Nigeria

A. Hiring of employees (onboarding)

1. Mandatory employer requirements

Nigeria has a number of mandatory requirements for employers. These are:

• Employment contract - An employer who employs a “worker” as defined by law, i.e., manual laborers and clerical workers, is statutorily required to issue an employment contract to the employee within 3 months of the commencement of the employment relationship, detailing the term (if applicable), nature of employment, notice period, among other relevant information. However, an oral contract is not invalid or unenforceable merely because it was not concluded in writing.
  
  There is no statutory requirement for employers to provide employment contracts for employees not classified as “workers” under the law. This includes person who perform administrative, technical, executive or professional functions; a person employed otherwise than for the purpose of the employer’s business; members of the employer’s family, etc. However, it is advisable that the terms of such employment are documented in a written contract.
• Group life insurance - The law requires every employer to maintain a group life insurance policy in respect of each employee, amounting to three times the employee’s total emoluments.
• Employee compensation - Subject to a few exemptions, no employer is expected to pay less than the national minimum wage to employees under its establishment. Doing so may attract penalties.
• PAYE - With respect to employment income, Nigeria operates a Pay-As-You-Earn system which requires every employer to register with the relevant State Internal Revenue Service, and to deduct and remit appropriate personal income tax from employees’ emoluments to the relevant tax authority.
• Contributory pension scheme - An employer is required to contribute 10% of the employee’s monthly gross emolument to the employee’s retirement savings account. The employer is also required to deduct 8% of the employee’s monthly gross emolument and remit same to the employee’s retirement savings account. The monthly emoluments include basic salary, housing and transport allowances.
• Industrial training fund - Any employer having 25 or more employees in its establishment and not operating within a free trade zone is required, in respect of each calendar year or prescribed date, to contribute 1% of its annual payroll to the fund.
• Employees compensation fund - Every employer is required to contribute 1% of its total monthly payroll cost to the employee’s compensation fund.
• Health insurance - Every employer with 5 or more employees and above is required to obtain health insurance for their employees.

2. Probation periods

• Nigerian law does not require probation periods in employment contracts. However, in practice, most employment contracts usually allow for probation periods, which are usually between 3-6 months.
• Generally, either party can terminate during the probationary period, with minimal obligations. In practice, a shorter notice of termination of employment is usually adopted during probation period. However, the courts have indicated that the employer must provide plausible justifications for the termination, especially where the termination is disputed.
• At the conclusion of the probation period, the contract of employment and/or the employee handbook will usually spell out next steps required to continue the employment relationship. This may either be confirmation or termination of the employ. Nigerian cases have held that an employer is not allowed to extend the probationary period.

3. Hiring checks

Medical examination

• Nigerian law requires the conduct of medical examination conducted by a registered medical practitioner, for manual and clerical employees upon employment. The employer will usually bear the costs of such medical examinations. Additionally, most employers conduct medical tests in order to determine whether the proposed employee is physically fit for the role. Such medical checks are normally conducted prior to hiring the employee.
• HIV/AIDS testing can only be done with the consent of the employee.
• Refusal to hire a person on the basis of the medical examination may amount to discrimination.

Criminal background check

An employer in Nigeria is not required to conduct criminal background checks on a potential employee. However, this may be done. An employer who intends to conduct criminal checks must ensure it does not infringe on the employee’s constitutional right to privacy. This usually requires obtaining the consent of the prospective employee before carrying out such checks in practice.

Reference and education checks

An employer in Nigeria is not statutorily required to conduct reference and education checks on a potential employee. However, this may be done subject to preferences.

4. Diversity & inclusion

• Save for certain government appointment/employments, Nigerian law does not provide for the observation of diversity quota when hiring. There are also no specific pay equity requirements.
• However, Nigerian law generally prohibits discrimination against Nigerian citizens on the basis of their community, ethnic group, place of origin, sex, religion, political opinion or the circumstances of their birth. Also, the law prohibits employers from discriminating directly or indirectly against employees on the basis of their HIV status or HIV-related illness. Similarly, the law prohibits discrimination on the basis of disabilities.

