When you offer someone ₦500,000 a month, how you divide that number changes pension, NHF and sometimes staff perceptions of fairness. Here's how Nigerian companies usually structure pay and why.
What are the components of a Nigerian salary?
| Component | What it is | Affects |
|---|---|---|
| Basic salary | The core wage | Pension, NHF, often leave pay and gratuity |
| Housing allowance | Contribution to accommodation | Pension |
| Transport allowance | Contribution to commuting | Pension |
| Other allowances | Utility, meal, entertainment, leave, clothing, and so on | PAYE only (usually) |
| Bonuses and 13th month | Performance or annual extras | PAYE |
All components are taxable for PAYE. The structure doesn't reduce PAYE under the 2026 rules, which tax total pay after reliefs.
What split do companies commonly use?
There is no legal formula, but a common pattern is:
| Component | Share of gross |
|---|---|
| Basic | 40–50% |
| Housing | 20–30% |
| Transport | 10–15% |
| Other allowances | The remainder |
Example: ₦500,000 gross
| Component | ₦ |
|---|---|
| Basic (45%) | 225,000 |
| Housing (25%) | 125,000 |
| Transport (12%) | 60,000 |
| Other allowances (18%) | 90,000 |
| Pensionable emoluments (basic + housing + transport) | 410,000 |
| Employee pension (8%) | 32,800 |
| Employer pension (10%) | 41,000 |
Why not make basic salary as small as possible?
Some employers shrink basic and housing to cut pension costs. It's a bad idea:
- It shortchanges employees' retirement, and staff notice.
- It invites PenCom scrutiny. Artificially low pensionable pay looks like avoidance.
- Gratuity, leave pay and severance are often calculated on basic, which creates disputes later.
Choose a structure you'd be comfortable explaining to an employee, an auditor and PenCom.
What about the minimum wage?
The national minimum wage is ₦70,000 a month under the National Minimum Wage (Amendment) Act 2024. At that level, PAYE is usually ₦0 under the 2026 bands, but pension still applies if you have 3+ employees. See how to calculate PAYE.
Tips for a clean structure
- Use one structure for everyone, applied as percentages, so it's fair and easy to run.
- Put it in offer letters and contracts so gross and components are clear.
- Quote gross pay in offers, not net, because PAYE changes with the law. Use the net to gross calculator if you've agreed a take-home figure.
- Review it when the tax rules or minimum wage change.
How BizBooks handles salary structures
BizBooks currently takes each person's total monthly gross and calculates PAYE, pension and take-home from it, treating total gross as pensionable pay. If your structure has large "other" allowances, check pension figures with your accountant. See payroll.
Frequently asked questions
What percentage of salary is basic in Nigeria?
There's no legal requirement, but many companies set basic at 40–50% of gross, with housing at 20–30% and transport at 10–15%.
Is pension calculated on gross salary?
No. Under the Pension Reform Act 2014 it's calculated on monthly emoluments: basic, housing and transport allowances.
Does salary structure reduce PAYE in 2026?
Generally no. PAYE is calculated on total taxable pay after reliefs such as pension, NHF and rent relief, so splitting allowances doesn't reduce it.
What is the minimum wage in Nigeria?
₦70,000 a month under the National Minimum Wage (Amendment) Act 2024.