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Hiring in Nigeria

Nigeria, officially known as the Federal Republic of Nigeria, is a country in West Africa. Abuja is the capital and Lagos is the largest city of Nigeria. Naira is the official currency and English is the official language. Financial services sector, petroleum production, textiles and leather manufacturing, and tourism are some of the major industries of Nigeria. Nigeria’s key trading partners are Japan, China, Brazil, US, India and the EU. Global PEO or Employer of Record (EOR) play a pivotal role in providing companies with services related to hiring employees, and ensuring compliance with Nigeria’s legal and tax regulations. The Labor Code stipulates that employees are entitled to 6 days of annual leave. Residents are taxed on their worldwide income; non-residents are taxed on Nigerian-source income only. Global PEO’s or Employer of Record (EOR) facilitate companies by ensuring compliance with Nigeria’s Labor Code and tax laws.

statutory labor requirements

Probation Period

  • The law does not prescribe the maximum length of probation periods. 
  • But in practice, probationary periods for employees is between three (3) and six (6) months

Annual Leave

  • A worker is entitled to annual leave of at least six working days with full salary. 
  • The annual leave is increased to at least twelve working days for young workers (under sixteen) including apprentices. 
  • A worker must have worked for at least twelve months in order to qualify for annual leave.

Public Holidays

  1. New Year’s Day (1st January)
  2. Good Friday (10th April)
  3. Easter Monday (13th April)
  4. Labor Day (1st May)
  5. Eid al Fitr
  6. Democracy Day (12th June)
  7. Eid al Adha
  8. Nigerian Independence Day (1st October)
  9. Prophet’s Birthday
  10. Christmas Day (25th December)
  11. Boxing Day (26th December)

Maternity Leave

  • Female employees are generally entitled to 12 weeks of maternity leave at 50% of pay

Paternity Leave

  • Paid paternity leave is available in the Lagos and Enugu States of 2 weeks and 3 weeks respectively.

Sick Leave

  • In general, employees are entitled to 12 days of paid sick leave per year.

Work Hours

  • As specified under the National Minimum Wage Act, Normal full time working hours are forty hours per week.
  • The labor law requires one 24-hour rest period every seven days and a one-hour break per six hours of work.

Overtime

  • Employers are required to pay these workers minimum wage and overtime pay if they work more than 40 hours in a week.
  • Under the Fair Labor Standards Act, employees must be paid one-half more than their hourly rate for overtime pay.

Notice Period

  • The required notice period for the termination of the employment contract depends on length of service. 
  • The notice period is as follows: -
    • one day for a period of three months or less
    • one week for more than three months but less than two years of service
    • two weeks for two to five years of service and 
    • one month for five or more years

Severance

  • There is no statutory severance pay.

13th / 14th Month Pay

  • Yes
  • There is no statutory requirement to pay the 13th or 14th month salary.
  • However, in some states the governors have made it mandatory but it is not a nation wide requirement.
  • Despite this, through collective bargaining and companies' culture, the payment of the 13th month is widely observed.

income tax

  • Residents are generally subject to tax on their worldwide income. 
  • However, foreign earnings derived by Nigerian residents are exempt from tax if the earnings are repatriated into Nigeria in convertible currency through a domiciliary account with an approved Nigerian bank. 
  • Income earned by a Nigerian from employment with the Nigerian government is considered Nigerian-source income, even if services are performed abroad. 
  • Nonresidents are subject to tax on Nigerian source income only.
  • In the case of employment, a non-resident person is liable to tax in Nigeria if the duties of employment are wholly or partly performed in Nigeria, unless:
    • the duties are performed on behalf of an employer who is in a country other than Nigeria,
    • the remuneration of the employee is not borne by a fixed base of the employer in Nigeria, and
    • the remuneration of the employee is liable to tax in that other country under the provisions of the avoidance of double taxation treaty (DTT) with that other country.
  • Where a taxpayer has no taxable income because of personal reliefs and allowances or total income produces a tax lower than the minimum tax, a minimum tax rate of 1% of the total income is payable.

