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Employer of Record (EOR) in Nigeria

When it comes to expanding your business into new territories, the path might seem treacherous. But what if there was a trailblazer who could lead the way, making the journey smoother and more manageable? That’s where a Nigeria Employer of Record (EoR) comes into play, especially in a vibrant and dynamic country like Nigeria. But what exactly is a Nigeria Employer of Record, and how does it function in the Nigerian context? Let’s embark on this enlightening journey together.

Key Takeaways

  • Engaging an Employer of Record in Nigeria provides international companies with compliance assurance, cost savings and streamlined hiring processes.
  • A Nigeria EOR is responsible for managing HR tasks, payroll processing and ensuring equal treatment & benefits for employees while adhering to local labor laws.
  • Leverage Nigeria EOR solutions to gain scalability, flexibility & efficiency. Allowing businesses to enter Nigeria markets faster and save costs.

Consider yourself a captain sailing unknown waters. The vast Nigerian market awaits you, and a Nigeria employer of record (EoR) acts as your seasoned navigator, steering your venture towards triumph. An EoR in Nigeria serves as the legal employer, managing HR responsibilities, payroll processing, and compliance for international companies when hiring employees. It’s like having a seasoned guide, well-versed in the terrain of Nigerian labor laws, including the terms of employment, worker rights, minimum wages, and termination clauses.

With an EoR at your disposal, you can:

  • Accelerate your market entry

  • Diminish your risk of legal and compliance issues

  • Achieve effective HR and payroll management, including contributions to the National Housing Fund

In essence, EoR services in Nigeria act as the legal employer, administering HR tasks, payroll, and compliance for international companies, including managing paid sick leave for employees.

The Role of an EoR

Navigating the intricate waters of HR management, payroll, and compliance can seem intimidating. That’s where an EoR steps in, taking the role of the proficient helmsman of your Nigerian enterprise. An Employer of Record in Nigeria is responsible for:

  • Managing HR tasks

  • Payroll

  • Compliance for international companies

  • Ensuring equal treatment and benefits for Nigerian female employees.

Think of it as having a master mariner who oversees all facets of HR administration, such as:

  • Payroll

  • Benefits

  • Employee onboarding

  • Adherence to local labor laws

  • Termination procedures

  • Considering the recommendations of the Industrial Wages Board

With an EoR at the helm, you can sail smoothly through the sea of Nigerian labor laws, ensuring your crew – your employees – receive their due benefits such as health insurance coverage.

Benefits for International Companies

Initiating an international business journey is a significant step. There are potential legal risks, such as corruption when interacting with Nigeria’s judiciary, weak government institutions, political instability, and the potential for coups and military rule. But with an EoR guiding your vessel, you can navigate these challenges with ease. EoR services in Nigeria offer a multitude of advantages, including:

  • Ensuring compliance with local rules and regulations

  • Providing an efficient way to hire contractors as employees

  • Reducing overhead costs and paperwork associated with in-country hiring and payroll

It’s like having a seasoned sailor who knows the winds and currents, ensuring a smooth and safe journey to the Nigerian market.

Crafting Compliant Employment Contracts

Just as a ship relies on a sturdy hull, an employment relationship depends on a solid contract. In Nigeria, employment contracts are legally mandated, serving as the backbone of the employer-employee relationship. These contracts encompass vital components like:

  • salary

  • benefits

  • termination clauses

  • working hours

And to ensure everyone is on the same page, these contracts are composed in English, with the compensation stated in Nigerian Naira (NGN), the local currency.

Key Elements of a Nigerian Employment Contract

Just as a ship’s blueprint details its design, a Nigerian employment contract outlines the specifics of the employment relationship. The Nigerian labor law, specifically the Labour Act of Nigeria, is one of the key employment laws that stipulates a written statement of the contract particulars must be provided to the employee within three months of their tenure. Salaries in these contracts are established through negotiations between the employer and the employee, and are contingent upon factors like:

  • the employee’s qualifications

  • experience

  • job responsibilities

  • prevailing market rates for similar positions.

But a contract isn’t just about the pay. It should also include benefits such as:

  • Compensation for work performed

  • Paid leave

  • Health insurance coverage

  • Pension or retirement benefits

  • Maternity leave

  • Termination and severance benefits

Language and Currency Specifications

Navigating the high seas of international business requires clear communication and a common currency. In Nigeria, contracts must be composed in English, and the stated compensation must be in Nigerian Naira (NGN). Specifying compensation in NGN safeguards both the employer and the employee from fluctuations in exchange rates, provides steadiness and predictability in salary payments, recognizes the local context, and facilitates precise tax calculations and compliance with Nigerian tax laws.

