Employee Leave, Entitlement and Pay

Employee Pay, Leave and Entitlement Under Nigerian Laws 

Spread the love

Employee Pay, Leave and Entitlement Under Nigerian Laws 


Employee Pay is the compensation employers pay to employees for the work they do. This payment may be in form of wages or salary. Basically, incentives and bonuses are made on top of any base pay. Likewise, pay do influence individual employees; most case, pay-for-performance systems link individual and organizational performance, employees will therefore see there is important, which will surely increase their job satisfaction because they are able to fulfill-high order needs.

However, according to Wikipedia, Annual leave is paid time off work granted by employers to employees to be used for whatever the employee wishes. Employee Leave is a period of time that one must be away from one’s primary job, while maintaining the status of employee. That is, Time a particular employee is off work for a while and will still go back to work after some while.

Also, Employee entitlements is the accrued claims together with all salary, wages, annual leave, sick leave, long service, employer retirement contributions and any other benefits due to or accrued to employees after completion. This can also be said to be rules about what employee get at work, such as what hours they work and how often they have a break.

Therefore, every employer must pay their employees at the correct rate, as well as any other entitlements they are eligible for and this can depend on various industry, employee age, qualifications and work responsibilities. As at now in Nigeria, the minimum wage of Nigeria employee is #30,000 per month which was signed into law on the April, 18 2019 and was implemented on April 2, 2020, almost a year after its been signed into law.

This post will expose you to various points in Nigeria law that says something about employee pay, employee leave and employee entitlement in Nigeria.

Employee Pay, Leave and Entitlement in Nigeria

Basically, the main sources of employment law in Nigeria are:-

  • The Constitution of the Federal Republic of Nigeria 1999 (as amended)
  • Federal law enacted by the National Assembly (National legislative houses) and State laws enacted by the house of assembly of each, which related to labour environment, pension   and workplace compensation.
  • The Labour Act, Chapter L1, Laws of the Federation of Nigeria 2004

However, there are other laws that served as a backup for Employee (that is, laws guiding             employee pay, leave and entitlement). E.g. Industrial Training Fund, Chapter 19, LFN 2004         (as amended), Pension Reform Act, 2014, Employee Compension Act, 2010. etc

However, there are two form of employee in Nigeria who are defined under the Labour Act as those  “Workers” who are generally employees who perform manual labour or clerical work and employees who perform administrative, executive, technical or professional functions (referred to as “Non-workers”. This same Labour act prescribes the minimum terms and conditions of employment which is limited in its scope as it applies only to Workers.

You may also want to read The Impact of Finance Act 2020 on Business in Nigeria

Section 7 of Nigeria Labour Act requires that every employer to issue a written contract to the employee within three months of the commencement of the employment relationship. In relation to Non-workers referred to above, there is no statutory requirement for their employment contracts to be in writing.  But in general term, it is advisable that contracts be made in writing for ease of reference and clarity of the employment terms.

Employee Entitlements, Leave and Pay
Bulls Capital Limited

Labour Act also prescribes the minimum terms and conditions of employment that employers must comply with in relation to workers. It requires employer to provide transportation allowance, provide paid sick leave which must be up to 12 days, annual leave of not less than six days and maternity leave to female workers.

Buttressing the leave given to female workers for maternity purposes; the Labour Act provides that a female worker who has been in employment for a period of six months or more immediately before the maternity leave shall be entitled to at least 50% of her salary during the duration of the maternity leave. This same act also provides that any employee nursing child is to be allowed half an hour, twice a day, during working hours for the purpose of nursing her child.

Whereas, generally Men (fathers) are  not given any leave if their wife give birth, although Lagos states offer paternity leave to male employers in the service of the state governments for jut two weeks, which only applies in relation to their first two children.

Largely, Nigeria employers are entitled to terminate a contract of employment at any time and without stating the reason or cause for doing so, in as much the appropriate notice of termination is given to the employee or the employee is paid a salary in lieu of such notice. Although, employee must state the reason(s) for terminating an employee’s contract.