Annual Income (NGN)

Personal Income Tax Rate  (%)

First 300,000

7

Next 300,000

11

Next 500,000

15

Next 500,000

19

Next 1,600,000

21

Above 3,200,000

24

deductible expenses

  • Allowable deductions are expenses incurred wholly, exclusively, necessarily, and reasonably in the production of taxable income

Employment Deductions

  • NHF contributions, National Health Insurance Scheme contributions, life assurance premiums, national pension scheme contributions, and gratuities are deductible.
  • Mortgage or other loan interest relating to owner-occupied accommodations is deductible from employment compensation.

Personal Deductions

  • Donations made to research centers are deductible, subject to a maximum of 10% of an individual's taxable income.
  • Medical expenses and insurance premiums are deductible.
  • Relief for life insurance premiums for the taxpayer and the taxpayer's spouse is restricted to the actual premium paid to an insurance company by the individual during the year preceding the year of assessment.

Personal Allowance

  • As a result of the consolidated relief allowance of at least 21% of gross income, the top marginal tax rate is 18.96% for income above NGN 20 million as only 79% of income is taxed at 24%; however, for income below NGN 20 million, the marginal rate is 19.2%.

Business Deductions

Examples include: -
  • Interest on money borrowed for business purposes.
  • Rent and premium payable on land or buildings occupied for the purpose of acquiring the income.
  • Repairs and maintenance expenses for premises, plant, or machinery used in generating income.
  • Bad debts.
  • Subscriptions, provided they relate to the business or profession.

Deductible Expenses

Employment Deductions

  • NHF contributions, National Health Insurance Scheme contributions, life assurance premiums, national pension scheme contributions, and gratuities are deductible
  • Mortgage or other loan interest relating to owner-occupied accommodations is deductible from employment compensation.

Personal Deductions

  • Donations made to research centers are deductible, subject to a maximum of 10% of an individual's taxable income.
  • Medical expenses and insurance premiums are deductible.
  • Relief for life insurance premiums for the taxpayer and the taxpayer's spouse is restricted to the actual premium paid to an insurance company

Personal Allowance

  • The top marginal tax rate is 18.96% for income above NGN 20 million as only 79% of income is taxed at 24%
  • For income below NGN 20 million, the marginal rate is 19.2%.

Business Deductions

  • Interest on money borrowed for business purposes.
  • Rent and premium payable on land or buildings occupied for the purpose of acquiring the income.
  • Repairs and maintenance expenses for premises, plant, or machinery used in generating income.
  • Bad debts.
  • Subscriptions, provided they relate to the business or profession.

 immigration

  • Temporary work permit (TWP) visas are issued to expatriates with specialized skills for work on short-term specific projects that are based in Nigeria.
  • The TWP visa application process is initiated in Nigeria by obtaining a TWP cable approval from the headquarters of the NIS. 
  • Specific information about the expatriate, including a copy of the international passport data page, the nature of assignment to be performed and country of visa application must be well articulated in the application. 
  • On approval of the CG of the NIS, a TWP cable approval is issued for presentation at the relevant Nigeria consulate abroad. 
  • TWP is valid for sixty (60) days
  • The following documents are generally required to process a TWP visa application: 
    • Completed visa application form 
    • Copy or original TWP cablegram as approved by the CG of the NIS 
    • Letter of invitation or visa application letter (to be provided by the host company on its letterhead and addressed to the specific Nigerian consulate abroad)
    • Acknowledgment receipt confirming payment of visa fee 
    • Postal order made payable to the Nigeria consulate office and additional administrative charges for express service (this may not apply to all Nigerian consulates) 
    • International passport with a minimum of six months’ validity and with two blank facing pages 
    • Return flight ticket
  • The subject-to-regularization (STR) visa is issued to expatriate assignees (including their dependents if applicable) who will be coming to work and live in Nigeria on a long-term basis. 
  • Expatriate assignees on this work visa platform are expected to be placed in the host company’s approved Expatriate Quota (EQ) positions. 
  • STR visas are granted for three months 
  • On arrival in Nigeria, a Combined Resident Permit and Alien Card (CERPAC) is issued to an expatriate assignee as a temporary resident permit receipt. 
  • Subsequently, a Green Card, which is a permanent resident permit, is expected to be issued within 90 days.
  • Applications for STR visas must be supported with quadruplicate copies of the following documents, stamped by the appropriate Nigerian consulate in the applicant’s home country or country of residence: 
    • Completed visa application form (Form IMM/22) 
    • Credentials and academic qualifications or certificates 
    • Valid EQ approval letter 
    • Business permit and certificate of incorporation of the host company 
    • Offer of employment letter 
    • Acceptance of employment letter 
    • Board of directors’ resolution (applicable if roles are to be assigned for senior management positions, such as Managing Director, Chief Executive Officer and General Manager) 
    • Letter of invitation or visa application letter (to be provided by the host company on its letterhead and addressed to the specific Nigerian consulate abroad)
    • Acknowledgment receipt confirming payment of visa fee, as well as a postal order made payable to the Nigeria consulate for additional administrative charges and express service (this may not apply to all Nigerian consulates) 
    • International passport with a minimum of six months’ validity and with two blank facing pages