5. Types of employment contracts

The most common types of employment contracts in Nigeria are:

• Full-time permanent employment contracts
• Fixed-term employment contracts
• Project-based employment contracts

6. Specific rules for executives

In Nigeria, executives do not qualify as workers (manual laborers and clerical workers) whose employment are regulated under the Labour Act. Thus, the contract of employment of an executive is the primary instrument governing the employment relationship between an executive and the employer. The ambit of rules of executive is generally regulated by corporate laws and regulations.

7. Language requirements

There is no strict language requirement in Nigeria. However, English language is the official language of Nigeria and the contract of employment is expected to be made in a language the employee understands or there is evidence of translation if he/she does not understand the language of the contract of employment.

8. Equal Pay

Nigerian law prohibits the discrimination of persons on the basis of sex or gender. However, there is no specific legislation on equal pay. However, it is important to note that there are many judgements which declared that wage and benefit discrepancies between local and foreign employees amounts to unfair practice and a violation of law.

9. Remote Work

There is no specific legislation dealing with remote work in Nigeria. Thus, whether or not an employee can work remotely is dependent on the terms of the contract of employment and the employer’s policies. There is no requirement for such arrangement to be validated by an employee representative body.

B. Termination of employees (Offboarding)

1. Kinds of dismissal

The following types of dismissals are obtainable in Nigeria:

• Termination with notice - This is where the employment contract is terminated by the employer or employee upon issuance of a valid notice, or payment in lieu of notice where the contract of employment provides for it.
• Summary dismissal - Here, the employer terminates the employment relationship without notice or payment in lieu of notice on the basis of gross misconduct. However, the employee must be given an opportunity to be heard prior to dismissal.
• Redundancy - THIS occurs where an employer terminates the employment relationship due to commercial/economic considerations requiring the employer to reduce its workforce. The Labour Act defines it as “an involuntary and permanent loss of employment caused by an excess of manpower”
• Expiration of contract - This is where a contract of employment for a fixed term automatically comes to an end upon completion of the term.

2. Dismissal motivation

In Nigeria, it has been held by the Nigerian courts that an employer is required to state a valid reason for dismissing an employee. The reason should be connected with the employee’s capacity, conduct, or based on the operational requirements of the undertaking, establishment, or service.  Failure to provide a valid reason may be grounds for the employee to institute a claim for wrongful dismissal.

3. Notice period

With regards to manual laborers and clerical workers, the Labour Act provides for the following notice periods:

The notice period for employees who perform administrative, technical, executive or professional functions is governed by the relevant contract of employment. The law also allows either party to an employment contract to terminate the contract by making a payment in lieu of notice.

4. Severance pay

Severance pay in Nigeria depends on:

• the terms of the agreement
• the terms of collective bargaining agreements (if any)
• the circumstances surrounding the termination

In the case of redundancy, the employer shall use his best endeavors to negotiate redundancy payments to any discharged workers who are not protected by regulations created by the Minister.

5. Dismissal formalities

• Dismissal formalities are normally as contained in the contract of employment, and in the Labour Act (for manual and clerical workers).
• There may be other industry specific requirements for dismissal in certain industries.

6. Special dismissal protection

Employees on maternity leave are protected from dismissal on the basis of their absence from work during the period of such maternity leave.

There may also be other industry related protection.

7. Legal means of employees

Generally, the legal means available to an employee include:

• seeking redress in the National Industrial Court, which is the court specifically empowered to address labour disputes in Nigeria.
• adopting alternative dispute resolution mechanism or any other dispute resolution mechanism contained in the contract of employment.
• International Labour Organization recommended avenues for employer/employee dispute resolution.

8. Specific rules for executives

The Labour Act does not apply to employees in executive positions. Such employment relationships are governed by the terms of their employment contracts. Corporate law rules also govern the relationship between the employer and executive in some instances.

9. Collective dismissals

The following will apply for collective dismissals:

• Redundancy rules under the Labour Act
• Provisions of the contract of employment
• Collective agreements (if any)

Get in touch

Agboluaje Asiata
Nigeria
aagboluaje@deloitte.com.ng | +23 419041890