Where an employee is dismissed because of issue relating to individual employee, the employee’s entitlement to compensation is subject to the provisions of his/her contract of employment. Usually, an employee is entitled to receive any accrued contractual payments such as salary in lieu of contractual notice, accrued salaries until the effective termination date such other payments that may be due to the employee, under the terms of his/her employment contract.

Labour Act says the employee is entitled to take the amount of leave accumulated on consecutive days. The Act also states that an employer must grant annual leave not later than six months after the end of annual leave cycle.

The Employee’s Compensation Act provides comprehensive compensation to employees who suffer occupational diseases or sustain injuries which arose from accidents at workplace or in the course of employment. Payment of compensation by the employer to the employee is rooted in the accepted principle that the employer has a duty of care, a duty to protect the health, welfare and safety of workers at work. Where the worker sustains injuries, gets ill or dies in work-related circumstances, the employer is liable to pay compensation to the worker or to his dependents, in the event of death. The foregoing forms the underlying philosophy behind the enactment of the Employee’s Compensation Act, 2010 (hereinafter called “the Act”).

Likewise, employer-worker relationship exists, whether express or implied, and if it is express, whether oral or in writing, the employer owes certain duties to the employee. These duties may be expressly provided for in the terms of the contract of employment or implied into the terms, even though not expressly stated.

The Constitution of the Federal Republic of Nigeria, 1999 ( as amended), It provides, inter alia, that the state shall direct its policy towards ensuring that conditions of work are just and humane, there are adequate medical and health facilities, and that the health, safety and welfare of all persons are safeguarded.

Employee Compensation Act 2010 represents a major step in the right direction in respect of labour rights and protection in Nigeria. According to Section 1 (a) of the act, it set out to provide a system of ‘guaranted’ compensation ‘for all employees or their dependents for any death, injury, disease or disability arising out of or in the course of employment.

Section 7 (1) of same act further states that any employee whether in workplace or not, who suffers any disabling injury arising out of or in the course of employment, shall be entitled to payment of compensation in accordance with Part IV of this Act.”

Most employers have clear procedures in place that help determine whether an employee receives workers’ compensation and for how long they will receive it. Naturally, this procedure includes regular visits to a doctor selected by the employer or by the company that provides the employer’s workers’ compensation insurance. The physician will assess the extent of the employee’s injuries, assign a percentage to his or her disability, and assess whether he/she can return to work. The physician may also issue a statement about when the injuries likely occurred. If the employee have injuries that could not have been caused by the type of accident alleged in his or her accident report, for example, the company may deny his or her claim. The company may also deny employee’s claim for any injury that they caused deliberately.

Employee Compensation Act also creates employer’s collective liability, such that all employers, in both private and public sectors of the economy, collectively share responsibility for funding the cost of worker’s compensation, insurance and paying compensation claims.  The act also establishes that, a state managed compensation fund under which the state manages the employer’s funded contribution, unlike the repealed Act under which employers were required to individually insure employees with insurance companies of their choice. Note that, the establishment of the State managed Compensation Fund constitutes one of the most important positive innovations brought into the recent Employee compensation Act.

Similarly, The Employee Compensation Act directs employer to contribute 1% of their total emoluments costs to the Nigeria Social Insurance Trust Fund (NSITF); this contribution is set aside as insurance for whatsoever  incident employees recorded during the course of work. Also note that, the fact that ECA was set up, doesn’t mean that workmen’s compensation is no longer required.

Furthermore, Nigeria Social Insurance Trust Fund applies to every employer and employee in the public and private sectors. Employers will, therefore, contribute 1% of employees’ monthly payroll to the NSITF in the first two years of commencement of the Act. (Payroll means remuneration defined in the Act, excluding pension contributions, bonuses, overtime payments, and one-off payments such as 13th-month income). Afterward, NSITF Board will perform a risk assessment to classify contributions on workers’ exposure and estimate the appropriate payments. This contribution is not a deduction from an employee’s monthly salary. Rather, it is a statutory payroll contribution by an employer.

