In Nigeria, the landscape of employee compensation is shaped by a combination of statutory provisions, industry practices, and economic factors. Understanding the legal considerations and the practical realities surrounding employee compensation is essential for both employers and employees. The Employee Compensation Act, of 2010, is a social security/welfare scheme that provides comprehensive compensation to employees who suffer from occupational diseases or sustain injuries arising from accidents at the workplace or in the course of employment. The basis or justification for 'compensation' is the employer's duty of care.


Nigeria's labor laws are primarily governed by the Labor Act, which sets the foundation for employment relationships. The Act outlines provisions related to wages, working hours, leave entitlements, and termination procedures.

In addition, the Employee Compensation Act of 2010 specifically addresses compensation for work-related injuries, disabilities, or death, establishing a framework for employer liability in such cases. The Employees' Compensation Act, 2010, was signed into law on 17th December 2010. This Act repeals the Workmen's Compensation Act Cap. W6 Laws of the Federation of Nigeria, 2004, and makes comprehensive provisions for payment of compensation to employees who suffer from occupational diseases or sustain injuries arising from an accident at the workplace or in the course of employment.


  1. The Constitution of the Federal Republic of Nigeria 1999 (as amended) (the "Constitution")
  2. HIV and AIDS (Anti-Discrimination) Act 2014.
  3. Immigration Act, 2015.
  4. Industrial Training Fund Act, Chapter 19, LFN 2004 (as amended).
  5. National Health Insurance Authority Act 2022.
  6. National Housing Fund Act, Chapter N45, LFN 2004.
  7. Pension Reform Act 2014.
  8. Trade Disputes Act, Chapter T8, LFN 2004.
  9. Trade Unions Act, Chapter T14, LFN 2004 as amended by the Trade Union (Amendment) Act 2005.
  10. National Minimum Wage (Amendment) Act 2019.
  11. National Industrial Court Act 2006.
  12. Factories Act, Chapter F1, LFN 2004.
  13. Finance Act, 2021.
  14. Personal Income Tax Act, Chapter P8, LFN 2004 (as amended by the Personal Income Tax (Amendment) Act, 2011).
  15. Discrimination against Persons with Disabilities (Prohibition) Act, 2018.
  16. Lagos State Special Peoples Law 2011.
  17. Nigerian Oil and Gas Industry Content Development Act 2010.
  18. Guidelines for the Release of Staff in the Nigerian Oil and Gas Industry 2019 issued further to the provisions of the Petroleum (Drilling and Production) Regulations 1969 (as amended), made under the Petroleum Act, Cap P10, LFN 2004 (now the Petroleum Industry Act, 2021).
  19. Nigeria Data Protection Regulation 2019 issued by the National Information Technology Development Agency


The Employee's Compensation Act opens with the objectives of the act as provided for in Section 1 as follows:

  • Provide for an open and fair system of guaranteed and adequate compensation for all employees or their dependants for any death, injury, disease, or disability arising out of or in the course of employment;
  • Provide rehabilitation to employees with work-related disabilities as provided in the Act;
  • Establish and maintain a solvent compensation fund managed in the interest of employees and employers;
  • Provide a fair and adequate assessment for employers;
  • Provide an appeal procedure that is simple, fair, and accessible, with minimum delays; and
  • Combine efforts and resources of relevant stakeholders for the prevention of workplace disabilities, including the enforcement of occupational safety and health standards.


  1. Scope and Application: The Employee Compensation Act applies to all employers and employees in both the public and private sectors, with limited exemptions for certain categories of workers e.g. members of the armed forces of the Federal Republic of Nigeria. Sections 2 and 3 of the Act
  2. No-Fault Compensation: The Act establishes a no-fault compensation scheme, meaning that compensation is provided regardless of who is at fault in a workplace incident. This approach expedites the compensation process and minimizes legal disputes.
  3. Compensable Injuries: The legislation defines compensable injuries as those arising out of or in the course of employment. This includes injuries sustained during work hours, on the employer's premises, or while performing job-related tasks. Section 11 of the Act
  4. Benefits and Compensation Structure: The Act outlines the types of benefits employees are entitled to in case of injuries, disabilities, or death. These benefits include medical expenses, temporary or permanent disability benefits, and survivor benefits for dependents in the event of a work-related fatality. Section 7 – 10 of the Act

    Notably, the provision of Section 7 of the Act widens the scope of liability of an Employer to the Employee, providing that:

    Section 7

    (1) Any employee, whether or not in a workplace, who suffers any disabling injury arising out of or in the course of employment shall be entitled to payment of compensation by Part IV of this Act.

