Employee benefits in Nigeria: all you need to know

As Africa's biggest economy, Nigeria is a great place to hire. 

But to attract the country’s best talent, you need to offer a compensation plan that is attractive, competitive, and — crucially — fully compliant with Nigerian employment laws. After all, you don’t want to accidentally misclassify your people and face penalties and fines.

To save you time and streamline the process, we’ve broken down everything you need to know about employee benefits in Nigeria. This guide will help you choose the most desirable benefits and then set them up and manage them — all while staying within the lines.

So let’s begin. 

Who is entitled to benefits in Nigeria?

Anyone that is employed while living in Nigeria is entitled to benefits. This includes foreign nationals, who receive the same benefits rights as Nigerian citizens (with the exception of pensions).

However, one unique distinction to consider in Nigeria is the difference between workers and employees. The term “worker” generally refers to manual laborers and clerical workers, while “employees” possess higher education or training (such as professionals). 

Both are entitled to benefits, but workers are covered by the Labor Act of the Laws of the Federation of Nigeria 2004, which sets out basic labor protections such as the minimum wage. In contrast, employee wages are dictated by their employment contracts.

It’s important to establish employment contracts for every employee. All benefits should be included in the contract, as it states the binding terms of the employment.

What about independent contractors?

Independent contractors are classed as self-employed, and are not entitled to the same statutory benefits as employees and workers. However, you can still choose to offer benefits to any independent contractors that you’re working with.

Be careful, though. If the authorities believe that you’re misclassifying contractors as employees (or vice versa), you could receive significant fines and penalties, and potentially even be restricted from doing business in Nigeria.

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So what kind of benefits should you offer your Nigerian workforce?

Statutory and common employee benefits in Nigeria

In most countries, certain employee benefits — such as leave entitlement and minimum wage — are required by law. In Nigeria, you will need to provide:

Leave entitlements

You must provide at least 12 sick days each year (although you can demand that the employee provides proof of sickness from a licensed medical practitioner). In addition, all employees should receive six days of statutory leave after 12 months of employment.

There are also 11 public holidays that the Nigerian government has declared as paid work holidays. As a result, you will need to compensate your employees for these days. 

Maternity and paternity leave

The Nigerian government requires employers to give at least 12 weeks of maternity leave (which can start up to six weeks before birth). The employee should still receive at least 50% of their regular salary.

There is currently no federal regulation that compels you to grant paternity or parental leave. However, in Lagos and Enugu, state law entitles new fathers to two and three weeks of paternity leave respectively.

Pension plans

Under the Pension Reform Act 2014, you and your employees must contribute to the Nigerian pension fund. You will contribute 10%, while your employee will need to contribute 8%. This money goes into your employees’ retirement savings accounts.

Minimum wage

As of 2023, Nigeria’s minimum wage is ₦30,000 (around $75) per month. Note that all payments must be converted to nairas to be deemed legitimate.

Working hours and overtime

The Nigerian workday is deemed to be eight hours long. If someone works more than six hours, they should receive a break of at least one hour. The Nigerian workweek is 48 hours, with every employee entitled to one paid rest day each week. 

If you require your employees to work beyond these thresholds, you must pay them the appropriate overtime pay. While there is no set minimum overtime rate in law, it should be clearly stipulated in the employment contract. 

Insurances

Under the Employee Compensation Act 2010, you must — as an employer — provide 1% of your monthly payroll to the Employee Compensation fund. This fund is managed by the Nigerian Social Insurance Trust Fund, and is a federal insurance that can assist employees or their dependents through work-related injury, disability, disease, or death.  

You must also purchase group life insurance for your Nigeria-based employees, with each employee receiving a policy worth at least three times their annual salary.

Common benefits in Nigeria

You should also understand which benefits are offered as standard in Nigeria. These are not necessarily required by law, but candidates will expect you to provide them. They include:

• A so-called 13th-month bonus (also known as 13th salary)

• A general annual bonus

• Performance-based quarterly or annual bonuses

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Supplemental benefits to consider for Nigerian employees

The benefits listed so far are either mandated by law, or expected as a bare minimum. However, to attract and retain the best talent — and get a leg up on your competitors — you need to go beyond the basic requirements. This is where supplemental benefits come into play.

A robust, modern benefits stack can be a key decision-maker for potential hires, and ensures that your existing employees feel valued and motivated at your company.

You don’t need to break the bank to offer appealing, valuable benefits, either, especially if you’re a small business. Some of the most attractive benefits you can offer your Nigeria-based talent include:

• Additional health insurance. While the Employee Compensation fund covers work-related incidents, offering a more comprehensive personal plan can make a huge difference. This benefit is especially helpful if an employee has dependents or ongoing medical concerns. 

• A flexible, asynchronous schedule. A flexible or asynchronous scheduling option is a game changer for many people. It allows them to balance their lives more efficiently, and ensures that they don’t have to work unsocial hours to align with a global team.

• Extended unpaid leave. Many traditional companies are hesitant to offer extended leave. However, this benefit allows your employees to manage their work-life balance more effectively and properly recharge their batteries — resulting in a stronger performance at work.

• Additional parental leave. This is another potential game changer for new parents, especially as mandated paternity leave is only limited to two localities. For many new mothers, 12 weeks of maternity leave may not be enough time, and extended parental leave encourages a strong work-life balance and a happier, healthier employee.

• Stock options. This can be a great option, especially for startups and small businesses. If you don’t have the budget to provide bonuses, stock options can be just as rewarding. They also encourage a sense of inclusivity and buy-in from your employees, as they’re more invested — literally and figuratively — in your company’s performance.

These are just a small sample of the ways you can show your appreciation to your Nigerian employees. If you have the budget and the means, you can also offer other soft benefits, like home office stipends, to make your company stand out.

How to set up and manage benefits for international employees

Once you’ve decided what your benefits stack is going to look like for your Nigeria-based employees, you need to put the wheels in motion. This is where things can start to get tricky.

Setting up payroll; managing leave entitlements; getting to grips with employee stock options (and the subsequent whirlpool of tax consequences and obligations)... it can all start to get a little daunting.

Which is why it’s a good idea to let a global employment services provider — like Remote — do all the heavy lifting for you.

In particular, our employer of record (EOR) service allows you to quickly and conveniently manage all the intricacies of your Nigerian operation, including:

• Organizing payroll and leave

• Distributing local employment taxes

• Maintaining compliance with statutory and supplementary benefits

• Offering competitive global compensation packages

• Scaling your team

All you have to do is focus on hiring the right people for your organization, and our team of local, in-house, on-the-ground experts will guide you the rest of the way.

Staying compliant with Remote

There you have it. When it comes to offering benefits to your Nigeria-based employees and new hires, it doesn’t have to be a stressful experience.

However, Nigerian employment laws can be complex, and — as with any country — subject to change. This can make it difficult to know if your business is doing everything by the book.

To make sure you don’t encounter any nasty surprises, check out our detailed process for hiring and managing international employees. Not only will you save yourself time, headaches, and, potentially, a world of legal trouble, but you’ll be free to focus your energy on standing out in a competitive, remote-first world.

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