Type of Visa /  Permit

Documentation

Validity

Eligibility

Temporary Work Permit (TWP)

  • Completed visa application form 
  • Copy or original TWP cablegram as approved by the CG of the NIS
  • Letter of invitation or visa application letter
  • Acknowledgment receipt confirming payment of visa fee 
  • Postal order made payable to the Nigeria consulate office and additional administrative charges for express service
  • International passport
  • Return flight ticket

60 days

  • Temporary work permit (TWP) visas are issued to expatriates with specialized skills for work on short-term specific projects that are based in Nigeria.

Subject-To-Regularization (STR)

  • Completed visa application form
  • Credentials and academic qualifications or certificates 
  • Valid EQ approval letter 
  • Business permit and certificate of incorporation of the host company 
  • Offer of employment letter 
  • Acceptance of employment letter 
  • Board of directors’ resolution
  • Letter of invitation or visa application letter
  • International passport
  • Acknowledgment receipt confirming payment of visa fee

3 months                                                                                                                         

  • The subject-to-regularization (STR) visa is issued to expatriate assignees (including their dependents if applicable) who will be coming to work and live in Nigeria on a long-term basis. 

 value added tax

  • The main VAT rate in Nigeria is 7.5% (raised from 5% on 1st February 2020). 
  • Only a limited number of supplies are nil-rated meaning any VAT suffered may be re-credited to the tax payer

VAT

Standard Rate

7.5%

Zero Rate

0%

 

withholding tax

  • WHT deducted from the income of resident individuals and companies is a payment on account of tax. 
  • WHT credit notes may be used to offset personal and corporate income tax liabilities, except where the tax withheld is a final tax (e.g. WHT on dividends). 
  • Where the recipient of dividends, interest or royalties is a non-resident, the WHT is a final tax.
  • Certain interest payments are exempt from WHT. 
  • The WHT rate on non-residents is reduced to 7.5% where the recipient is resident in a country that has concluded a tax treaty with Nigeria. 
  • The WHT rate for non-treaty countries is 10%.
  • Certain payments to domestic companies/individuals and non-resident companies/investors are subject to WHT at the following rates:

Payments

Corporate Bodies

Individuals

Dividends

10%

10%

Interest

10%

10%

Royalties

10%

10%

Director’s Fee

n/a

10%

Rent (including the hire of equipment)

10%

10%

Construction and related activities

5%

 

Management, consultancy,

professional fees and technical

service fees

10%

5%

termination

  • The contract of employment may be terminated by either party at any time, with or without any reason by either party giving the notification period provided in the contract. 
  • A contract of employment is terminated by the expiry of the period for which it was concluded, death of the worker before expiry of contract and by giving a notice for a period specified under the law.
  • The required notice period for the termination of the employment contract depends on length of service.
  • For a worker employed for three or more months, the employer is not liable to make any payment for a period during which the worker is absent from work with the leave granted by the employer at the request of the worker. 
  • Payments owed to the worker must be paid on or before the expiry of notice period.
  • Right to notice may be waived by either party and payment in lieu of notice is acceptable. It is calculated by taking basic salary into an account and excluding overtime and other allowances.
  • A court decision of 1967 states that summary dismissal is warranted if an employee’s conduct is of some grave and weighty character that it undermines the relationship of confidence which must exist between a master and a servant. 
  • The examples of such grave character include verbal or physical violence, assault on employer, intoxication during working hours, stealing, fraud, bribery, or corruption, etc.
  • The employer cannot terminate the employment contract without prior notice except in cases specified by the law, otherwise it is treated as fundamental breach of contract.
  • Employer in not obliged by the law to make any severance payment.

statutory benefits

  • These are mandatory benefits as postulated by law
  • These include probationary period, annual leave, public holidays, sick leave, maternity leave, paternity leave, overtime pay, and notice period.
  • Statutory benefits also include social security benefits such as pension fund, employee compensation etc.