Navigating Nigerian Labor Laws with an EoR

As a lighthouse guides ships safely to shore, an EoR navigates businesses through the complex landscape of Nigerian labor laws. EoR services guarantee compliance with required benefits, leave policies, and termination regulations. They ensure adherence to the mandated benefits such as:

  • minimum wage and working hours

  • paid time off

  • parental leave

  • pension

  • health insurance

  • retirement benefits

  • death in service benefits

  • long-term disability benefits

  • annual leave

They also assist in managing the challenging aspects of employee dismissals, whether due to incompetence, misconduct, or role redundancy.

Mandatory Benefits and Leave Policies

An EoR ensures that your ship stays in line with the navigational buoys of mandatory benefits and leave policies. In Nigeria, these include annual leave, sick leave, and maternity/paternity leave. Nigeria female employees are entitled to 12 weeks of maternity leave at 50% of their regular pay, while paid paternity leave is available in Lagos and Enugu States for two and three weeks respectively.

An employee in Nigeria who has completed 12 months of continuous service is also eligible for a paid holiday of at least six working days. Employees are entitled to 12 days’ sick leave for temporary illnesses. A medical practitioner must certify the illness in order to be eligible.

Termination and Severance Guidelines

Every voyage, no matter how smooth, can sometimes require a change in crew. In such situations, an EoR ensures that the process follows the compass of Nigerian labor laws. In Nigeria, termination and severance procedures necessitate notice periods and must be followed accordingly. The notice period for termination varies according to the length of service, ranging from:

  • one day for a period of three months or less

  • one week for a period of three months to one year

  • two weeks for a period of one to five years

  • one month for five years or more

When it comes to severance pay, it’s regulated by the terms of the contract of employment and is typically calculated based on length of service, age, and other relevant factors.

Payroll and Tax Compliance Made Easy

As a captain monitors the ship’s provisions and expenditure, an EoR oversees the company’s payroll and tax compliance. Register all necessary company and personnel information for payroll calculation in the payroll software. After that, systemize this data to accurately calculate the payroll..

An important aspect of this is the mandatory contribution towards social security, with employees required to contribute 8% of their earnings. Employers and employees are also mandated to make a mandatory minimum contribution of 10% and 8% respectively of the employee’s monthly emoluments towards pension. In terms of corporate tax, most companies in Nigeria are subject to a rate of 30%.

Employer’s Contribution to Social Security

Just like a ship’s crew contributes to the smooth running of a vessel, employers in Nigeria contribute to social security. Employers contribute 10% of an employee’s salary to social security. This contribution is based on a fixed percentage of the employee’s monthly salary, with the minimum contribution being 18% of the monthly emolument, with the employer contributing 10% and the employee contributing 8%.

Employers who fail to remit social security contributions on time may incur a penalty of 50,000 Naira, while noncompliance by corporations can result in a fine of 500,000 Naira.

Employee Income Tax Management

In the same way a good helmsman steers the ship through all kinds of weather, an EoR steers a business through the complexities of employee income tax. The EoR is responsible for deducting taxes from the employee’s gross income prior to any other deductions.

The taxation system for individual income in Nigeria includes Personal Income Tax (PIT), with individuals who are resident in Nigeria liable for taxation on their global income. The taxation rates for PIT range from 7% to 24% of the taxable income.

Health Insurance and Additional Benefits

As a ship’s crew requires proper provisions for maintaining health and efficiency, employees necessitate health insurance and additional benefits. In Nigeria, EoR services provide these benefits, including health insurance and additional benefits to employees. The National Health Insurance Scheme (NHIS) is a government-run health insurance program that provides citizens with access to health care services. There are also a range of private health insurance providers for those who prefer private coverage.

In addition to health insurance, customary bonuses in Nigeria include annual bonuses and performance-based bonuses.

Options for Health Coverage

As a capable captain ensures the ship is adequately stocked with necessary provisions, an EoR guarantees that employees have access to health coverage. In Nigeria, the National Health Insurance Scheme and private health insurance plans are available for health coverage. The NHIS promotes, regulates, and integrates health insurance schemes in the country with the goal of providing mandatory health insurance coverage for every Nigerian.

Private health insurance plans provide comprehensive coverage for medical expenses, including hospitalization, surgery, and prescription medications.

Enhancing Employee Packages

Just as a well-stocked ship ensures a successful voyage, well-structured employee benefit packages contribute to a successful business. An EoR can assist in enhancing these packages by providing supplementary benefits such as bonuses and life insurance. These benefits are regulated by the Pension Reform Act (PRA) and must be made available to all employees.

