Introduction 

Nigeria is Africa’s largest economy and a growing hub for tech, finance, and creative industries. For international companies looking to expand into West Africa, Nigeria offers enormous potential. But with opportunity comes the need for due diligence - especially when it comes to employment law.

Nigeria's labour laws have their roots in both colonial statutes and more recent local legislation, making the legal landscape both unique and complex. From hiring practices to terminations, non-compliance can expose employers to fines, reputational damage, and even criminal liability. For any business entering or operating in Nigeria, getting employment compliance right is not optional - it’s a strategic necessity.

Quick Tips

• Employment terms must be clearly written and delivered within 3 months of hiring.

• Termination without proper notice or payment in lieu is a breach of the Labour Act.

• All employees are entitled to at least 6 days of paid annual leave after 12 months.

• Foreign companies must register with local bodies like PENCOM and NSITF when hiring.

• Trade unions are active and protected - ensure you’re ready for collective bargaining.

Understanding the Legal Framework 

Nigeria’s employment law is primarily governed by the Labour Act (1971), which applies mainly to workers engaged in manual labour or clerical work. More senior or professional employees are governed by contract and common law. The dual structure creates a risk of misapplying rules or assuming protections where none exist.

For instance, while the Labour Act outlines minimum conditions such as hours, rest days, and leave, it does not apply automatically to all white-collar staff. This means HR teams must carefully distinguish which laws apply to which workers. A one-size-fits-all contract can quickly backfire if challenged in court.

To avoid misclassification or employment disputes, align your offer letters and contracts to the specific category of worker. Clarify terms around duties, benefits, and termination rights - and review them at least annually to reflect changes in roles or local case law.

Termination Requires Caution and Clarity 

Termination in Nigeria is a sensitive process. Employers must provide appropriate notice or payment in lieu - and wrongful termination claims are not uncommon. According to recent case law, even where a contract allows for at-will dismissal, Nigerian courts often expect employers to demonstrate fairness and procedural integrity.

I supported a multinational tech firm in Lagos that had to downsize following a restructure. We ensured all staff received proper notice and terminal benefits, communicated clearly and compassionately, and engaged with labour representatives early. The result? A difficult process, but one completed with no claims and preserved employer brand.

If you’re considering redundancies or dismissals, seek local legal guidance and follow best practice protocols. Remember - even informal exits can become formal claims.

Navigating Payroll, Tax, and Compliance Bodies 

Nigeria has a robust framework of statutory deductions and employee protections. Employers must deduct and remit Pay As You Earn (PAYE) tax, pension contributions (to PENCOM), social security (NSITF), and employee compensation (to the Nigeria Social Insurance Trust Fund).

Failure to comply can lead to fines or criminal penalties. I once worked with a client who hadn’t registered their new Lagos entity for pension contributions. We helped them rectify the error swiftly, avoiding sanctions and setting up compliant payroll systems for future hires.

Setting up in Nigeria means thinking beyond contracts - it’s about getting payroll, tax registration, and compliance reporting right from day one. Use onboarding to ensure all documents and employee data are captured correctly, and consider using local payroll providers for added peace of mind.

A Real Example: Local Expertise Saved a Global Brand 

A European client approached us after receiving a demand notice from Nigeria’s tax authority. They’d assumed their remote team didn’t trigger local obligations. But under Nigeria’s ‘significant economic presence’ rules, they were liable.

We worked with local counsel to set up proper contracts, register the entity, and align payroll systems with regulatory expectations. It was a lesson in how fast informal hiring can lead to formal consequences - and how expert advice early on can save serious cost later.

Final Thoughts 

Nigeria is a vibrant and exciting market, but its labour laws require careful navigation. What works in the UK or US won’t always translate, and assuming compliance without verification is a risk you can’t afford.

What’s next for your global people strategy? 

Book a free compliance check-in or HR audit with ThinkGlobal HR. Whether you’re entering the Nigerian market, reviewing employee classifications, or need to align your contracts with local laws, we’re here to help - with practical insight, local knowledge, and global perspective.