Hire employees in Nigeria
Everything a foreign company needs to know before employing people in Nigeria: whether you need an entity, what an employee really costs, how state-level PAYE and the pension system work, what leave and cover are mandatory, and why the National Industrial Court has changed the termination picture. Written for CHROs, CFOs, General Counsel and founders.
Quick answers
The questions leadership teams ask first, answered directly. Detail follows further down the page.
Do I need a local Nigerian entity to hire?
No. Foreign companies can engage talent in Nigeria through three routes:
- Employer of Record. Dryft Global employs the person through compliant local corporate infrastructure. Dryft issues the contract, runs monthly Pay-As-You-Earn (PAYE) with the State Internal Revenue Service, remits pension to a licensed Pension Fund Administrator (PFA) under the Pension Reform Act 2014, funds NSITF, ITF and NHIA and holds the statutory Group Life policy. You direct the day to day work.
- Direct local entity (Private Company Limited by Shares). Section 78 of the Companies and Allied Matters Act 2020 (CAMA) bars trading through an unregistered branch, so you incorporate a subsidiary with the Corporate Affairs Commission (CAC), then register with FIRS, the State IRS, PenCom, NSITF, ITF and NHIA.
- Independent contractor (B2B agreement). Lawful only for genuine, registered freelancers delivering discrete, project-based work without management direction. See the contractor section below for why this is the riskiest route.
When should I use an EOR instead of incorporating a Nigerian subsidiary?
An EOR makes commercial sense when you are:
- Onboarding people in 3 to 7 business days rather than the 8 to 16+ weeks CAC incorporation, corporate banking and multi-agency registrations take.
- Running a remote team of 1 to 20+ professionals across Lagos, Abuja, Port Harcourt and Ibadan without a local tax entity or permanent establishment.
- Testing the market or serving West Africa from Lagos without committing paid-up share capital.
A subsidiary becomes the right answer when you are running large physical operations (typically 30 to 50+ contact centre, logistics or assembly staff), bidding on public procurement, financial services or oil and gas contracts that need a local tax clearance certificate, or sponsoring several expatriates through Expatriate Quotas.
What does an employee actually cost beyond salary?
Plan for roughly 12.5% to 16%+ on top of the salary package. The big item is the 10% employer pension contribution on "emoluments" (basic salary plus housing and transport allowances), matched by 8% from the employee. Add 1% of payroll to the NSITF for injury cover, 1% to the Industrial Training Fund once you have 5 or more staff or turnover of NGN 50 million, and a Group Life policy worth 3 times annual emoluments (about 0.5% to 1%). Mandatory health insurance in practice means a private HMO plan at NGN 150,000 to 450,000+ per employee per year. Full breakdown below.
How difficult is termination in Nigeria?
Less rigid than most markets on paper, and getting stricter in practice. The Labour Act's notice rules cover only manual and clerical "workers"; professionals are governed by their contracts, and historically an employer could terminate on notice for any reason or none. The National Industrial Court of Nigeria (NICN) now applies ILO Convention 158 and increasingly treats termination without a valid reason as an unfair labour practice, with damages to match. Summary dismissal needs a written query and a fair hearing; redundancy needs union consultation. Document every exit.
Can Dryft Global legally employ my team in Nigeria?
Yes. Dryft supports employment in Nigeria through compliant local corporate infrastructure. We structure the emoluments split, register each employee with their State IRS, remit pension within 7 business days of payday, cover your people under master Group Life and HMO policies, file NSITF and ITF, and run exits to the NICN fair-hearing standard, while you direct the work.
Hiring routes compared
Here is how the three routes stack up on speed, presence, cover and risk.
| Factor | Direct entity (CAMA Ltd) | Dryft Global EOR | Independent contractor |
|---|---|---|---|
| Speed to onboard | 8 to 16+ weeks (CAC, FIRS, State IRS, PenCom, bank) | 3 to 7 business days | Immediate, with severe reclassification risk |
| Local entity required | Yes, incorporation under CAMA 2020 | No, employed through Dryft's local infrastructure | No, direct consulting contract |
| Payroll tax and levies | You file PAYE, PenCom, NSITF, ITF | Fully managed through Dryft payroll | Worker self-files; you face withholding tax audits |
| Pension (PRA 2014) | You register with PenCom and remit to PFAs | Compliant, 10% employer / 8% employee | Non-compliant; pension arrears on audit |
| Group Life and NSITF | You buy the policy and register with NSITF | Covered under Dryft's master policies | Not covered; injury creates common-law liability |
| Permanent establishment risk | Direct Nigerian tax presence (30% CIT) | Substantially mitigated for non-sales-closing roles | Extreme corporate tax and penalty exposure |
| Termination and NICN exposure | You are the defendant at the NICN | Managed by Dryft under fair-process rules | Claims escalate to the NICN as disguised employment |
| Best fit | Large physical hubs, tenders, expatriate sponsorship | 1 to 20+ tech, sales and BPO hires | Discrete, project-based work only |
What an employee costs in Nigeria
Nigerian pay is structured into components, and the split matters. Basic salary (40% to 50% of the package), housing (20% to 30%) and transport (10% to 15%) together form the pensionable "emoluments" base under the Pension Reform Act 2014; other cash allowances are taxable but not pensionable.
