Mastering Payroll in Nigeria: A Practical Guide for HR Professionals


Payroll is one of the most critical responsibilities of any HR department. Beyond ensuring employees are paid accurately and on time, payroll also involves strict compliance with statutory deductions like PAYE, NHF, NSITF, ITF, and Pension contributions. Failure to comply can lead to penalties, employee dissatisfaction, and reputational damage for the organization.

So, how do you manage payroll effectively while keeping everything in line with Nigerian labor laws? Let’s break it down.

1. Collect and Verify Data

The first step in payroll is gathering accurate employee information: attendance, overtime, allowances, deductions, and benefits. Errors at this stage lead to bigger issues down the line, so cross-checking with line managers is essential.

2. Calculate Salaries and Deductions

Once gross salaries are determined, apply statutory deductions:

  • PAYE (Pay As You Earn): Income tax deducted from employees’ monthly salary.

  • Pension: Minimum 8% employee + 10% employer contribution.

  • NHF (National Housing Fund): 2.5% of basic salary.

  • NSITF: 1% of gross payroll for social insurance.

  • ITF (Industrial Training Fund): 1% of annual payroll for staff training (where applicable).

3. Prepare Remittance Schedules

Each statutory body has a specific remittance format. HR must prepare schedules showing employees’ names, IDs, salary details, and amounts deducted. These are then submitted to bodies like FIRS, PENCOM, NSITF, and ITF along with payment.

4. Reconcile and Report

Before closing payroll, HR should reconcile totals with finance. This ensures no discrepancies and that all deductions match what is paid out. Reports should be kept securely for audits and compliance checks.

5. Communicate with Employees

Payslips should clearly show gross pay, deductions, and net salary. Transparency builds trust and reduces complaints. If employees have concerns, HR should be prepared to explain deductions (like pension or PAYE) with clarity.

Pro Tips from DatVirtualHR

  • Always stay updated with Nigerian tax and labor law changes.

  • Use HR/payroll software to reduce manual errors.

  • Maintain both soft and hard copies of remittance receipts.

  • Never delay statutory payments — it damages compliance records.

Conclusion

Payroll isn’t just about numbers; it’s about people and compliance. When managed properly, it ensures staff are motivated and organizations remain compliant with the law.

At DatVirtualHR, we empower professionals and businesses with the tools and knowledge they need to handle payroll confidently. Whether you’re new to HR or a growing business owner, mastering payroll is a step toward organizational success.


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