Thus, engaging an EoR can aid in comprehending and honoring these cultural norms, ensuring a smooth sail in the Nigerian business waters.

Streamlining the Hiring Process with an EoR

As every ship requires a skilled crew, so does every business need a competent workforce. An EoR can streamline the hiring process, making it easier to recruit and onboard employees in Nigeria. They provide efficient hiring services, manage employee benefits such as health insurance coverage, and provide access to local talent pools.

They can also streamline the onboarding process, ensuring employees smoothly transition into their new roles.

Recruitment and Onboarding

Just like a captain needs a competent crew to navigate through stormy seas, a business needs a skilled workforce to navigate the competitive market. An EoR can assist with candidate selection, contract drafting, and employee onboarding in Nigeria. They help in defining the job vacancy, formulating a recruitment strategy, sourcing candidates, conducting interviews, and finally in hiring the best candidate.

They also provide crucial support during the onboarding process, welcoming the new employees and providing essential training and orientation.

Work Permits and Visa Assistance

Just as every ship needs the right documentation to sail international waters, foreign employees need the right permits to work in Nigeria. An EoR can assist with obtaining work permits and visas for foreign employees in Nigeria. Obtaining visas, work, or residence permits usually starts from employers. The process involved will vary depending on the country of origin and other individual considerations..

An EoR can provide support in obtaining these permits, ensuring a smooth journey for Nigerian employees into the Nigerian workforce.

Adhering to Local Employment Practices

As every sea possesses its unique currents and weather patterns, each country has distinctive employment practices. An EoR ensures adherence to local employment practices, including working hours, overtime regulations, and cultural considerations in the Nigerian workplace. They ensure compliance with the mandated 40-hour work week, the required 24-hour rest period every seven days, and a one-hour break for every six hours of work.

Working Hours and Overtime Regulations

Just as a ship’s crew needs to know their shifts and duties, employees need clarity on working hours and overtime regulations. Nigerian labor laws stipulate the regulations regarding working hours, rest periods, and overtime pay rates.

An EoR ensures that these regulations are followed, providing a smooth sailing experience for both the employer and the employees.

Cultural Considerations in the Workplace

Just as every sea has its unique folklore and traditions, every workplace has its cultural nuances. In Nigeria, understanding the local business environment, respecting hierarchy and authority, loyalty to long-term relationships, and importance of personal relationships all shape the Nigerian business environment, which is influenced by the local entity.

An EoR, with their cultural understanding and language proficiency, can help to bridge the cultural gap and ensure effective communication and understanding between employers and employees.

Leveraging EoR Solutions for Business Growth

As an experienced captain utilizes his knowledge for a successful voyage, businesses can make use of EoR solutions for growth and expansion in Nigeria. Implementing EoR solutions can provide businesses expanding into Nigeria with:

  • Flexibility

  • Scalability

  • Cost-effectiveness

  • Efficiency

They help organizations to remain compliant with local standards and expectations, thus reducing liability.

Flexibility and Scalability

As a ship requires flexibility to navigate through different conditions, businesses necessitate flexibility and scalability to prosper in diverse markets. An EoR can provide businesses looking to scale with the following benefits:

  • Global expansion

  • Faster market entry

  • Cost savings

  • Greater flexibility

  • Risk mitigation

By taking on the administrative burdens of employment, EoRs allow companies to respond to changing market conditions and adjust their workforce size as needed.

Cost-Effectiveness and Efficiency

As a well-maintained ship operates efficiently and cost-effectively, an EoR can increase the efficiency and cost-effectiveness of business operations. Utilizing an EoR service in Nigeria can offer cost benefits, including cost-effectiveness, budget-friendly pricing structures, and potential savings in time and money.

By outsourcing employer responsibilities to an EoR, companies can avoid the costs and complexities of setting up a legal entity in Nigeria.

Summary

Just as every voyage concludes with a return to harbor and a reflection on the journey, let’s recap our exploration of EoR services in Nigeria. EoRs act as navigators, guiding businesses through the unfamiliar waters of Nigerian labor laws, employment contracts, payroll management, tax compliance, and local employment practices. They ensure a smooth journey by providing HR services, obtaining work permits and visas, managing health insurance and benefits, and offering cost-effective and efficient solutions for business expansion. With an EoR at the helm, your business is set for a successful voyage into the Nigerian market.

Milly is an international lawyer and tech entrepreneur who has advised companies on expanding globally for over 5 years. She is an advocate of remote hiring and regularly consults on future of work matters. Milly founded RemotePad to help employers learn more about building and growing international teams.

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