child labor laws that prohibit the employment of children in hazardous work environments.
Employers in Nigeria are required to make several payroll deductions, including:
PAYE (Pay As You Earn): A progressive income tax deducted from employees’ salaries.
NHF (National Housing Fund): A contribution towards employees’ housing benefits.
NSITF (Nigeria Social Insurance Trust Fund): A mandatory insurance contribution for employees.
Pension Contributions: Employers must contribute a minimum of 10% of the employee’s monthly salary, with employees contributing an additional 8%.
The PAYE tax rates in Nigeria are as follows:
Income Level (NGN) | Applicable Tax Rate |
Up to 300,000 | 7% |
300,001 to 600,000 | 11% |
600,001 to 1,100,000 | 15% |
1,100,001 to 1,600,000 | 19% |
1,600,001 to 3,200,000 | 21% |
Above 3,200,000 | 24% |
Employees in Nigeria are entitled to various types of statutory leave, including:
Paid Vacation: A minimum of 6 days of paid leave annually, accruing after 12 months of continuous service.
Maternity Leave: 12 weeks of fully paid leave, available after serving for a minimum of 6 months.
Paternity Leave: 10 days of fully paid leave, though not mandatory in all states.
Sick Leave: 12 days of paid sick leave annually, with the requirement of a medical certificate for absences exceeding 2 days.
Adoption Leave: Not explicitly mandated by federal law but may be provided by individual employers.
Mandated public holidays in Nigeria are:
Holiday Name | Date |
New Year’s Day | January 1 |
Good Friday | Varies (March/April) |
Easter Monday | Varies (March/April) |
Workers’ Day | May 1 |
Democracy Day | June 12 |
Independence Day | October 1 |
Christmas Day | December 25 |
Boxing Day | December 26 |
Id el Fitri (End of Ramadan) | Varies (Islamic Calendar) |
Id el Kabir (Feast of Sacrifice) | Varies (Islamic Calendar) |
Maulud (Birth of Prophet Muhammad) | Varies (Islamic Calendar) |
National Youth Day | November 1 |
Id el Maulud | Varies (Islamic Calendar) |
Employers in Nigeria are required to provide several benefits, including:
Pension: Contributions towards employees’ retirement, with both employer and employee contributions required.
Healthcare Benefits: Provided through the National Health Insurance Scheme (NHIS) or private health insurance.
Gratuity: While not mandated by law, gratuity is a common practice, particularly in long-term employment.
Annual Bonuses: Common in many industries, though not legally mandated.
Severance Pay: Provided in cases of redundancy or retirement, based on years of service.
Nigeria does not operate under At-Will Employment laws. Termination must be justified and can only be carried out for valid reasons, such as misconduct, poor performance, or redundancy. Employers are required to provide a notice period, typically one month, or payment in lieu of notice. Termination benefits may include severance pay, especially in cases of redundancy or where stipulated in the employment contract.
Employees who feel they have been unfairly dismissed can challenge the termination in labor courts. The process involves mediation or legal proceedings to resolve disputes. Legal termination must follow the due process stipulated in the employment contract and labor laws, ensuring that employees’ rights are protected throughout the process.