Payroll in Nigeria: the complete guide for employers

Payroll is where HR promises become money. Get it right and nobody notices. Get it wrong and you have unhappy staff, penalties from tax and pension authorities, and records that do not add up at year end. This guide covers payroll in Nigeria from first set-up to annual returns, and links to a detailed guide for each part.

Before the first payroll

Set these up once, before you pay anyone:

1. A salary structure. Decide how gross pay splits into basic, housing, transport and other allowances. The split affects pension and NHF, which are calculated on parts of pay. See how to build a salary structure.
2. PAYE registration. Register as an employer with the internal revenue service of the state where your staff live, so you can remit PAYE and file returns. Lagos employers deal with LIRS; see our Lagos PAYE guide.
3. Pension. Employers with 15 or more employees must operate the contributory pension scheme. Each employee chooses a Pension Fund Administrator and has a Retirement Savings Account PIN. See pension contributions.
4. NSITF. Register for the Employees’ Compensation Scheme and pay 1% of monthly payroll. See NSITF registration and payment.
5. NHF and ITF. Set up NHF remittance for contributing employees, and register with the ITF if you have five or more employees or turnover of ₦50 million or more. See NHF and ITF.
6. Employee records. For each person: contract, bank details, TIN, PFA and RSA PIN, NHF number where they have one, and next of kin. Our onboarding checklist lists them.

The numbers payroll runs on

Statutory rates and limits for Nigerian payroll in 2026

Employee pension

8 %

Of basic, housing and transport, deducted from pay

Employer pension

10 %

Of the same emoluments, paid on top

NHF

25 %

Of basic salary, deducted from pay

NSITF

1 %

Of total monthly payroll, paid by the employer

ITF

1 %

Of annual payroll, for employers over the threshold

PAYE 0% band

800000 ₦ a year

The first slice of taxable income

Minimum wage

70000 ₦ a month

Pay at or below this is exempt from PAYE

Source: Nigeria Tax Act 2025; Pension Reform Act 2014; NHF Act; Employees' Compensation Act 2010; ITF (Amendment) Act 2011; National Minimum Wage (Amendment) Act 2024.

The monthly cycle

Running payroll in Nigeria each month

1Collect changes2Calculate gross pay3Work out deductions4Check and approve5Pay, remit and file

Step 1 of 5

Collect changes

New hires, leavers, pay changes, overtime, unpaid leave and loans

1. Collect changes

Close inputs a few days before pay day: starters and leavers, promotions, overtime approved by managers, unpaid leave, new loans and the end of old ones. Late changes are the main cause of payroll errors.

2. Calculate gross pay

Apply the salary structure, then pro-rate for anyone who joined, left or took unpaid leave during the month. Add overtime and one-off payments on separate lines.

3. Work out deductions

Deduct PAYE under the 2026 rules, the employee’s pension contribution, NHF for contributing staff, and any deduction the employee has agreed to in writing, such as a staff loan.

Under section 5(7) of the Labour Act, total deductions in any month cannot exceed one third of that month’s wages.

4. Check and approve

Compare the payroll with last month. Every large change should have a reason: a new hire, a pay rise, a bonus. A second person should approve before money moves.

5. Pay, remit and file

Pay net salaries on the agreed date, then remit each deduction by its deadline.

Where the pay period is longer than a month, wages must be paid “at intervals not exceeding one month.”

Labour Act, section 15

Monthly deadlines

The timeline assumes salaries are paid on the 25th. If you pay on a different date, the pension deadline moves with it, because it runs from the day salaries are paid.

A payroll month, if salaries are paid on the 25th

Deadlines from the Nigeria Tax Administration Act 2025, Pension Reform Act 2014, NHF Act and Employees' Compensation Act 2010.

151015202530

1. Day 1

   Pension for last month

   Due within 7 days of paying last month’s salaries on the 25th

2. Day 10

   PAYE for last month

   Remit to each employee’s state tax authority

3. Day 25

   Pay day, and NHF for last month

   NHF is due within one month of the deduction

4. Day 30

   NSITF for this month

   1% of the month’s total payroll, by the last day of the month

Late payment is expensive. Late pension remittance attracts a penalty of at least 2% of the amount due for each month it is late, and an employer that fails to deduct or remit PAYE pays the tax, a 10% penalty and interest.

The annual calendar

Deadline	What	Who receives it
31 January	Employer annual return of each employee’s pay and PAYE for the previous year	State internal revenue service
28 February	Statement of actual and projected payroll for the Employees’ Compensation Scheme	NSITF
31 March	Annual returns by individuals who file their own	State internal revenue service
1 April	ITF levy of 1% of the previous year’s payroll	Industrial Training Fund

Our statutory deductions guide explains each one, with the rates and penalties side by side.

Records to keep

Keep these for every pay period, and keep them safe, because they hold personal data protected by the Nigeria Data Protection Act 2023:

• The payroll register: every employee, every earning and every deduction.
• Payslips issued.
• Proof of each remittance: PAYE receipts, pension schedules and payment confirmations, NHF and NSITF receipts.
• Approvals for pay changes, overtime and one-off payments.
• Employee declarations, such as rent for rent relief, and written consent for loan deductions.

Common payroll mistakes in Nigeria

• Old tax logic. Spreadsheets carried over from 2025 still applying CRA or the old bands. See what changed in 2026.
• Pension on the wrong base. Pension is calculated on basic, housing and transport. A consolidated salary line makes the base unclear.
• Paying PAYE to the wrong state. PAYE goes to the state where the employee lives, not where the office is.
• Missing the pension window. Seven days from pay day is short. Prepare schedules before pay day.
• No second check. One person preparing and approving payroll is the easiest route to errors and fraud.
• Undocumented deductions. Loan and cooperative deductions without written consent invite disputes.

Tools that help

You can run payroll for a small team in a spreadsheet, as long as the formulas are right and someone checks them. The free payroll template applies the 2026 rules for up to 50 staff, the PAYE calculator checks individual salaries, and the payslip generator produces a payslip for one employee. As headcount grows, payroll software saves time and reduces risk; our payroll software buyer’s guide explains how to choose.