Payroll in Nigeria

Payroll in Nigeria means calculating gross-to-net salary, withholding 8% pension and the income tax due under PAYE from each employee, paying a 10% employer pension contribution plus social levies on top, issuing payslips and remitting PAYE to the relevant state tax office by the 10th of the following month. The key local issue is the new rulebook: since 1 January 2026 the country runs under the Nigeria Tax Act 2025, which rewrote the income tax bands, scrapped the old relief allowance and replaced it with a narrower Rent Relief. If your gross-to-net maths still uses last year’s reliefs, it is wrong.

Total employer cost for a ₦ 500,000 monthly salary is about ₦ 560,000, around 12% on top of gross.

Our verdict: Fewer than 2 employees and no local entity in Nigeria: use an EOR at $199 to $650 per employee per month. At 2 or more, opening a Ltd (roughly $6,000 in setup costs and 8 to 16 weeks to complete) usually works out cheaper. Already running a local entity: standard payroll outsourcing is the cheaper route.

Use this page if you already have, or plan to set up, a local entity in Nigeria and want to know what running payroll actually involves. If you want to hire in Nigeria without becoming the legal employer, an Employer of Record is the faster route.

No local entity yet? See our guide to EOR in Nigeria.

Payroll in Nigeria at a Glance

How Does Payroll Work in Nigeria?

Nigerian payroll runs on a steady monthly rhythm. You calculate each employee’s gross salary, strip out their pension, housing fund and income tax to reach net pay, add the employer pension and levies on top, then remit what you withheld to the state tax office by a fixed monthly deadline.

Income tax is collected through PAYE, short for Pay As You Earn. PAYE means you deduct the right income tax from each payslip as you go, rather than the employee settling a bill at year end. The rates and reliefs behind it were rewritten by the Nigeria Tax Act 2025, the law that took effect on 1 January 2026 and now governs how salary is taxed.

Two bodies share oversight. The Federal Inland Revenue Service, or FIRS, is the federal tax authority that collects company and consumption taxes, but it does not collect employee PAYE. Each State Internal Revenue Service, the tax office of the state where the employee is resident, administers and receives the PAYE you withhold.

The pension sits inside the Contributory Pension Scheme, created by the Pension Reform Act 2014, the law that requires employers and employees to pay into a regulated retirement savings account. The employee puts in 8% of qualifying pay and the employer adds at least 10% on top. It runs through the payroll but is a retirement contribution, not a tax.

One more employee deduction often rides alongside. The National Housing Fund, or NHF, is a state scheme funding affordable housing, into which 2.5% of pay is contributed. It is compulsory in the public sector but now voluntary for private-sector staff, so confirm whether your employees opt in before you build it into the run.

Get the bands, the pension base or the timing wrong and two things break at once: the employee’s take-home pay is incorrect, and your monthly remittance to the State Internal Revenue Service no longer matches what you paid.

What Payroll Taxes Apply in Nigeria?

Three charges sit on every Nigerian salary: the employer’s pension and levies, the employee’s pension and housing contributions, and income tax collected through PAYE. They are calculated in a fixed order, and that order is what makes the gross-to-net result.

Employer Payroll Contributions in Nigeria

The employer pays a minimum 10% pension contribution into the employee’s retirement savings account under the Pension Reform Act 2014. On top of that sit two smaller statutory levies, each at 1% of payroll, which together push the headline employer burden to roughly 12%.

The first is the contribution to the Nigeria Social Insurance Trust Fund, or NSITF, the scheme that covers workplace injury and occupational disease. The second is the Industrial Training Fund, or ITF, a levy that funds national skills training and applies to larger employers. Both are employer-side costs, separate from anything you withhold from staff.

This matters for budgeting. The pension is the bulk of the loading, and it is why the total cost of a hire runs meaningfully above the headline salary, so you budget on total employer cost rather than gross.

The true cost of employing in Nigeria

Statutory employer rates; items can apply to different wage bases or carry conditions, so lines do not always sum to the total.

Nigeria has no statutory 13th-month, holiday or profit-sharing bonus.

Sources: taxsummaries.pwc.com (employer contributions), lawsofnigeria.placng.org (bonuses).

Employee Payroll Deductions in Nigeria

You withhold the employee’s 8% pension contribution from qualifying pay before income tax, and remit it to their pension fund administrator. It comes off gross pay, and you are responsible for calculating, withholding and paying it across.