| Component | Employer share | Notes |
|---|---|---|
| Pension (PRA 2014, PenCom) | 10.0% of emoluments | Employee pays 8%; remit to the PFA within 7 business days of payday |
| Employees' Compensation (NSITF) | 1.0% of gross payroll | Employer only; injury, disease and death benefits |
| Industrial Training Fund (ITF) | 1.0% of annual payroll | Employers with 5+ staff or turnover of NGN 50 million+; up to 50% reclaimable for training |
| Group Life insurance (PRA s.4(5)) | ~0.5% to 1.0% | Cover of 3 times annual emoluments; without it you owe the death benefit |
| NHIA health insurance | Statutory minimum | Met in practice by a private HMO plan (below) |
| Statutory subtotal | ~12.5% to 16%+ | Above emoluments, before market benefits |
| Private HMO medical | NGN 150,000 to 450,000+ a year | Employee, spouse and up to 4 children; market standard |
| Total employer on-cost | ~14.2% on a senior package | Statutory plus HMO, per the worked example below |
For a senior engineer on NGN 2,000,000 a month (NGN 24 million a year, all pensionable), budget roughly NGN 27.4 million all-in including HMO. Ask us for a country-specific cost model for your salary structure.
Payroll and tax
Nigerian payroll runs strictly monthly, with three remittance clocks. Pension (the full 18%) goes to the employee's Pension Fund Custodian within 7 business days of payday. PAYE goes to the State Internal Revenue Service by the 10th of the following month. NSITF and ITF follow their own schedules. Payslips must itemise each allowance, PAYE, the 8% employee pension and any National Housing Fund deduction, plus the employer's own pension, NSITF and ITF.
State-level PAYE and the CRA
Income tax is a state tax under the Personal Income Tax Act. You register and remit with the State IRS where each employee lives on 1 January of the tax year (LIRS for Lagos, FCT-IRS for Abuja). Before the bands apply, gross income is reduced by the Consolidated Relief Allowance (the higher of NGN 200,000 or 1% of gross, plus 20% of gross) and by the employee's pension, NHIS, NHF and life insurance contributions. Rates then run from 7% on the first NGN 300,000 of annual taxable income, through 11%, 15%, 19% and 21%, to 24% above NGN 3.2 million. A minimum tax of 1% of gross applies where the computed tax would be lower. The National Housing Fund deduction is 2.5% of basic where the scheme applies.
Statutory minimum wage
Nigeria sets a single national monthly wage floor under the National Minimum Wage Act, amended in 2024, applying to employers with 25 or more staff. Professional salaries sit far above it: entry-level developers earn NGN 350,000 to 700,000+ a month and senior engineers NGN 1.5 million to 4 million+.
Leave and mandatory benefits
- Paid annual leave. The Labour Act floor is 6 working days after 12 months for manual and clerical workers (Section 18). Professional and tech contracts universally give 15 to 21+ working days. Cash in lieu is prohibited except on termination.
- Public holidays. 11+ federal holidays declared by the Ministry of Interior, with occasional state additions.
- Sick pay. Up to 12 working days at full pay per calendar year with a medical certificate (Section 16). Tech employers typically offer 15 to 30 days, backed by HMO cover.
- Maternity. 12 weeks (6 before and 6 after delivery) at not less than 50% of basic wages (Section 54); the market standard is 12 to 16 weeks at full pay. Nursing mothers get two paid 30-minute breaks a day.
- Paternity. 14 working days in the federal public service; 1 to 2 weeks fully paid is the norm in tech and multinationals.
- 13th month. Customary rather than statutory: one month's basic salary paid with December payroll, widely expected in corporate roles.
- Working time. Hours are set by contract or collective agreement (Section 13); offices run 40 hours a week. One 24-hour rest day in every 7 (Section 19). Market overtime is 1.5 times on workdays and 2 times on rest days and holidays; managers are exempt.
Termination and notice periods
Nigeria runs a dual regime. The Labour Act applies only to "workers" doing manual or clerical work and sets minimum notice by length of service. Executive, technical and professional staff are "non-workers" whose notice comes from the contract, standardly 1 to 3 months or gross pay in lieu. Statute is silent on probation; the market runs 3 to 6 months with 1 to 2 weeks' notice and a written confirmation letter. Over both sits the NICN, with exclusive jurisdiction under Section 254C of the Constitution.
| Continuous service (Labour Act workers) | Statutory minimum notice (Section 11) |
|---|---|
| Up to 3 months | 1 day |
| More than 3 months, up to 2 years | 1 week |
| More than 2 years, up to 5 years | 2 weeks |
| 5 years or more | 1 month |
- Give a reason. The old common-law rule that an employer may terminate for good, bad or no reason is being displaced. The NICN, applying ILO Convention 158, can declare a termination without a valid reason an unfair labour practice and award substantial damages. Keep performance files and restructuring records.
