Payroll Management in Nigeria: A Business Guide

Nigeria Payroll Management System

Payroll Management every month and every year can be stressful for some companies that have workers in Nigeria. There are employee records to keep, taxes to calculate and paid, employees’ salaries to be accounted for, and paid and so many more. Outsourcing your payroll to consulting companies like PoweredUp Consulting can be the best option you might have ever made.

Payroll Management

Why invest in Nigeria?

Nigeria has the highest population (200 million) in the entire Africa. With a gross domestic product of 440.83 billion US dollars in 2021. This makes Nigeria highly sought for, especially for companies that want to set up subsidiaries in the country or seek remote workers. There are lot of paper works to be done in compliance with Nigerian labor laws and practices on payroll management. These processes and procedures can be quite tasking and sometimes lead companies to make mistakes especially those not familiar with the frontiers of Nigerian Laws. That is where PoweredUp Consulting will help you to ensure seamless, stress-free processing. You take your hands off the daunting tasks and focus on the core running of your company  and we do everything for you while maintaining quality and professional integrity.

What is payroll and payroll management in Nigeria?

Payroll is the compensation made by a business to its employees for their work. In other words. Payroll means the gross total amount of money you pay your worker for their job at a specified set of times. Payroll processing includes tracking employees’ time, calculating gross wages, withholding deductions, calculating taxes, filling tax forms, keeping records, calculating the hours worked, and distributing salaries or wages. Payrolls are managed by human resources in a large company or owners of a small business.

Payroll management is the supervision of financial records of employees which covers gross earnings, payroll deductions, bonuses, wages, and net pay. Managing and maintaining payroll is a complex and difficult task for companies especially foreign companies with locations in Nigeria. Because the companies have to keep records of foreign workers, which is fundamental to payroll, adhere to the statutory laws of the country, and many more. A lot of tasks come with employing a new employee such as filling out relevant forms that must conform to the regulations of the country and failure to do could attract fines. This is why outsourcing your payroll to an indigenous payroll company will ensure the smooth running of the processes in accordance with the statutory requirements of the Nation.

Payroll management options in Nigeria

For effective processing of payroll in Nigeria, companies can choose any of the following options.

  • Remote: in remote options, you can add your employees to the parent payroll of the company to compensate them remotely. However, you still have to be familiar with the labor act law of the country.
  • Internal: parent companies can establish subsidiary companies in Nigeria to set up an internal payroll. This involves a bigger budget, and the need to hire an HR, and can be a complicated task.
  • Nigeria Payroll Company:  outsourcing with a local payroll company in Nigeria like PoweredUp Consulting, will stand as a better option as we are conversant with the laws of Nigeria. We will make sure all processes are carried out in compliance with the law as well as manage your payroll while you manage your core business.

Labor Act laws in Nigeria

Terms and conditions

Employers are required by law to stipulate the terms of workings in the contract of employment.

Work hours

Employees should work for 8 hours daily, 40-48 hours per week. In case an employee works for more than 48 hours per week, overtime should be paid which must be stipulated in the employment contract. Working days are Monday to Friday. An employer can pay employees monthly or biweekly.

Employee benefit

An employee is permitted 12 days of sick leave per year, provided a medical report is presented after two days of absence. Employees on maternity leave are to be paid at least 50% of their salary every month, for the 3-month duration of the maternity leave provided they have worked with the company for a minimum of 6 months. Employees should be given at least 6 days paid off per year after 12 months of complete service in addition to 11 public holidays. There is no provision for paternity and parental leave.


Employees should be given notice of termination of employment as determined by the contracts of employment and provide freedom to employees for defense against termination. We advise companies to always stipulate the terms regarding termination of employment in their contracts to avoid penal judgment in the country.

Taxes and Pension

  • Employees are to pay about 8% of their monthly emolument (basic salary, transport allowance, and house allowance) and employers pay 10% of their employees’ monthly emolument in the contributory pension scheme enacted in the Pension Reform Act of 2014. However, if the employer decides to bear the cost of the employee’s pension fund, the company will pay 20% of the employee’s emolument to the pension fund.
  • Employees are mandated to remit 2.5% of their monthly basic salary to the Federal Mortgage Bank of Nigeria as their contribution to the National Housing Funding (NHF). This contribution would give employees an opportunity to secure a mortgage facility for the federal government housing project for a period of 30 years at a 6% interest rate.
  • Employers who have more than 5 staff and an annual turnover of above N50 million naira are mandated to contribute 1% of their staff’s annual payroll cost to the Industrial Trust Fund (ITF) not later than the first of April of every year. This contribution is used to pay students for industrial training (IT) or SIWES.
  • The welfare of employees is catered for by the National Social Insurance Trust Fund (NSITF), this body sees to the compensation of occupational diseases or injuries sustained/ disability that arise from accidents at the workplace or in the course of employment, whether at the usual place of work or outside of it. Employers with over 5 staff are mandated to pay 1% of their monthly payroll cost to the NSITF or 6% of each staff’s basic salary.

Payroll management services offered by us

What we do at PoweredUp Consulting as an outsourcing payroll organization is to:

  • Maintaining track of your employee’s total work hours.
  • Keep records of employees’ information by carrying out a thorough background check on the employee.
  • Calculate employment taxes in compliance with state and federal government tax laws and ensure prompt payment of taxes.
  • Calculate the compensation due to the employees as at when due based on the employment contract.
  • Create a pay slip and distribute payment via cheque or direct deposit.

Ensure the payroll process is in line with the prevailing labor laws in Nigeria.

Benefits of working with us


payroll woman

Let’s talk about the benefits you will get for employing the service of PoweredUp Consulting as your payroll management provider:

  • We will produce well-detailed reports that will simplify your accounting procedures and help your organization ensure that it’s in compliance with legal and tax filing requirements.
  • We will help maintain a record of how much vacation or personal time employees have used so that no party is cheated.
  • We will ensure that there is no inaccurate accounting that could lead to employee dissatisfaction.
  • There will be proper documentation on our end to avoid tax penalties that might emerge from tax errors.
  • We will ensure all employees’ complaints are attended to without delays.
  • We are very affordable for the quality of the service we render, so you don’t need to break the bank to have us come on board.
  • Confidentiality is our watchword, so be assured that your employees’ details, the company’s financials, and tax information are safe with us.

Our experts are here to help you manage your payroll. To find out more about our services reach out to us today

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