1. Employment Terms1

The principal legislation governing employment issues in Nigeria is the Labour Act, Cap L1 LFN 2004 (the "Labour Act"). Section 91 of the Labour Act defines a "worker," for purposes of the Labour Act, as:

"... any person who has entered into or works under a contract with an employer, whether the contract is for manual labour or clerical work or is expressed or implied or oral or written, and whether it is a contract of service or a contract personally to execute any work or labour ...."

Section 91 of the Labour Act goes further to exclude certain categories of persons from the above definition and, thereby, from the provisions of the Labour Act. For instance, it is pertinent to note the exclusion of "persons exercising administrative, executive, technical or professional functions as public officers or otherwise", from the ambit of the Labour Act.

Terms of employment of such excluded categories of employees are governed by the terms and conditions contained in their respective individual contracts of employment.

With regards to "workers" whose terms of employment are subject to the provisions of the Labour Act, Section 7 thereof provides that the employer must, not later than three (3) months after the commencement of employment, provide workers with a written statement specifying inter alia, the nature of the employment, rates of wages, termination notice, and terms and conditions of service i.e. work hours, holidays etc.

  1. Pensions

The Pension Reform Act 2014 (the "PRA") repealed the Pension Reform Act No. 2 of 2004 and makes provisions for a uniform contributory pension scheme for organizations in both the public and private sectors in Nigeria.

Section 2 of the PRA provides that private sector employers with fifteen (15) or more employees must establish a contributory pension scheme ("Scheme"), for the benefit of their employees, wherefrom retirement benefits would be paid to such employees. However, Section 2(3) of the PRA also provides that, notwithstanding the prescribed mandatory minimum threshold stated above, private sector employers with less than three (3) employees or self-employed persons are also entitled to voluntarily establish Schemes, in accordance with guidelines issued by the National Pension Commission.

The minimum2 rates of contribution are – (1) ten percent (10%) of an employee's monthly emoluments, to be contributed by the employer; and (2) eight percent (8%) of an employee's monthly emolument to be contributed by the employee.

An employer is duty bound to deduct at source, the employee's contribution and within seven (7) days from the date of payment of salary, remit the employee and employer's contributions to the employee's preferred Pension Fund Administrator.

  1. Employees' Compensation for Injuries

The Employees Compensation Act 2010 ("ECA") provides the framework for employee compensation issues in Nigeria. The ECA applies to all workers employed in private and public sector and provides for compensation for injuries sustained in the work place or occupational diseases picked up in the course of employment whether at the usual place of employment or outside it.

The ECA establishes an Employees' Compensation Fund to be administered by the Nigerian Social Insurance Trust Fund Management Board which is the authority responsible for implementing the provisions of the ECA. Employers are obligated to make a minimum contribution to the fund for the compensation of injured employees. The ECA also seeks to provide for the rehabilitation of injured employees, and expands the scope of injury to workers by including for example compensation for mental stress.

Every employer is required to pay a minimum of one percent (1%) of its annual payroll to the Fund in the first two (2) years of the enactment of the ECA. Subsequently, the applicable rate is determined by the Nigerian Social Insurance Trust Fund Management Board.

  1. Industrial Training

The Industrial Training ITF Act, Cap I9, LFN 2004, as amended by the Industrial Training ITF Amendment Act, 2011 (the "ITF Act") establishes the Industrial Training Fund (the "ITF"). The purpose of the ITF is to promote the acquisition of relevant skills in industry or commerce with a view to generating a pool of indigenous manpower to satisfy the needs of the economy. Every employer that is liable under the ITF Act must contribute one (1) percent of the amount of its annual payroll to the ITF. Employers that are liable to make contributions under the ITF are:

  • Employers having five (5) or more employees in their establishment;
  • Employers who have less than five (5) employees but having a turnover of fifty million Naira (N50,000,000) and above per annum;
  • Suppliers, contractors or consultants who bid for contracts from any federal government agency or parastatals or private companies; and
  • Companies operating in the free trade zone which seek expatriate quota approval(s) or make use of any custom services.

In the determination of the contributions to be made to the ITF, all employees including those who work part time and temporary employees are included in the assessment. Further, all the allowances and entitlements paid to such employees within or outside Nigeria are calculated when considering the total payroll of an employer.

The ITF Act further imposes a duty on employers to provide training for their indigenous staff with a view to improving their job related skills. Furthermore, the ITF Act provides that the ITF's Council may make a refund of up to 50% of the amount paid by an employer where it is satisfied that its training program is adequate.

Failure to make contributions within the stipulated period in a calendar year attracts a penalty of five per cent (5%) of the amount unpaid for each month or part of a month after the date on which payments should have been made.

  1. Trade Unionism

Section 1 of the Trade Unions Act, Cap T14 LFN 2004 defines a trade union as:

"any combination of workers or employers, whether temporary or permanent, the purpose of which is to regulate the terms and conditions of employment of workers, whether the combination in question would or would not, apart from this Act, be an unlawful combination by reason of any of its purposes being in restraint of trade, and whether its purposes do or do not include the provision of benefits for its members".

Under Nigerian law, one of the fundamental human rights entrenched in and protected by the Constitution is the right to peaceful assembly and association. Specifically, Section 40 of the Constitution of the Federal Republic of Nigeria provides inter alia that

"every person shall be entitled to assemble freely and associate with other persons, and in particular, he may form or belong to any political party, trade union or any other association for the protection of his interests..."

Nigerian courts have upheld this right to freedom of association by holding that the right to form or join any political party or trade union is exclusively that of the individual citizen and not that of his employer.

Accordingly, every worker or employee in Nigeria has the right to, in conjunction with others form a trade union or join an existing one. The decision whether or not to exercise this right rests solely with such an employee, and he can neither be compelled to form or join a trade union nor can he be prevented by his employers from so doing, at least not overtly.


The Trade Disputes Act makes provisions for the settlement of trade disputes and other matters ancillary thereto.


1 Please note that Organisation which hold oil mining leases, oil prospecting licences, permits (or any interests in the foregoing) issued pursuant to the Petroleum Act or regulations made thereunder or persons registered to provide services in the Nigerian oil & gas industry are also required to comply with the provisions of the Guidelines and Procedure for the Release of Staff in the Nigerian Oil and Gas Industry issued by the Department of Petroleum Resources on March 5, 2015.

2 More than the statutorily prescribed minimum amount may be contributed by either or both the employer and the employee. Indeed, the PRA sets out instances where the employer may agree to make both contributions (i.e. the employer and the employee's contributions) to the Scheme.

The information contained here is based on relevant Nigerian laws, regulations and practices applicable to doing business in Nigeria, as of November 14 2018. This Manual only highlights legal issues, in general, and is not exhaustive. Also it does not, and it is not intended to, constitute legal advice and or opinion. If you have questions or require advice in respect of matters contained herein or any other specific issues, kindly contact us for such advice and we would be happy to assist you on an individual basis and walk with you on your journey to explore the limitless opportunities for investments in Nigeria.

Banwo & Ighodalo does not accept liability for any action (or lack thereof) by you or anyone else as a result of reliance on, or any other use of, information contained herein. For the avoidance of doubt, under no circumstance shall Banwo & Ighodalo be liable for any consequences resulting from reliance on or use of information contained in this Manual.

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.