25 January 2021

Overview Of Employment Laws In Nigeria – Manpower Policy & Regulations

There are various laws governing employment-related matters in Nigeria.
Nigeria Employment and HR
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There are various laws governing employment-related matters in Nigeria. Some of these employment laws include the Nigerian Labour Act, the Pensions Act, the Industrial Training Act, Employee Compensation Act, Trade Unions Act, among few others. In this write-up, we will briefly the impact of some of these laws on employment matters in Nigeria.

  • The Labour Act

The Nigerian Labour Act 1971 is the principal law that governs employment-related matters and the relationship between an employer and employee in Nigeria. The Act uses the word "workers" to describe employees and it defines workers in Section 91 of the Act as "any person who has entered into or works under a contract with an employer, whether the contract is for manual labour or clerical work or is expressed or implied or oral or written, and where it is a contract of service or a contract personally to execute any work or labour".

There are also certain categories of persons excluded from the definition of workers, and these categories of persons are governed by the terms and conditions contained in their contracts of employment. Section 91 of the Act goes further to describe these set of persons as "persons exercising administrative, executive, technical or professional functions as public officers or otherwise"

In respect of employment contracts, Section 7 of the Labour Act provides that "Not later than three months after the beginning of a worker's period of employment with an employer, the employer shall give to the worker a written statement specifying the following;

  • The name of the employer or group of employers and where appropriate of the undertaking by which the employee is employed.
  • The name of the employee, address, position to be occupied, and the date of engagement.
  • The nature of the employment.
  • If the contract is for a fixed term, the date when the contract expires.
  • The appropriate period of notice to be given by the party wishing to terminate the contract.
  • The rate of wages and method of calculation and the manner and periodicity of payment.
  • The terms and conditions relating to the hours of work, holiday pay, and conditions for incapacity to work due to sickness, injury, inclusive of provisions of sick pay.
  • Leave allowance, medical and other special allowances to be accrued.
  • Special conditions of the contract.

Another salient provision of the Labour Act is Section 11 of the Act, which provides for the termination of a contract of employment by the issuance of notice in writing. It states that either party to a contract of employment may terminate the contract on the expiration of a notice given by him to the other party of his intention to do so.

The notice to be issued shall be in this format by the provisions of the law;

  • One day, where the contract has continued for three months or less.
  • One week, where the contract has continued for more than three months but less than two years.
  • Two weeks, where the contract has continued for two years but less than five years.
  • One month, where the contract has continued for five years or more.
  • Employee Compensation Act

The Employee Compensation Act 2010 applies to all employees in the private and public sector in Nigerian. The Act imposes obligations on employers of labour in both the private and public sector of the economy throughout the Federation to deduct 1% from the monthly salary of its employees and remit it to an Employee Compensation Fund (which is the authority responsible for implementing the Act), as provided under Section 33 of the Act in event of death, injury, disease, or disability of the employee arising in course of employment. 

The Act also established the Nigerian Social Insurance Trust Fund Board (NSITF) by Section 2(2) of the Act as the Board that has the power to implement the fund established under the Act. The scheme is targeted at protecting private-sector employees and their dependents from financial difficulties in the event of diseases, injury, or death associated with the employee's employment.

The scale of compensation for an injury, disease, or death suffered in the course of employment is provided under Part IV of the Act. Section 17 of the Act provides for compensation in fatal cases as it provides that where death results from an injury of an employee, compensation shall be paid to the dependants of the deceased. The compensation paid to the employee's widow(er) or children ranges from 30% -90% of the employee's total monthly remuneration as at the date of death, although this is dependent on the circumstances of the dependants.

When accepted, the employee compensation forbids or bar the affected employee or his siblings from further instituting any legal action against the employer in respect of the same subject matter.

  • The Industrial Training Act

Another employment law in Nigeria is the Industrial Training Act Cap L9, Laws of the Federation of Nigeria 2004 which have been amended by the Industrial Training Amendment Act 2011. The Act was enacted to promote the acquisition of relevant skills in industry and commerce with the view to generate a pool of indigenous manpower to satisfy the needs of the economy as provided by Section 2 of the Act.

The Act further imposes a duty on employers to provide training for their indigenous staff to improve their job-related skills. It also provides that the Fund'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 as provided by Section 4 of the Act.

Section 6 of the Act provides that every employer having five or more employees in his establishment or having less than 5 employees but with a turnover oof N50 Million and above per annum shall in respect of each calendar year or the prescribed date contribute to the Fund 1% of his total annual payroll.

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 as provided in Section 9.

  • Pensions

Another law that regulates employment-related matters is the Pension Reform Act 2014, which repealed the Pension Reform Act No.2 2004. The Act was enacted to promote and govern the administration of the uniform contributory pension scheme for an organization in both the public and private sectors of the Nigerian economy.

Section 1 of the Act provides that the objectives of the Act include establishing a uniform set of rules, regulations, and standards for the administration and payments of retirement benefits for the public service of the Federal Capital Territory, the Public Service of the State Governments, the Public Service of the Local Government Councils and the Private sector. It also includes making provisions for the smooth operations of the Contributory Pension Scheme.

Section 2 of the Act further provides that the private sector employers with fifteen (15) or more employees must establish a Contributory Pension Scheme for the benefit of the employees, wherefrom retirement benefits would be paid to the employees.

Section 2(3) of the Act provides "that notwithstanding the prescribed mandatory minimum threshold stated, private sector employers with less than three (3) employees or self-employed persons are also entitled to voluntarily establish schemes, following guidelines issued by the National Pension Commission".

The Act in Section 4 provides that the minimum rate of contribution payable by the employer is 10% of an employer's monthly remuneration and 8% of an employee's monthly remuneration to be contributed by the employee.

The rate of contribution payable may also upon the agreement between the employer and employee be revised upwards from time to time and when such a situation arises, the Commission will be notified of the revision.

  • Trade Unions

Trade Unions in Nigeria are associations joined by workers or employees to seek the improvement of working conditions through the use of collective efforts. They also seek to provide social and economical benefits for their members.

The Trade Union Act Cap T4 LFN 2004 is another law that regulates employment-related matters in Nigeria. It defines trade union in Section 1 as "any combination of workers or employers, whether temporary or permanent, the purpose of which is to regulate the terms and conditions of employment of workers, whether the combination in question would or would not, apart from this Act, be an unlawful combination by reason of any of its purposes being in restraint of trade, and whether its purpose does or do not include the provision of benefits for its members". By the provision of this Act, every worker or employee has the right to form a trade union or join an already existing trade union.

Section 17 of the Act provides for the deductions from wages of union members, that upon the registration and recognition of any of the trade union, the employer shall;

  • Make deductions from the wages of every worker who is a member of any of the trade unions to pay contributions to the trade union so registered and also,
  • Remit such deductions to the registered office of the trade union within a reasonable period or such period as may be prescribed from time to time by the registrar.


In closing, where there is an employment-related dispute between an employer and employee, the appropriate court with the exclusive jurisdiction to determine such a matter is the National Industrial Court established under the 1999 Constitution (as amended). Apart from all the employment laws summarized above, there are still other laws and statutory regulations that govern employment in Nigeria. Some of these laws include the National Industrial Court.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

25 January 2021

Overview Of Employment Laws In Nigeria – Manpower Policy & Regulations

Nigeria Employment and HR


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