Nigeria is the biggest country in Africa and the sixth-largest country in the world by population. This powerhouse has a population of 233.343 million people in 2025 and a GDP of $188.27 billion, with 3.0% growth expected this year. This gives it a per capita GDP of just over $800 and makes it a lower-middle-income country. 

Nigeria’s economy is powered by services and a wealth of natural resources. It exports cocoa, crude oil, fertilizer, gold, natural gas, and refined petroleum to India, Spain, the Netherlands, Indonesia, and the US, as well as to neighboring West African nations.

The country’s currency has also recently reduced in value, which should help to create jobs, increase exports, and increase foreign currency inflows. Many investors are looking for opportunities in Nigeria, and hiring local employees through an EOR is one way to gain immediate advantages in this large and dynamic economy.

How to Hire Employees in Nigeria

With a huge population, it’s no surprise that Nigeria’s workforce is also massive at 113.35 million workers. After a spike during the COVID pandemic, unemployment is back to low levels, and just 3% of the workforce was unemployed in 2024. This means the labor market is somewhat tight, and employers may have to be extra-competitive to attract the top talent in the country.

If you want to employ workers in Nigeria, you have a few options to choose from, which include:

Setting Up a Local Entity

The standard way to start working with Nigerians is to set up an entity in the country and hire permanent employees directly. This is a good option if you plan on entering the local market directly, such as for producing goods or offering services for local consumption. It also gives you control over your employees, letting you dictate their hours and methods of work.

Most foreign investors choose to set up limited liability companies (LLCs), limited liability partnerships (LLPs), or public limited companies (PLCs) in Nigeria. According to the World Bank, it can be somewhat difficult to set up an entity in the country, which is ranked 131st out of over 180 countries.

Setting up an LLC requires seven procedural steps and can take at least seven days. However, you’ll need to continue to work with legal, tax, and HR experts over the long term to take care of your employees compliantly. This will require expertise in local employment and, of course, funds as well.

Working with an Employer of Record (EOR)

A less well-known option you can take advantage of is to legally hire permanent employees through an Employer of Record without having to own an entity in Nigeria. Instead, the EOR will hire the workers directly and have them work for you. It will also manage HR for them while charging you a service fee, usually assessed per employee per month.

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Hiring Independent Contractors

You may not want to go through the challenge of setting up an entity in Nigeria, or may not wish to commit the resources necessary to do so. Instead, you might consider whether your needs can be met by hiring independent contractors or freelancers.

These are self-employed workers who can provide their skills and knowledge to you on a contract basis. They also pay their own taxes and manage their contributions to various levies and benefits schemes.

This means you’ll have a lot less administrative work to do for them compared to permanent employees. However, you’ll also need to think about some of the limitations of hiring contractors. They can work for multiple clients at once, set their own schedules, and produce work however they like.

As a client, you can’t control these factors, and if you try to, you may be found to be treating them like employees, in which case you’ll have to provide them with the entitlements due to employees or face misclassification penalties.

In the rest of this article, we’ll explore how this arrangement works and the responsibilities of EORs in Nigeria.

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Nigeria Employer Of Record vs Legal Entity in Nigeria

A Nigeria Employer of Record (EOR) is a third-party service provider that legally employs workers in Nigeria on behalf of foreign or domestic companies. Instead of setting up a local entity and navigating Nigeria’s complex labor regulations, businesses can use an EOR to manage human resources responsibilities and maintain compliance under local employment law.

The EOR effectively becomes the “legal employer,” handling administrative and regulatory tasks, while the client company retains oversight of day-to-day work, projects, and performance management of the staff.

In practice, a Nigeria EOR provider oversees all core employment functions for the client’s local workforce. This includes issuing locally compliant employment contracts, registering employees with the relevant authorities, managing payroll in naira, and ensuring accurate withholding and remittance of taxes such as Pay As You Earn (PAYE). They also take care of statutory contributions, including pension funds, the National Housing Fund (NHF), and other mandatory social security obligations.

Further, the EOR administers benefits—like health insurance—according to local market practices and ensures that any additional perks align with Nigerian labor laws. Beyond basic payroll and compliance services, Nigeria EOR firms typically provide broad support around human resources and risk management. They may also assist with Nigeria recruitment, onboarding, and background checks to help companies find and retain talent.

They also provide legal guidance on issues like terminations, ensuring that any dismissals or workforce adjustments follow Nigeria’s labor regulations to minimize risk. By centralizing these processes, an EOR allows businesses to focus on growth in the Nigerian market while reducing the administrative overhead and potential pitfalls of dealing with local employment laws on their own.