- Summary dismissal has a process. Only for gross misconduct (fraud, theft, insubordination, violence), and only after a written query, time for a written defence and a disciplinary panel hearing that respects natural justice.
- Redundancy (Section 20). Inform the union or workers' representatives, select on last-in-first-out adjusted for merit and skill, and pay negotiated or statutory redundancy allowances plus accrued salary and leave.
- Protected situations. No termination notice during maternity leave or pregnancy-related illness (Section 54(4)). The NICN awards punitive damages for harassment and hostile-environment dismissals.
Can I use independent contractors?
Only for genuinely independent suppliers. Nigerian courts and State tax authorities apply the common-law control and integration tests alongside an economic reality test: who sets the methods, hours and reporting lines, whether the person is embedded in your team, whether they depend on you for income, who supplies the equipment, and whether they serve other clients. Consulting fees carry 5% withholding tax, and if the State IRS or the NICN reclassifies the relationship you are assessed retroactively for unwithheld PAYE at up to 24%, the 10% employer pension with PenCom penalties of at least 2% a month, 1% NSITF arrears, a 10% statutory penalty and interest at the Central Bank of Nigeria policy rate. The worker can then sue at the NICN for back leave pay, overtime and unfair termination damages. An EOR is the compliant alternative for anyone who works like an employee.
The legal framework in brief
Nigerian employment law combines federal statutes, state tax law and NICN precedent. The statutes you will hear referenced most:
- Constitution 1999 (as amended). Section 254C gives the NICN exclusive civil jurisdiction over employment; Section 42 prohibits discrimination on ethnic group, origin, sex, religion or political opinion.
- Labour Act (Cap L1, LFN 2004). Written particulars, notice, leave, sick pay, maternity and redundancy for manual and clerical workers; professionals fall under contract and common law.
- Pension Reform Act 2014. The 10% / 8% contributory scheme for employers with 15 or more staff, PFA remittance within 7 business days, and the Section 4(5) Group Life mandate. Unremitted pension attracts a PenCom penalty of at least 2% a month.
- Employees' Compensation Act 2010. The 1% NSITF no-fault injury scheme.
- Industrial Training Fund Act. The 1% training levy and reimbursement scheme.
- National Health Insurance Authority Act 2022. Mandatory basic health insurance for formal-sector employees.
- Companies and Allied Matters Act 2020. Section 78 requires foreign companies to incorporate locally; CIT is 30% for large and 20% for medium companies.
- Nigeria Data Protection Act 2023. Lawful basis for employee data (Section 25), registration as a Data Controller of Major Importance above thresholds, and safeguards before sending data to a foreign parent or global HRIS.
- Immigration Act 2015. Expatriate Quotas (needing NGN 100 million paid-up capital and two Nigerian understudies per expatriate), STR visas and CERPAC residence cards.
Where the talent is
Nigeria is Africa's largest economy by population and a global centre of software engineering and fintech, home to Paystack, Flutterwave, Interswitch and Andela. English is the language of business and government, and the youth population is the largest on the continent. West Africa Time (UTC+1) lines up with the UK and Western Europe, with 4 to 6 hours of overlap with the US East Coast. Nigeria is also a major destination for customer support, content moderation, data operations and finance shared services.
| Region | Talent and industry concentration |
|---|---|
| Lagos | "Silicon Lagoon" tech ecosystem (Yaba, Lekki, Victoria Island), fintech, venture capital, digital banking, pan-African HQs, BPO and CX |
| Abuja | Federal government, regulators, public policy, legal operations, international NGOs, energy |
| Port Harcourt | Oil and gas engineering, marine logistics, heavy infrastructure, industrial services |
| Ibadan and Enugu | Academic software incubators, agritech R&D, remote software engineering, shared services centres |
Nigeria Implementation Kit
This page tells you the rules. The kit tells you what to do, in what order, and what goes wrong when you skip a step. Built from Dryft's own onboarding checklist for Nigeria.
- Step-by-step implementation checklist, from hiring route selection to first payroll
- Emoluments structuring: basic, housing, transport and other allowances under PRA 2014
- Probation terms, confirmation letters and notice clauses
- State IRS registration and PAYE setup with the Consolidated Relief Allowance
- PenCom and PFA enrolment, plus NSITF and ITF accruals
- Group Life and HMO procurement to satisfy PRA and NHIA mandates
- NDPA employee privacy notice and cross-border transfer wording
- Expatriate Quota and CERPAC checks
This guide is general information, not legal, tax or immigration advice. Nigerian employment, pension and state tax rules change regularly through federal statute, state circulars and NICN rulings. Confirm current figures with a qualified adviser or with Dryft before acting. Last reviewed September 2026.
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