Statutory Benefits

Probationary period

Annual leave

Public Holidays

Sick Leave

Maternity Leave

Paternity Leave

Overtime Pay

Notice period

Social security benefits 

payments and invoicing

  • The tax year in Nigeria is the calendar year. 
  • Income tax is assessed on employment income on a current-year basis. 
  • Tax on income from a trade, business, profession or vocation is assessed on a preceding-year basis, except for the first three and the last two years of assessment. 
  • The basis period is the financial year chosen for the trade, business, profession or vocation. Investment income and other income are also assessed on a preceding-year basis. 
  • Employers are obliged to file annual returns in respect of an assessment year for employees not later than 31 January of the following assessment year. 
  • Other individual taxpayers must file a tax return within 90 days after the beginning of each year of assessment. 
  • Individuals with annual taxable income of NGN30,000 or less are not required to file tax returns.
  • Like residents, nonresidents must account for all income in their tax returns, and they may claim a credit for most taxes withheld. 
  • Tax on employment income is paid by withholding from salary under the Pay-As-You-Earn (PAYE) system. 
  • For business income, the tax due must be paid within 60 days after the receipt of an assessment notice from the Internal Revenue.

ease of doing business 

  • The ease of doing business index is an index created by Simeon Djankov, an economist at the Central and Eastern Europe sector of the World Bank Group.
  • Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
  • According to the World Bank Nigeria ranked 131st in the World in 2019 in terms of ease of doing business.

employee accruals

   
Christmas Bonus%

Based on one month bonus (it is customary but not legally mandated)
8.33%

Christmas Bonus Over Vacations %

0%

Severance per Year %

Subject to Contract

Vacations % Employees are entitled to 6 days of annual leave (1.64% of annual salary)
Notice %

Employees are entitled to 1 week of notice after one year of service (1.37% of annual salary)

Christmas Bonus Over Notifications% 0%
Vacations Plus% 0%
Total percentage of Salary (yearly) The total employment accruals as a percentage of salary per anum are equal to 11.34%

 

 employer accruals

Additional information (Country Accruals)

   
Pension 10.00%
National Housing Fund 2.50%
Maternity leave 12 weeks
Christmas Bonus 8.33%
Vacations 1.37%
Description The Pension Act signed on 1 July 2014 provides that employers with at least 15 employees are required to participate in a contributory pension scheme for their employees. The minimum contribution under the Act is 18% of monthly emolument (with a minimum contribution of 10% by the employer and 8% by the employee). If the employer decides to bear all the contribution, the minimum contribution is 20% of monthly emolument. Mandatory and/or voluntary contributions by the employers and employees are deductible for tax purposes. The Act also requires every employer to take out life insurance coverage for its employees.
NHF contributions are applicable to Nigerian employees earning a minimum of NGN 3,000 per annum. The employer is required to deduct 2.5% of basic salary from employees earning more than NGN 3,000 per annum and remit it to the Federal Mortgage Bank of Nigeria within one month of deduction.

Employer Accruals Additional information

    Employment Accruals
Annual Leave A worker is entitled to annual leave of at least six working days with full salary. This equals 1.64% (6/365 days) of annual income
Maternity Leave Female employees are generally entitled to 12 weeks of maternity leave at 50% of pay. This equals 50% of 23% (12/52 weeks) of annual income
Paternity Leave Paid paternity leave is available in the Lagos and Enugu States of 2 weeks and 3 weeks respectively. This equals 3.84% (2/52 weeks) of annual income
Sick Leave In general, employees are entitled to 12 days of paid sick leave per year. This equals 3.28% (12/365 days) of annual income
Overtime Under the Fair Labor Standards Act, employees must be paid one-half more than their hourly rate for overtime pay. Depends on the number of overtime hours worked
Social Security Employers must make the following social security contributions: - Pension 10%; Employee Compensation Scheme 1%; Industrial Training Fund 1%. This equals 12% of annual income

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