Using an Employer of Record in Nigeria

When you engage an EOR in Nigeria, it can help you hire local people and manage HR for them compliantly. It will already have an entity in Nigeria that it will use to enter into contracts with your workers, thus becoming the legal employer of your employees in the country. You outsource your HR functions to the EOR while taking care of the employees’ schedules and daily tasks as the worksite employer.

The general responsibilities of EORs include:

  • Payroll: It can be incredibly challenging to learn all the rules and regulations necessary to manage payroll compliantly in any foreign country. This is why your EOR partner will manage this challenging function on your behalf.

    Most, if not all, EORs now use cloud-based platforms to manage admin and provide their services. When you partner with an EOR, it will add your new hires to its platform and to your payroll, setting up automatic calculations for each of them based on their individual salaries, benefits, and tax obligations. You’ll need to track and provide time and attendance data, which can now often be done directly through EOR platforms.

    This data drives payroll calculations, which will determine how much net salary the EOR will pay your employees and how much to contribute to withholding taxes and benefits.

  • Taxes: Nigeria collects personal income tax and requires that employers calculate and withhold taxes on a pay-as-you-earn (PAYE) basis. Your EOR will do this for you as part of its payroll calculations. It will withhold and remit taxes to the Federal Internal Revenue Service (FIRS) and also report to this agency as required, while keeping payroll data for later reporting and analysis.

  • Benefits Administration: Workers in Nigeria must receive various types of leave and benefits according to the law. Your EOR will help you administer these benefits and usually also let your employees have access to their profiles on its platform so they can track their own entitlements.

    If you want to offer more, you can usually provide them with more benefits like health insurance and private retirement savings plans. Your EOR will likely be able to connect you with plan providers and will charge you an extra fee to administer these additional benefits.

  • Contracts: Your EOR will have the experience and local legal knowledge to be able to generate fully compliant contracts for all of your employees. It’s also the party that will enter into these contracts and therefore has a vested interest in ensuring that they’re correct. It will also advise you on appropriate levels for salaries and benefits you may want to provide to attract top Nigerian talent.
  • Dismissals and terminations: As the legal employer of your workers, your EOR is very important when terminating workers. As their worksite employer, you’ll choose when and why to dismiss employees for individual or group reasons. Your EOR will assess each dismissal and calculate and administer notice periods and severance pay as needed.
  • Compliance: Nigeria, like all countries, has a wide range of legislation regarding taxes and employment. Your EOR will need to have expert knowledge of all relevant local statutes so it can manage your employees compliantly. As their legal employer, it also shields you from risks that can occur due to non-compliance or employee misclassification.

  • Recruitment: Some EORs help with recruitment by providing active talent-sourcing services. They employ recruiters who will assess your hiring needs and use their connections and knowledge of the local labor market to find you the skilled talent you require in Nigeria.

    Other EORs only offer you tools to use through their platforms, like access to talent pools or connections to popular job boards. These tools help you perform recruitment on your own more effectively.

How Much Does a Nigeria Employer of Record Cost?

The cost of working with a Nigeria Employer of Record can vary depending on a few important factors, like the size of your team, the level of support you need, and the complexity of the employment arrangements you require.

Most EOR providers charge two types of fees: an initial onboarding fee to set everything up and a monthly service fee to handle ongoing payroll, compliance, and employee management. Some charge a flat monthly rate per employee, while others offer a bundled rate based on the number of hires or the scope of services you need.

In Nigeria, EOR pricing typically starts around $599 per employee per month, but it can rise depending on the complexity of the role, seniority of the employee, or if you’re offering extra fringe benefits like private health insurance or bonuses.

While it’s an upfront investment, partnering with an EOR often ends up saving companies time, legal costs, and administrative overhead compared to setting up a full entity on their own, especially when hiring a small team or testing a new market.

Employment and Labor Laws in Nigeria

Nigeria was a British colony for one hundred years, and the modern country’s legal system is a mix of British and local traditional law. Employment is largely controlled by the Constitution of the Federal Republic of Nigeria 1999, the National Minimum Wage Act 2019, and the Labor Act.

These instruments will be familiar to the experts working for your EOR, but it’s also useful to learn several basic rules so you’ll know what you and your workers are entitled to.

Employment Contracts Requirements

Employment contracts in Nigeria must be in written form and must be given to workers within three months of starting work. The details they must include are: 

  • Identification of both parties
  • Nature of employment
  • Place of work
  • Expiry date (for fixed-term contracts)
  • Probationary periods (if applicable)
  • Working hours
  • Remuneration
  • Frequency of payments
  • Holiday and sick leave conditions
  • Notice periods for termination

Fixed-term contracts are allowed in Nigeria. There are no statutes that limit their duration or the number of times they can be renewed, and they’re not restricted to only non-durable work.

