What an employee really costs in 2026

The bill, line by line

Most of the cost of an employee in Nigeria sits in a handful of statutory items. For employers the relevant laws cover, they are:

Item	Who pays	How much	Law
Minimum wage	Employer	At least ₦70,000 a month. Some employers are exempt, including those with fewer than 25 workers	National Minimum Wage Act, as amended in 2024
Pension	Both	Employer at least 10%, employee at least 8%, of monthly emoluments (basic pay plus housing and transport)	Pension Reform Act 2014
Group life cover	Employer	Premium for cover of at least three times the employee’s annual total emoluments	Pension Reform Act 2014, now reinforced by the Insurance Industry Reform Act 2025
Employees’ compensation	Employer	1% of payroll, paid to NSITF	Employees’ Compensation Act 2010
Training levy	Employer	1% of annual payroll, if you have five or more staff or turnover of ₦50 million or more	Industrial Training Fund Act
PAYE	Employee (the employer deducts and remits)	Progressive rates under the new tax law	Nigeria Tax Act 2025

Taken together, the employer-side items usually add about a tenth on top of gross pay, depending on how salaries are structured, plus the group life premium. That is manageable. Getting it wrong is not.

What is coming

The ₦70,000 minimum wage was agreed in July 2024, and the review cycle was cut from five years to three. The next review is due in 2027, and labour has already started. The NLC and TUC said they would open talks in July 2026, and in August 2026 the NLC named ₦500,000 as its target. Whatever the final figure, it will be higher than today’s.

A new minimum wage also moves the rest of the bill. Pension and the other percentage-based items rise with pay, and many pay scales are built up from the minimum.

Our view: the cheapest employee is a documented one

As costs rise, many small employers are tempted to keep staff off the books: cash pay, no contract, and “consultant” labels for people who work full time. It looks cheaper. It is not.

An undocumented employee can still bring a claim. When they do, the employer usually has no contract to rely on, no pay records, no proof of notice and no pension remittances. Arrears, penalties and compensation can quickly exceed what compliance would have cost. Employees also have their own reasons to want to be on the payroll now: rent relief under the new tax law, for example, runs through PAYE.

We would also like to see government make compliance easier for small employers. Pension, NSITF, the training levy and PAYE go to different bodies, with different forms and deadlines. A single payroll filing for businesses under a set size would cost little and bring far more workers into the formal system.

What to do now

• Budget for 2027 now. Model your payroll at a few possible minimum wage levels, including the knock-on effect on pension and the other percentage-based items.
• Check your cover. Confirm that group life cover is in place and paid up for every employee.
• Fix the paperwork. Every employee should have a written contract, a payslip and a pension account.
• Review your “consultants.” If someone works fixed hours, under your direction and only for you, the law may treat them as an employee whatever the contract calls them.
• Put remittances on a calendar. Each statutory payment has its own deadline. Missing them costs more than paying them.