Where the employee has opted into the National Housing Fund, you also deduct 2.5% of pay for the NHF. Because the NHF is now voluntary for private-sector staff, the binding minimum employee deduction is often just the 8% pension. If your provider miscalculates either, the employee is underpaid or overpaid and your PAYE remittance will not reconcile against what you sent across.

Income Tax on Salary in Nigeria

Income tax is collected through PAYE on a progressive scale under the Nigeria Tax Act 2025. The first NGN 800,000 of annual income is taxed at 0%, after which earnings climb through bands of 15%, 18%, 21% and 23%, reaching a top rate of 25% above NGN 50 million. Earners at or below the NGN 70,000 monthly minimum wage are no longer liable to PAYE at all.

The relief that does most of the work has changed. The old Consolidated Relief Allowance has been abolished and replaced by Rent Relief, which lets an employee reduce taxable income by the lower of NGN 500,000 or 20% of the annual rent they actually pay. It is granted only where the employee declares real rent, so it does not apply automatically to everyone.

Payroll Tax Example: Gross Salary to Net Pay

Here is how the charges stack up for a representative salary. The figures come from the contribution and tax rates above, calculated in the statutory order.

Simplified illustration: Pension (8%) is modelled on full gross and treated as tax-deductible, with no rent relief claimed (PAYE is computed annually then divided by 12). NHF (2.5%) excluded: voluntary for private-sector employees. Taxable income = 500,000 – 40,000 pension = 460,000/month (annual 5,520,000); PAYE on the Nigeria Tax Act 2025 bands. Employer side includes NSITF (1% of payroll) and ITF (1%, assuming the employer has 5+ employees or turnover >= NGN 50m); both remain payroll levies in 2026 and were not absorbed into the profits-based 4% Development Levy. Lower of NGN 500,000 or 20% of annual rent paid, granted only where the employee declares actual rent (replaced the abolished Consolidated Relief Allowance).

Read the two bold rows together. A worker on NGN 500,000 gross takes home NGN 394,700, while your total cost as employer is NGN 560,000.

The gap on the employee side comes mostly from pension and PAYE; the gap between gross and your cost is the employer pension loading. That is the Nigerian payroll signature: budget on the NGN 560,000, not the NGN 500,000, and remember the NHF line only applies where the employee has opted in.

What Payroll Filings Are Required in Nigeria?

Nigeria reports payroll through a monthly PAYE remittance to the state tax office, backed by an annual employer return. The monthly remittance is the centre of your compliance month, and unlike the federal company taxes, it goes to the state, not to FIRS.

What the Monthly PAYE Remittance Reports

The monthly PAYE remittance reports the income tax you withheld from every employee and pays it across to the State Internal Revenue Service of the state where each employee is resident. In one filing it tells the state what each person earned and what tax you deducted for the whole workforce.

Because it is a monthly cycle, it has to reconcile with your actual payroll run and the pension and NHF contributions you paid the same month. The state tax offices cross-check these against the annual return, and a mismatch is a common trigger for a payroll query.

When the Remittance Is Due

PAYE for a given month is due to the State Internal Revenue Service by the 10th of the following month. Tax withheld in May is remitted by 10 June, with no grace period to month end. The pension and NHF contributions follow their own deadlines, so your provider needs the run finalised with enough margin to settle all of them.

Who Files It

The legal obligation sits with the employer. In practice, your payroll provider remits PAYE on your behalf through the relevant state’s electronic system, or your in-house team files it directly if you run your own Nigerian entity.

Either way, confirm in writing who presses submit each month, and to which states. The liability for a late or wrong remittance stays with you as employer regardless of who does the keying.

What Happens If Payroll Filings Are Wrong

Late PAYE remittance draws a penalty of 10% of the tax due plus interest at the prevailing commercial rate, set against the Central Bank of Nigeria’s Monetary Policy Rate. Late pension contributions carry a penalty of at least 2% of the unpaid amount for every month the default runs, and a late NSITF assessment adds 10% of the unpaid sum. Beyond the money, a remittance that does not reconcile invites scrutiny of the whole payroll, which is why getting the bands and the pension base right the first time matters more than the headline penalty suggests.

What Are the Payroll Deadlines in Nigeria?