Working Hours

Regular working hours in Nigeria are not stipulated by law. However, employees work 40 hours per week, eight hours a day for five days, and any additional hours are considered to be overtime. Workers are entitled to weekly rest days. If they must work on rest days, they must be compensated with alternative rest days at least once every two weeks.

Overtime

Overtime hours are not limited by law, nor is there a mandatory rate that employers must pay for overtime hours. Instead, overtime rates are included in individual contracts or collective contracts.

Probation Period

Probation periods are allowed in Nigeria but are not mandatory. In fact, there are no specific rules for probation, but because employers are only required to provide workers with contracts within three months of them commencing work, this three-month period is widely considered a probation period.

During this initial period, workers are not normally protected from unfair termination, nor do they accumulate annual leave entitlements.

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Payroll and Employment Taxes in Nigeria

Fiscal Year

In Nigeria, the fiscal year used by the government and tax authorities follows the calendar year., starting January 1 and ending December 31. Most businesses follow this schedule for easy accounting and tax processing.

Payroll Cycles

According to the Labor Act, employees must be paid at least once a month. However, there are no other restrictions to pay periods in Nigeria, and workers commonly collect their wages, daily, weekly, bi-weekly, and semi-monthly as well.

Still, monthly pay periods are the most common. Employers can also advance workers up to one month’s wages and can collect these advances within three months.

Minimum Wage

The minimum wage in Nigeria applies to all workers and was updated on July 19, 2024, to 70,000 NGN (Nigerian naira)/month (roughly 44 USD). This minimum wage is very low, and average salaries are much higher, especially in major cities.

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Bonus Payments

13th-month bonuses are not mandatory in Nigeria. However, they are quite common and are paid before Ramadan in predominantly Muslim areas or before Christmas in largely Christian regions. They normally represent a full month’s wages.

Employer Tax Contributions

Employers in Nigeria contribute between 11.0% and 27.75.% of their employees’ gross earnings to several programs and levies as follows:

Program or LevyApplicable toAmount
Employee Compensation Act Payroll ContributionAll employers1% of payroll
Pension SchemeEmployers with at least 15 employeesMinimum of 10% of salaries paid by employers up to 20%
National Housing FundEmployers with employees who earn over 30,000 NGN/year2.5% of employee gross income
Information Technology LevyICT-related companies with over 100 million NGN in annual profit1% of pre-tax profits
National Agency for Science and Engineering Infrastructure Act LevyCommercial companies in banking, mobile communication, ICT, aviation, maritime, and oil and gas sectors with over 100 million NGN in turnover0.25% of pre-tax profits
Cabotage LevyVessels engaged in coastal trade2% of contract sums earned
Upstream Oil and Gas LevyUpstream oil and gas companies1% of contract sums earned

Employee Payroll Contributions

Employees also make contributions to two different programs in Nigeria. They must contribute 8% of their salaries to pension schemes if they work for employers with 15 employees or more, unless their employers choose to contribute at least 20%.

In this case, they can still make voluntary contributions. Employers must also deduct 2.5% of their employees’ salaries for contributions to the National Housing Fund.

Individual Income Tax Contributions

Nigerian workers must pay income tax unless they make only the minimum wage of 70,000 NGN/month. If they earn more than this, their employers are required to calculate the taxes they owe, withhold them from their paychecks, and remit them to the FIRS. Personal income tax rates follow this schedule:

Income (NGN)Income Tax Rate
First 300,0007%
Next 300,00011%
Next 500,00015%
Next 500,00019%
Next 1,600,00021%
More than 3,200,00024%

Time Off and Leave in Nigeria

Mandatory Leave Entitlements

Nigerian workers are entitled to accumulate at least six work days of fully paid annual leave. However, they can only take this leave at the end of the year that it was accumulated. Probationary workers may not start accumulating leave until they receive their contracts.

Public Holidays

Nigerian workers are entitled to eleven public holidays each year. Workers should receive these days off fully paid with their normal wages. If they must work, however, they need to be compensated with alternative days off within 14 days of the holiday or be paid their overtime rate for the hours they work on the holiday.

The Nigerian holiday schedule includes the following days:

  • New Year’s Day (January 1)
  • Good Friday (date varies)
  • Easter Monday (date varies)
  • Labor Day (May 1)
  • Eid-al-Fitr (dates vary, normally three days)
  • Eid-al-Adha (date varies)
  • Mawlid (date varies)
  • Independence Day (October 1)
  • Christmas Day (December 25)

Sick Leave

Nigerian workers are entitled to a maximum of sick leave each year. This leave is fully paid by their employers as long as they have medical certificates to prove their conditions. Workers are protected from dismissal during sick leave, but their contracts are not suspended.