    An employee is entitled to payment of compensation concerning any accident sustained while on the way between the place of work and:
    1. the employee's principal or secondary residence
    2. the place where the employee usually takes meals; or
    3. the place where he usually receives remuneration provided that the employer has prior notification of such a place.
  5. Scale of Compensation: The scale of compensation for an injury, disease, or death suffered in the course of employment is provided under Part IV of the Act. Section 17 of the Act provides for compensation in fatal cases, stating that where death results from an injury of an employee, compensation shall be paid to the dependents of the deceased. The compensation paid to the employee's widow(er) or children ranges from 30% – 90% of the employee's total monthly remuneration as of the date of death, although this is dependent on the circumstances of the dependents. Section 17 – 25 of the Act. Where the compensation offer is accepted, this further bars the affected employee or his siblings from instituting any legal action against the employer in respect of the same subject matter.
  6. Employer's Liability: Employers are held liable for providing compensation to employees affected by work-related incidents. The Act specifies the obligations of employers in promptly reporting accidents, facilitating medical examinations, and ensuring compliance with the compensation process. Section 5 of the Act
  7. Establishment of the Employees Compensation Fund: The legislation mandates the creation of the Employees Compensation Fund, managed by the Nigeria Social Insurance Trust Fund (NSITF). The fund serves as the financial pool from which compensation payments are made to eligible employees. Section 56 – 63 of the Act
  8. Compensation Administration: The Act establishes the administrative structure for the implementation of the compensation scheme. This includes the role of the NSITF in managing the fund, adjudicating claims, and overseeing the overall compensation process. Sections 31 and 32 of the Act

One notable achievement is the clear articulation of the compensation process, providing a structured mechanism for addressing work-related incidents. The legislation establishes a no-fault compensation scheme, shifting the focus from attributing blame to swiftly compensating employees. This is a positive departure from traditional legal processes that could be protracted and adversarial.


However, the effectiveness of these laws faces challenges in practical implementation. Delays in the disbursement of compensation and disputes over the extent of liability are issues that need attention. The administrative hurdles and complexities in navigating the compensation process sometimes hinder the timely delivery of benefits to affected employees.

Furthermore, the scope of these laws may need to advance to address the changing nature of work. The rise of non-traditional employment arrangements, such as gig work and freelancing, presents new challenges in defining employer-employee relationships and determining liability in the event of work-related incidents.

To enhance the impact of Employee Compensation laws in Nigeria, there is a need for strengthened enforcement mechanisms. This involves ensuring that employers are aware of their obligations and are held accountable for compliance. Furthermore, streamlined and efficient processes for filing and adjudicating compensation claims can contribute to a more expeditious resolution of cases.

Public awareness campaigns can also play a crucial role in informing both employers and employees about their rights and responsibilities under these laws. Improved awareness can contribute to a culture of safety in workplaces and empower workers to assert their rights when necessary.

Despite the existence of robust legal frameworks, several challenges persist in the realm of employee compensation in Nigeria. Enforcement of labor laws can be inconsistent, especially in smaller enterprises or informal sectors where oversight is limited. This inconsistency sometimes leads to exploitation and unfair practices, such as inadequate wages or denial of benefits.

Moreover, the complex nature of the labor market, including issues like contract work, outsourcing, freelancing, and gig employment, poses challenges in defining and ensuring fair compensation. The evolving nature of work requires continuous adaptation of legal frameworks to address emerging trends and protect the rights of all workers.


Employee compensation laws in Nigeria provide a crucial foundation for ensuring fair and just remuneration. However, the practical realities highlight the need for ongoing efforts to strengthen enforcement mechanisms, address emerging challenges, and foster a culture of compliance. Employers and employees alike must stay informed about their rights and obligations to contribute to a work environment where compensation is not just a legal requirement but a reflection of dignity and fairness in the workplace. Commendably, the Federal Government of Nigeria issued a circular for the commencement of the mandatory contribution of one percent of the emoluments of all public servants to the Employees' Compensation Scheme of the Nigeria Social Insurance Trust Fund, NSITF. This should also be emulated by employers in the private sector.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.