Nigeria, the unrivaled economic powerhouse of West Africa, is the most populous country in Africa and also boasts the continent’s largest economy. The economy is expected to be the fastest growing in Africa through at least 2050, at which time it will host the third largest population globally. While the Nigerian economy is still largely dependent on the oil sector, the economy is gradually diversifying and new incentives are attracting the attention of multinational companies (MNCs) and foreign investors.
- Key growth sectors such as manufacturing, textiles, food processing, agrotechnology, financial services, information and communications technology (ICT), retail, media and tourism continue to mature in Nigeria.
- The country offers MNCs the opportunity to tap into the region’s fast-growing consumer class. Over the last decade, Nigeria’s economy – from manufacturing to professional services – is meeting pent-up consumer demand from emerging consumers throughout West Africa.
- Nigeria is one of the largest English-speaking countries in the world. With more than half the population under the age of 30, Nigeria offers an up-and-coming, low-cost labor pool that will continue to advance in terms of skills, education and innovation.
- Several well-known multinational brands have already invested in Nigeria, including Uber, Facebook, Emergent Payments, Michelin, HSBC, UBS, Woolworth and Tiger Brands.
What is the labor landscape in Nigeria like?
Employment law in Nigeria is generally seen as employer-friendly. However, there are a myriad of federal and local employment and labor laws employers must follow when it comes to contracts, wages, hours, discrimination, terminations, layoffs and privacy. The Ministry of Labor and Productivity is the main regulatory agency for labor matters in the country.
What laws or statutes determine labor laws in the country?
Nigerian labor and employment laws are primarily based on the following documents:
- Labor Act of 2004
- Trade Union Amended Act, 2005
- Employees Compensation Act, 2010
- Factories Act, 2004
- Pensions Reform Act, 2004
- Trade Disputes Act, 2004
In addition to these federal statutes, employers should become familiar with any local labor statutes as well.
Are there any nuances in labor laws that employers should be aware of?
There are two broad categories of employees in Nigeria, as defined in the country’s main Labor Act. ‘Workers’ are ‘generally employees who perform manual labor or clerical work’ and ‘non-workers’ are employees who perform administrative, executive, technical or professional functions. The Labor Act prescribes the minimum terms of employment and applies only to workers. Non-workers are subject to the terms of their employment contracts
Are probation periods regulated in Nigeria?
There are no provisions for probationary periods under the Labor Act but such periods can be stipulated under the employment contract.
How does overtime compensation work in Nigeria?
Section 13 of the Labor Act offers stipulations for overtime. Hours in which a worker is required to work in excess of the normal hours fixed by mutual agreement, or in a collective bargaining agreement, will count as overtime. The employment contract should state the rate of overtime compensation.
In practice, senior executives are usually not entitled to overtime payments.
Are bonuses mandatory in Nigeria?
There is no statutory requirement for employers in Nigeria to pay a bonus. However, it is common practice to reward employees with contractual or discretionary bonuses.
What do employers need to know about termination?
Employers are generally entitled to terminate a contract of employment anytime without stating reason or cause, provided the appropriate notice is given or that a salary in lieu of such notice is paid. However, it is recommended the employer state the reasons for terminating an employee contract, in accordance with international standards. Termination due to business reasons (e.g. redundancy or layoffs) follow a different set of standards for workers.
What happens if a worker is terminated for business reasons?
For termination due to business reasons, a worker is entitled to the following payments:
- Agreed redundancy or severance payment
- Accrued salary until effective termination date
- Encashment of accrued, unutilized annual leave entitlement
- Unpaid incentives or bonuses (if applicable)
- Gratuity payments (if applicable)
- Reimbursement of out-of-pocket expenses incurred by employee (if applicable)
For non-workers, there is no statutory obligation for redundancy payments. Instead, this is subject to the individual contracts of employment.
Do employers need to do anything else after terminating a worker for redundancy?
In the event of a redundancy, the employer must inform the trade union representatives the reasons for and the extent of the expected redundancy. The employer will be expected to apply the principle of ‘last in, first out’ in determining the employees affected by the process and negotiate redundancy payments.
For termination due to reasons specific to an employee, the entitlement to compensation is subject to the provisions of the contract of employment. This typically includes accrued contractual payments (e.g. salary in lieu of notice if the employer chooses not to give notice), accrued salary and encashment of unutilized annual leave.
If the termination is due to misconduct, the employer must offer the employee an opportunity to defend himself or herself prior to dismissal.
When an employee is no longer employed by a company, the tax authority must be advised accordingly.
Why are some MNCs turning to the Employer of Record (EOR) model for hiring in Nigeria?
Many MNCS want to tap into the immense investment potential Nigeria offers, particularly its low-cost, rising workforce that has a great deal to offer. However, there are some challenges for doing business in Nigeria, such as labor regulations stemming from a multitude of sources rather than one centralized document. This can make it difficult for an unfamiliar HR team to follow. Furthermore, some processes – such as termination – are regulated and a single misstep can find an MNC in hot water.
By partnering with a local EOR, such as GoGlobal, an MNC can circumvent these challenges and avoid tasking their HR department with learning the labor framework of Nigeria. Moreover, they can avoid the fees and time restraints associated with setting up an in-country entity.
Sometimes, the EOR is a permanent solution while other times it serves as a bridge solution as the MNC sets up shop in Nigeria. Either way, hiring through an EOR enables companies to freely tap into the country’s promising talent pool.
How does GoGlobal’s EOR solution operate?
GoGlobal takes the reins on the end-to-end recruit and hire process.
Before the onboarding process begins, our onshore team in Nigeria will meet one-on-one with the hired worker to explain how the EOR arrangement works. This same dedicated team stays on board as the point of contact for both the client and the client-employee throughout the worker’s tenure.
We’re proud to serve our clients and our client workers. We can answer any questions that come up in payroll, taxation or benefits. We can even handle termination compliantly, if necessary.
What makes GoGlobal’s approach to international HR unique?
At GoGlobal, we’re proud to embrace a global mindset when it comes to business expansion and hiring. What makes us unique is our team of local experts on the ground in every market we operate in who are dedicated to supporting both our clients and our client workers.
Our experts in Nigeria know the nuances of the regulatory environment and will stay up to date on all legislative updates. They also know the “ins and outs” of Nigeria’s business customs and local culture, which translates to a comfortable, positive experience for clients and client-workers alike.
Our end goal is to bring agility, efficiency and peace of mind to the global hiring process. This way our clients and client-workers can focus on core business activities – while we handle the rest!
GoGlobal has a significant on-the-ground footprint in Africa, maintaining local offices across 18 countries spanning from North Africa to Sub-Saharan Africa. This extensive on-the-ground footprint empowers GoGlobal to offer exceptional assistance to clients in expanding their operations and building successful teams across Africa.