Non-payment of contribution fascinates a penalty of 10% of the unpaid assessment or the value of the security required. Any employer who fails to provide the necessary payroll information to the Board may be liable to pay the best of judgment assessment levied by the Board, including a penalty. Also, an employer or the responsible officer may be liable to imprisonment, a fine or both.

Also note that, there is another scheme called National Health Insurance Scheme Act LFN (2004), the scheme benefits employee by the way of protecting families of an employee from the financial hardship of huge medical bills and to limit the rise in the cost of health care services. To ensure equitable distribution of health care costs among different income groups. To maintain high standards of health care delivery services within the Scheme. Basically, what the scheme covers are: Maternity care, preventive care, hospital care, prosthetics, outpatient care, consultations with medical specialists and Dental care and eye care of employees of Government parastatals or any other private organizations that registered with them.

Under Industrial training fund Act (Liability to contribute to the Fund), No. 37 1974, where it was stated every employer having twenty-five or more employees in his establishment, shall in respect of each calendar year and or the prescribed date, contribute to the Fund one per centum of the amount of his annual pay roll. In this section, “employees” means all persons whether or not they are Nigerian, employed in any establishment in return for a salary, wages or other consideration, and whether employed full-time or part-time, and includes temporary employees who work for periods of not less than three months in a year.

Whereas, in relation to refund, The Council may make a refund of up to fifty percent of the amount paid by an employer if the Council is satisfied that the training programme of the employer is adequate and the Council shall notify the Federal Board of Inland Revenue of any refund made pursuant to this Act. All employers are duly charged by Industrial Training Fund Act to train their indigenous staff and all employers who pay their annual training levies shall at all times, provide adequate training for indigenous staff with a view to improving on the skills related to their job and evidence of such training shall be forward to the fund.

The Industrial Training ITF Act, Cap I9, LFN 2004, as amended by the Industrial Training ITF Amendment Act, 2011 (the “ITF Act”) establishes the Industrial Training Fund (the “ITF”). The purpose of the ITF is to promote the acquisition of relevant skills in industry or commerce with a view to generating a pool of indigenous manpower to satisfy the needs of the economy. Every employer that is liable under the ITF Act must contribute one (1) percent of the amount of its annual payroll to the ITF. Employers that are liable to make contributions under the ITF are:

  • Employers having five (5) or more employees in their establishment
  • Employers who have less than five (5) employees but having a turnover of fifty million Naira (N50,000,000) and above per annum
  • Suppliers, contractors or consultants who bid for contracts from any federal government agency or parastatals or private companies
  • Companies operating in the free trade zone which seek expatriate quota approval(s) or make use of any custom services.

The ITF also mandated that, in each calendar year employer should have remit their contributions to their cover not later the 1st day of April of each such year.

In the determination of the contributions to be made to the ITF, all employees including those who work part time and temporary employees are included in the assessment. Further, all the allowances and entitlements paid to such employees within or outside Nigeria are calculated when considering the total payroll of an employer.

The ITF Act further imposes a duty on employers to provide training for their indigenous staff with a view to improving their job related skills. Furthermore, the ITF Act provides that the ITF’s Council may make a refund of up to 50% of the amount paid by an employer where it is satisfied that its training program is adequate.

Failure to make contributions within the stipulated period in a calendar year attracts a penalty of five per cent (5%) of the amount unpaid for each month or part of a month after the date on which payments should have been made.

Employee Entitlement in relation to Pension Reform Act (2014) which can be channeled to the retirement benefits, which states a holder of a retirement savings account shall, upon retirement or attaining the age of 50 years, whichever is later, utilize the amount credited to his retirement saving accounts for the following benefits. Withdrawal of a lump sum from the total amount credit to his retirement savings account provided that the amount left after the lump sum withdrawal shall be sufficient to procure a programmed fund withdrawals or annuity for life. Section 7 (1).

