Hiring your first employees is a milestone, and the start of monthly obligations to four or five different bodies. This guide lists what a Nigerian company must set up, what to deduct, what the company pays on top, and a routine that keeps you compliant.
What must I register for before running payroll?
- State Internal Revenue Service (SIRS): register as an employer for PAYE in the state where your employees live (Lagos IRS, FCT IRS and so on). You'll need your company TIN.
- Pension: under the Pension Reform Act 2014, employers with 3 or more employees must operate the contributory pension scheme. Each employee chooses a Pension Fund Administrator (PFA) and has a Retirement Savings Account (RSA) PIN.
- NSITF (Employee Compensation Scheme): register and contribute 1% of monthly payroll.
- ITF (Industrial Training Fund): employers with 5 or more employees (or ₦50m+ turnover) contribute 1% of annual payroll.
- NHF (National Housing Fund): employees who register contribute 2.5% of basic salary, deducted by the employer.
What do I deduct from each employee's pay?
| Deduction | Rate | Goes to |
|---|---|---|
| PAYE | Per the 2026 bands (first ₦800,000 a year tax-free) | State IRS where the employee lives |
| Employee pension | 8% of basic + housing + transport | Employee's PFA |
| NHF (if registered) | 2.5% of basic | Federal Mortgage Bank of Nigeria |
See how to calculate PAYE for worked examples.
What does the company pay on top of salaries?
| Employer cost | Rate |
|---|---|
| Employer pension | 10% of basic + housing + transport |
| NSITF | 1% of monthly payroll |
| ITF | 1% of annual payroll (5+ staff or ₦50m+ turnover) |
Example: An employee on ₦400,000 gross costs a company with 5+ staff about ₦448,000 a month: ₦400,000 pay + ₦40,000 employer pension + ₦4,000 NSITF + ₦4,000 ITF. Try the cost of an employee calculator or the net to gross salary calculator.
What's the monthly payroll routine?
- Before pay day: collect changes (new hires, exits, raises, unpaid leave).
- Calculate gross pay, PAYE, pension and NHF for each person.
- Pay net salaries from the company account, usually by bulk transfer.
- Issue payslips. Each one shows gross pay, every deduction and net pay.
- Remit pension to each PFA within 7 working days of paying salaries.
- Remit PAYE to the State IRS by the 10th of the next month.
- Record the cost in your books: salaries, employer pension and statutory contributions.
- Keep records. At year end you'll file the employer's annual return (Form H1) by 31 January.
What should be on a payslip?
At minimum: company name, employee name and ID, pay period, gross pay broken down by component, each deduction (PAYE, pension, NHF, others), net pay and the pay date. Showing the employer's pension contribution too helps staff see their full package.
Employees or contractors?
Freelancers and contractors are generally not on PAYE. You deduct withholding tax (usually 5% for professional services) instead. Treating someone who works like an employee as a contractor can create back-tax and pension liabilities. See employee or contractor?
How BizBooks runs payroll
Add each person once, as staff or contractor. Every month BizBooks calculates PAYE (2026 bands), pension, NHF and contractor WHT, creates payslips and a bank bulk-transfer file, records the cost in your books when you mark the run as paid, and puts PAYE, pension and WHT on your tax calendar. Salaries are paid from your bank. See payroll.
Frequently asked questions
Is pension compulsory for small companies in Nigeria?
It's compulsory for employers with 3 or more employees under the Pension Reform Act 2014: 8% from the employee and 10% from the employer.
When is PAYE remitted?
By the 10th of the month following the salary payment, to the State Internal Revenue Service where each employee lives.
What is NSITF and how much is it?
The Nigeria Social Insurance Trust Fund runs the Employee Compensation Scheme. Employers contribute 1% of monthly payroll.
Who pays ITF?
Employers with 5 or more employees, or turnover of ₦50 million or more, contribute 1% of annual payroll to the Industrial Training Fund.
Is NHF compulsory?
NHF is 2.5% of basic salary for employees registered with the scheme. Employers deduct and remit it for registered staff.