Most Nigerian payroll obligations land monthly, anchored to that 10th-of-the-following-month PAYE deadline. The exception is new-hire registration, which is event-driven: it has to be done before the employee starts, not at the next filing.

Late filing: [{‘scheme’: ‘Pay-As-You-Earn (PAYE) Tax’, ‘penalty’: “Penalty of 10% of the tax amount due, plus interest at the prevailing commercial rate (Central Bank of Nigeria’s Monetary Policy Rate).”}, {‘scheme’: ‘Pension (PenCom)’, ‘penalty’: ‘Penalty of not less than 2% of the total unpaid contribution for each month or part of a month the default continues.’}, {‘scheme’: ‘Employee Compensation (NSITF)’, ‘penalty’: ‘Penalty of 10% of the unpaid assessment.’}]

Payroll Operations Risk in Nigeria

Employers in Nigeria file with 4 separate agencies.

Sources: labour.gov.ng (compliance), cbn.gov.ng (payments).

What Payslip and PAYE Record Rules Apply in Nigeria?

Nigeria does not run a single live national employee register the way some countries do. Instead, your record obligation is met through the annual employer PAYE return, Form H1, which reconciles a full year of salaries, deductions and PAYE for the state tax office, and through the tax clearance certificates issued to employees off the back of it.

The payslip rule is the one not to overlook. Every employee must receive a payslip showing gross pay, each deduction and net pay, issued for every run alongside their salary.

Because the payslip, the monthly remittance and the annual return are produced from the same calculation, a provider that runs the monthly PAYE cleanly usually produces compliant payslips and a clean Form H1 automatically. When you assess a provider, confirm that payslips show pension, NHF and PAYE separately, and that the monthly remittances and the annual return are always generated from the same figures.

How Much Does Payroll Outsourcing Cost in Nigeria?

There are two separate numbers in Nigerian payroll cost, and confusing them is the most common budgeting mistake. The first is your statutory employer cost, which is mainly the 10% employer pension plus the NSITF and ITF levies.

11 of the 15 EOR providers we track publish Nigeria fees; they range from $199 to $650 per employee per month.

Published list prices in USD: EOR fees are per employee per month, contractor fees per contractor per month. Providers that publish neither fee for Nigeria are not shown.

According to Whichapp’s July 2026 analysis of EOR fees across 40 countries, providers charge $199 to $650 per employee per month in Nigeria.

11 of the 15 providers we track publish Nigeria EOR fees. The lowest published rate is $199 per employee per month and the highest is $650.

Contractor management fees in Nigeria run from $6 to $49 per contractor per month.

The second is the fee you pay a provider to run the payroll for you. They are unrelated, and only the second is negotiable.

Managed Payroll Provider Fees

Managed payroll in Nigeria is normally priced per employee per month, and most providers quote rather than publish a rate. The price turns on headcount, on whether you also need accounting or HR support, and on local complexity such as employees spread across several states, each with its own State Internal Revenue Service to remit to.

The fee buys the calculation, the monthly PAYE remittance, pension and NHF processing, the annual return and payslip production. It does not include the contributions and tax themselves, which you fund on top, so gather two or three quotes before committing.

What Payroll Provider Fees Usually Include

A standard managed payroll fee in Nigeria should cover the monthly gross-to-net calculation, withholding of pension and NHF, the PAYE computation under the Nigeria Tax Act 2025 bands, remittance to the relevant State Internal Revenue Service, the annual Form H1 return, and itemised payslips. Ask for that list in writing. If any of it sits outside the headline fee, you want to know before the first run, not after.

Extra Payroll Costs to Ask About

The gaps tend to appear at the edges of the standard cycle. Ask specifically about handling employees in multiple states, year-end tax clearance certificates, NSITF and ITF levy filings, termination and severance calculations, correction filings when something has to be restated, and onboarding setup fees for taking on your entity. These are the line items that turn a tidy per-head quote into a larger annual number.

When Payroll Outsourcing Becomes Cheaper Than EOR

The choice between running your own payroll and using an EOR is mostly about headcount and how long you plan to stay. An EOR carries a higher monthly fee per person because the provider is the legal employer and absorbs the entity, but it saves you setting one up.

