Insights
Payroll in Nigeria: A 2026 Employer Guide
Insights · By Chen ChunJie · Published 5 November 2026 · Updated 14 November 2026
A Nigeria payroll cycle calculates gross-to-net pay, records lawful deductions and employer contributions, pays employees and completes the relevant remittances. PAYE is due by the 10th of the following month; pension remittances are due within seven working days of salary payment. Confirm employee residence, pensionable pay and statutory coverage before applying the 2026 rates below.
Reviewed 14 November 2026 against Nigerian legislation and regulator guidance. General information, not legal or tax advice; the worked example uses stated assumptions.
What a Nigerian payroll has to cover
| Item | Who pays | Position in 2026 |
|---|---|---|
| PAYE | Employee, deducted by the employer | 0% on the first NGN 800,000 of annual chargeable income, then 15% to 25%; assess exemptions and qualifying deductions. |
| Pension | Employer at least 10%, employee at least 8% | Contractual monthly emoluments, no less than basic salary plus housing and transport. Assess coverage under the Pension Reform Act and PenCom rules, including smaller-employer rules. |
| NSITF | Employer | 1% of monthly payroll |
| ITF | Employer | 1% of annual payroll for employers with 25 or more employees outside free trade zones under the amended Act. A separate provision covers suppliers, contractors and consultants with more than 25 employees bidding for contracts. |
| NHF | Employee, voluntary in the private sector | 2.5% of monthly income for eligible private-sector employees who elect to contribute, not merely basic pay. |
| Group life insurance | Employer | For covered employment, insured benefit of at least three times annual total emoluments; this is not the premium. |
| Health insurance | Under the applicable scheme | Mandatory coverage under the NHIA Act 2022. Check federal/state scheme funding rules and any supplementary plan. |
Sources: PenCom guidance; Business Facilitation Act amendments to ITF and NHF; NSITF services; NHIA Act 2022.
2026 PAYE bands
| Annual taxable income (NGN) | Rate |
|---|---|
| First 800,000 | 0% |
| Next 2,200,000 | 15% |
| Next 9,000,000 | 18% |
| Next 13,000,000 | 21% |
| Next 25,000,000 | 23% |
| Above 50,000,000 | 25% |
Use taxable pay, including taxable benefits, less qualifying deductions actually made. Eligible pension, NHF, health-insurance and life-insurance contributions require the appropriate evidence. The former consolidated relief allowance no longer applies. Rent relief is 20% of eligible actual annual rent paid, capped at NGN 500,000 and supported by the employee’s claim. Employment income at or below the NGN 70,000 monthly national minimum wage is exempt; unrelated taxable income is assessed separately.
Sources: Nigeria Tax Act 2025; JRB 2026 personal income tax guidelines.
A worked example: NGN 1,000,000 a month
This resident-employee illustration assumes pension and NSITF apply and the whole salary is pensionable monthly emoluments. PAYE deducts only employee pension; rent relief and other personal deductions are excluded. The NGN 110,000 employer addition shown below excludes ITF, insurance, other benefits and administration costs. Where ITF applies, a further 1% provision would add NGN 10,000 a month in this example.
| Step | Amount |
|---|---|
| Annual gross pay | NGN 12,000,000 |
| Less employee pension at 8% | – NGN 960,000 |
| Taxable income | NGN 11,040,000 |
| Tax: 0% on 800,000, 15% on 2,200,000, 18% on 8,040,000 | NGN 1,777,200 a year |
| Monthly PAYE | NGN 148,100 |
| Monthly take-home after pension and PAYE | NGN 771,900 |
| Employer pension at 10% and NSITF at 1% | NGN 110,000 a month on top of salary |
Try the Nigeria salary and employer cost calculator for an estimate. Its simplified model includes ITF automatically; read the coverage and calculation qualifications before using the result.
The Nigeria payroll calendar
| When | What is due |
|---|---|
| Each agreed pay cycle | Calculate and pay wages on time; Labour Act payment intervals for covered workers must not exceed one month. |
| Within 7 working days of payday | Pension to the Pension Fund Custodian specified by the employee’s PFA. |
| By the 10th of the next month | PAYE to the relevant State/FCT authority under residence rules, or NRS for assigned categories. |
| Every month | Reconcile NSITF at 1% of total monthly payroll and follow the applicable remittance schedule. |
| By 31 January | Employer’s annual return of emoluments for the previous year |
| Yearly | ITF where applicable, insurance renewal and review of registrations and rule changes. |
Mistakes that cause problems
- Using one tax authority for everyone. Confirm residence and relevant State/FCT jurisdiction, or a designated NRS category. Check changes when employees move.
- Using the wrong pension base. Follow contractual monthly emoluments, with a minimum of basic pay plus housing and transport; other contractual pensionable items may count.
- Applying every levy to every employer. Check pension, ITF and insurance coverage separately; the same salary does not establish identical obligations.
- Keeping old PAYE rules. Use the 2026 bands and supported deductions, including actual eligible rent paid.
- Misclassifying employees. Assess the real working relationship, including control and independence. Paying a monthly fee under a contractor label does not settle employment status.
In-house, outsourced or employer of record
| Option | Who is the employer | Best when |
|---|---|---|
| In-house payroll | Your company | You have local payroll expertise and enough staff to justify it |
| Payroll software | Your company | Your team is comfortable running and checking it |
| Outsourced payroll | Your company | Your company already employs in Nigeria and needs payroll calculations, payslips and reports; agree filing and payment responsibilities. |
| Employer of record | The lawful employer under the arrangement | You need local employment support and the role, business activity and required permissions allow the arrangement. EOR does not itself remove tax or corporate obligations. |
FAQ: payroll in Nigeria
How does payroll work in Nigeria?
Collect approved pay inputs, calculate gross-to-net wages and applicable contributions, obtain employer approval, pay employees and complete the required remittances and returns. Confirm the wage-payment method, employee residence and statutory coverage; a payroll provider does not automatically become the employer.
What is the NSITF contribution in Nigeria?
The employer contributes 1% of total monthly payroll to the Employees’ Compensation Scheme. It is an employer cost, not a deduction from the employee’s salary.
Who gets the PAYE?
The relevant State or FCT tax authority normally administers PAYE under employee-residence rules. Ordinary FCT residence does not by itself make the Nigeria Revenue Service the authority; NRS administers specified categories such as certain non-residents, diplomats and armed-forces personnel. Confirm the correct jurisdiction.
Is the National Housing Fund compulsory?
For eligible private-sector employees earning at least the national minimum wage, participation is voluntary. The amended Act specifies 2.5% of monthly income, not just basic salary. Public-sector rules differ; record the employee’s election and actual qualifying contribution.
Is a 13th-month salary required in Nigeria?
There is no general statutory thirteenth-month salary. A contract, collective agreement or binding company policy may create an entitlement. Statutory paid-leave and other employment rights remain separate.
Can I outsource payroll and still be the employer?
Yes. NNRoad can calculate payroll and prepare payslips and reports while your company remains the employer. Confirm responsibilities for approval, funding, filing and remittance; outsourcing does not transfer the employer’s statutory liability. See Payroll Services in Nigeria.
Want your Nigeria payroll calculated for you?
NNRoad’s Local Team calculates gross-to-net pay and prepares payslips, reports and filing schedules for employers in Nigeria. Your company remains the employer and retains its statutory responsibilities. Confirm the calculation scope, input deadlines, approval process and responsibility for each payment and filing.
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