Every employee in Nigeria must know their right in relation to Pension Reform Act; they must know what they are going to contribute and what their employer must contribute as well. Basically, Employee have to contribute 8 % of their monthly pay and their employer will contribute 10% and the total will be remitted to a Pension Fund Custodian known to the employee. Likewise for those in state employment, there is a particular amount that the government will also contribute to the fund on their behalf. Generally, this contributions (funds) are referred to as Retirement savings Funds. This Act also requires employers that has 3 staff or more to register with the scheme so as to contribute their own quota to the funds on behalf of their staff.

Meanwhile, the due date set-out under direct payment arrangements for the payment of contributions to the pension scheme is 22nd day (or 19th day if the payment is by cheque) of the month following deduction. By this day of the month, employer contributions must have be paid.

 Also, where an employee voluntarily retires, disengaged or is been disengaged form employment, as provided under section 16 (2) and (5) of this Act, the employee may with the approval of the Commission, withdraw an amount of money not exceeding 25 percent of the total amount credited to his retirement savings account, and such withdrawals shall only be made after four months of such retirement or cessation of employment and the employee does not secure another employment. Likewise, where an employee dies, his entitlements under the life insurance policy maintained under section 4(5) of this Act shall be paid by an underwriter to the named beneficiary in line with section 57 of the Insurance Act.

However, in Part IV of Pension Funds Act, it was stated that employer shall deduct at source the monthly contribution of the employee, and this should not be later than 7 working days from the day the employee is paid his salary, remit and amount comprising the employee’s contribution.

Another Act that safeguarded the entitlements of employees is Trade Union and their activities are govern by Trade Unions Act, LFN 2005 as amended. This union has the rights to negotiate the terms  and conditions of employment on behalf of employees who are members of the trade union and also embark on industrial strike action if their employer fails to do what is expected of them and finally the union also engage in peaceful protesting when the rights of employees are been trampled upon.

Conclusion and Summary

The Nigeria Labour Act only covers employees involved under a contract of manual labour or clerical work in private and public sector. All employees must have a written contract. The Labour Act posits that an employer must give an employee a written contract within 3 months of the commencement of the employment.

More so,  the Industrial Training Fund Act (as amended) requires all employers to pay their annual training contributions, which is one percent of their annual payroll, with the objective of ensuring that at all times, employers provide adequate training to their indigenous employees which training will improve on the employee’s.

In relation to Employee leave (Annual) which means that there is an application and approval requirement for annual leave to be granted. It is must be done by the worker’s supervisor after operational needs must have been taken into cognizance. The fact that an employee attends twelve months of continuous does not automatically mean that he or she would take the annual leave automatically. It is must be properly scheduled in such a way that the company’s operations does not suffers. And this does not also means that it should be denied or prolonged unnecessarily. It is must be planned and adequately structured by HR and the staff involved.

Finally (in relation to employee leave and pay), employee is entitled to annual leave of at least six working days with full salary. However, it is unlawful for an employer to pay basic wage in compensation of un-availed annual leaves except in case of termination of the employment contract.

Likewise, employee may challenge their dismissal by instituting an action against their employer. If an employee is treated as having been dismissed where his/her contract of employment is terminated for cause. This can also be linked/traced to Section 5 (4) of the Labour Act; where it was stated employer are prohibited from terminating the contract of any female worker who is absent due to maternity leave, or who remains absent from her work for a longer period as a result of illness which arose out of her pregnancy or confinement and which renders her unfit for work.

Meanwhile, you need to also know that, Rest hours, sick leave and holidays are part of employee entitlements. Moreover, if a worker is at work for more than 6 hours a day, he/she must be given at least 1 hour of rest-interval in that day. Further, in every period of 7 days, a worker is entitled to at least 1 day of rest which must not be less than 24 consecutive hours.

About the Writer

Olusipe Abiodun Yinka is an Audit Associate in Bulls Capital Limited. He has a National Diploma in Accounting from Abraham Adesanya Polytechnic as well as a Degree in Accounting from Alex Ekwueme Federal University, Ebonyi State. He is a creative copywriter and a Trendsetter. Apart from writing, Olusipe is also an entertainer.

In case you need our service in relation to this post, please call 08023200801, 08075765799, email: sales@bullscapitalltd.com. Alternatively, you may complete our request for proposal form hereunder.