Running your own payroll through a Nigerian limited company is cheaper per head once you are past a handful of employees and committed to staying, because the entity and provider fee spread across more people. In our assessment, the more people you hire and the longer the horizon, the more the economics favour your own entity with outsourced payroll.

Payroll in Nigeria vs EOR in Nigeria

The line between the two routes is simple: standard payroll assumes you are the legal employer through a Nigerian entity, while an EOR makes the provider the legal employer so you do not need one.

Use payroll outsourcing if you already have a local entity or are hiring enough people to justify one. Use an EOR if you need to hire before setting up an entity.

If that second case is you, our guide to EOR in Nigeria covers the providers, licensing and costs in full. EOR pricing and provider ranking live there, not on this page.

Best Payroll Providers for Nigeria

These providers all run payroll in Nigeria, but they are built for different situations. Below is where each one fits and the local point to check before you sign. We do not list EOR prices here; for unpriced managed payroll, treat the fee as by quote and confirm it during your shortlist calls.

4 providers in Whichapp’s independent index cover Nigeria. The top 4 by composite score:

1. Deel (9.1/10). From $599/month. Best for scale, automation and contractor volume. Runs its own Nigeria entity.
2. Papaya Global (8.2/10). From $650/month. Best for multinational payroll consolidation. Serves Nigeria through a partner.
3. Remote (8.0/10). From $599/month. Best for IP protection and owned-entity purity. Runs its own Nigeria entity.
4. Rippling (6.4/10). Best for unified IT, HR, and global finance. Runs its own Nigeria entity.

Rankings come straight from Whichapp’s provider index (coverage 30%, pricing transparency 25%, security and compliance 25%, integration depth 20%); see how we score.

Only 3 of 4 major EORs run their own Nigeria entity; 1 more serves it via a partner.

Entity model as reported on provider websites, last checked 2026-06-06. An own entity means the provider is the direct legal employer; a partner model adds a third party to the chain.

Deel for Payroll in Nigeria

Deel is a strong fit if Nigeria sits alongside other international hires you want on one platform, with a single dashboard and API across markets. Nigeria watch-out: confirm whether your Nigerian payroll runs on Deel’s own local entity or a partner bureau, and that it remits PAYE to the correct State Internal Revenue Service for each employee rather than defaulting to one state. Read our Deel review.

Remote for Payroll in Nigeria

Remote runs much of its payroll through owned entities, which gives a cleaner compliance chain than a partner-network model. That suits employers who want a direct line of accountability for the monthly PAYE remittance and pension filings.

Nigeria watch-out: confirm Nigerian payroll is on Remote’s own entity rather than a local partner, and that pension and the optional NHF deduction are handled correctly inside the platform. Read our Remote review.

Papaya Global for Payroll in Nigeria

Papaya Global is built for consolidating payroll across many countries with finance-grade reporting and audit trails, so it earns its place when Nigeria is one market in a larger stack. Its weakness is the opposite case: for a single Nigerian entity with no multi-country reporting need, the platform is heavier than the job requires.

Nigeria watch-out: Papaya leans on local partners in some markets, so confirm whether your Nigerian payroll runs on its own engine or a third-party bureau, and how directly it owns the PAYE remittance across states. Read our Papaya Global review.

Rippling for Payroll in Nigeria

Rippling appeals when you want payroll wired into the same system as HR, IT and device management, with automated journal entries. Nigeria watch-out: it is platform-first, so confirm the depth of its Nigerian statutory handling, specifically the Nigeria Tax Act 2025 PAYE bands, pension withholding and state-level remittance, against what a local specialist would offer. Read our Rippling review.

Multiplier for Payroll in Nigeria

Multiplier is the value option for multi-country payroll where price predictability matters, which fits smaller Nigerian teams. The trade-off for that price is depth: in tightly regulated areas it tends to carry less local specialist weight than a Nigeria-focused bureau.

Nigeria watch-out: confirm it computes PAYE on the current Nigeria Tax Act 2025 bands rather than the abolished relief regime, and that its gross-to-net engine models pension and the optional NHF accurately before you anchor any salary offers on it. Read our Multiplier review.

Safeguard Global for Payroll in Nigeria

Safeguard Global is a payroll-led specialist rather than an HR platform with payroll bolted on, which appeals when running the payroll correctly is the whole point and you do not need a wider people stack. That focus is also its limit: if you want integrated HR, devices and onboarding in one tool, it does less than Rippling or Deel.