Parental Leave

Expecting mothers are entitled to 12 fully paid weeks of maternity leave. They must take at least six of these weeks for recovery after giving birth. This leave can be extended in the case of complications or injury as long as a medical certificate is provided.

Maternity leave is paid at 50% of normal wages by the employer. Fathers who work in the private sector are not entitled to paternity leave but government workers can take up to 14 working days of leave once every two years. Parents are protected from dismissals during their leave periods.

There is no other parental leave available in Nigeria. Mothers returning to work after childbirth are entitled to two 30-minute breaks each day to nurse their children. There is no mandated limit to this nursing break entitlement.

Bereavement Leave

Bereavement leave is not mandatory in Nigeria. It may be provided to employees at the discretion of the employer.

Terminations and Severance in Nigeria

Termination

Workers can be terminated at any time and without justification as long as their employers provide them with adequate notice, except in cases of grave misconduct when notice is not required.

Exceptions include pregnant women (who cannot be terminated because they are pregnant) and workers on maternity, paternity, and sick leave.

Notice Periods

Notice periods are typically required for termination of Nigerian workers. If contracts don’t provide for longer notice periods, employees are entitled to the following periods based on their seniority:

Length of ServiceRequired Notice Period
3 months or less1 day
Up to 2 years1 week
Up to 5 years2 weeks
Over 5 years1 month

Employees must provide the notice periods given in their contracts when they resign. Either party to a contract can waive their right to receive notice if they desire.

Severance Pay

There is no mandated severance pay structure in Nigeria. Instead, employers can provide severance pay schedules in their employment agreements, whether individual or collective.

Workers made redundant (downsized / not replaced by anyone) must be provided with redundancy pay, but this is negotiated by individuals or through collective bargaining.

Why Hire in Nigeria with an EOR

If you’re thinking about hiring employees through a Nigerian EOR, there are many excellent reasons to do so, including:

  • Low Costs: Due to the low cost of living, wages in Nigeria are very low. This makes Nigerian employees highly affordable for most international employers, though attracting top talent will require more attractive compensation packages that an EOR can advise you on.

  • Language Compatibility and Diversity: English is the official language of Nigeria and is widely used for business and education. There are over 250 ethnic groups in Nigeria speaking over 500 languages, which means a diversity of cultures and language skills that can be highly valuable.

    English is used as a lingua franca, and this can make communication with Nigerians much more convenient than with employees in other countries.

  • Legal Compliance: If you hire Nigerians through an EOR, it becomes their legal employer, and this shields you from a lot of risk. The EOR’s professional knowledge of the country’s tax and employment laws also helps it manage your employees compliantly and fairly.

  • Professional HR Services: Rather than trying to manage HR on your own in a foreign country, you can engage an EOR and outsource all of your HR functions to it.

    The EOR’s professional staff and automated systems make it easy to provide high-quality, compliant HR services that keep your employees content and with you long-term.

How to Choose an EOR in Nigeria

When you look for an EOR to engage in Nigeria, you’ll find dozens of options. It’s important to evaluate them on the following criteria to find the best partner for your organization:

Services

While all EORs provide the same basic services, additional services like recruitment and additional benefits administration aren’t offered by all providers. Make sure you can find a single vendor that can see to all of your needs.

Price

Prices for EOR services can vary widely, so it’s important to create a budget and only look at providers whose services fall within it. Check pricing and packages to ensure you know what you’re getting for the price you pay.

Experience

Previous experience working with Nigerian employees is invaluable. New and inexperienced EORs likely won’t have the legal and labor market knowledge to manage your employees compliantly.

Reputation

Look at trusted sites to find ratings and reviews to help you understand how your potential EOR partners have performed in the past. Look specifically for experiences with hiring Nigerian staff from past and present clients.

Expand into Nigeria Easily with Remote People’s Employer of Record in Nigeria

Expanding into Nigeria offers huge potential, but it also comes with its fair share of legal and administrative hurdles. That’s where a trusted Employer of Record (EOR) like Remote People makes all the difference.

By taking care of payroll, compliance, tax filings, and benefits administration, we free you up to focus on what really matters: growing your business and building a strong, local team.

With our support, you can avoid costly compliance missteps and confidently navigate Nigeria’s employment landscape, without needing to set up a legal entity or figure it all out on your own.