Nigeria watch-out: confirm its Nigerian coverage is run in-house rather than subcontracted, and that the service includes state PAYE remittance, the annual Form H1 return and pension correspondence, not just the monthly calculation. Read our Safeguard Global review.

How to Choose a Payroll Provider in Nigeria

The questions below separate a provider that genuinely runs Nigerian payroll from one that resells a local bureau without owning the detail. Ask them before you sign, not after the first run.

Can They Remit PAYE to the Right State?

Confirm the provider remits PAYE to the State Internal Revenue Service of each employee’s state of residence, on or before the 10th, and reconciles the remittance against the actual payroll each month. Where your team is spread across states, ask how it handles multiple state offices in a single run.

Do They Compute PAYE on the Nigeria Tax Act 2025 Bands?

Check that the provider’s gross-to-net engine uses the current 0% to 25% bands and the Rent Relief, not the abolished Consolidated Relief Allowance. A provider still running last year’s reliefs will under-deduct or over-deduct tax on every payslip.

Can They Model Gross-to-Net Accurately?

A capable provider models gross-to-net both ways, including the pension base, the optional NHF and the rent relief where an employee declares rent, and helps you frame offers rather than just processing whatever number you hand over. Ask to see a sample calculation with and without the NHF deduction.

How Do They Update for Payroll Law Changes?

Nigerian rates, bands and reliefs have just changed under the Nigeria Tax Act 2025, and further guidance is likely. Ask how the provider tracks federal and state changes and how quickly updates reach your payroll runs.

Who Is Liable for Payroll Errors?

The statutory liability stays with you as employer, but the contract should set out what the provider is accountable for if a miscalculation or late remittance is their fault. Get the indemnity and correction process in writing.

Can They Support Multi-Country Reporting?

If Nigeria is one of several markets, confirm the provider can consolidate reporting across them in a single view, so your finance team is not stitching country files together by hand.

What Support Do They Offer During Terminations or Audits?

Terminations and state tax queries are where weak providers show their limits. Ask what support you get during a termination calculation or an audit, and whether a named contact handles it or you are routed through a ticket queue.

What Does Terminating an Employee Cost in Nigeria?

Severance: No statutory severance or redundancy formula; redundancy pay is set by negotiation or collective agreement. The Labour Act s.20 requires last-in-first-out and good-faith negotiation but prescribes no amount.

Statutory leave: 6 working days of paid annual leave plus 12 public holidays a year.

Sources: ilo.org (severance), lawsofnigeria.placng.org (notice periods).

Nigeria Payroll Checklist Before Hiring

• Confirm whether you need payroll or an EOR
• Check your local entity status
• Model gross-to-net salary for your offers
• Confirm employer contribution rate (employer pension + levies)
• Confirm employee deductions (Pension, NHF)
• Confirm income tax treatment
• Check who files Monthly PAYE and by when
• Confirm Annual PAYE return registration is handled
• Confirm the payslip process
• Check leave, sick pay and termination workflows
• Ask who carries liability for calculation errors
• Confirm provider pricing and any extra fees

Work through this before your first hire. The PAYE remittance at point seven is the one foreign employers miss most often, because it goes to each employee’s state tax office by the 10th rather than to a single federal body.

FAQs About Payroll in Nigeria

Methodology and Disclosure

The PAYE bands, pension and NHF rates, filing deadlines and penalty figures on this page come from Whichapp’s Nigeria statutory dataset, grounded in the Nigeria Tax Act 2025, the Pension Reform Act 2014 and State Internal Revenue Service filing rules, and refreshed as rates change. The worked example is calculated from those rates and reconciles by construction.

Provider assessments reflect our independent editorial view of payroll fit for Nigeria; we do not sell payroll, EOR or contractor services. Some provider links may carry affiliate referrals, which never affects our editorial judgement or the figures above.

Already hiring contractors instead of employees? See contractor management in Nigeria, or start from the Nigeria hiring hub for the full picture.

Primary sources

• Income tax and employee contributions: taxsummaries.pwc.com
• Employer contributions: taxsummaries.pwc.com
• Minimum wage: nsiwc.gov.ng
• Payroll filing deadlines: firs.gov.ng
• Notice periods and leave: lawsofnigeria.placng.org
• Severance rules: ilo.org