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The short answer
Very likely yes. PenCom states that the Pension Reform Act 2014 applies to private sector organisations with three or more employees, so a business with, say, 5 or 12 staff is covered, and the 15-employee figure you may have heard is not the threshold PenCom gives. Employers with fewer than three staff, and self-employed people, may join voluntarily under section 2(3) of the Act and PenCom's micro pension framework.
Where the 15-staff idea comes from, and the threshold PenCom gives
Small business owners often hear that pensions only apply "once you have 15 staff". That is not what the pension regulator says. PenCom's page on its micro pension framework states that the Pension Reform Act 2014 applies to all employees in the public service of the Federation, the FCT, states and local governments, and to private sector organisations "in which there are three or more employees". PenCom's 2023 FAQs say the same: the contributory pension scheme covers private organisations with three or more staff.
We could not open a full text of the Act itself for this article, so we rely on the regulator's own statements. If you have been told a different number, ask the person to show you where it comes from.
| Your business | Position as PenCom describes it |
|---|---|
| 3 or more employees | Covered by the contributory pension scheme |
| 1 or 2 employees | Not compulsory; may participate under section 2(3) and PenCom guidelines |
| Self-employed, no staff | May participate, for example through micro pension |
What being covered means
PenCom's FAQs set out the core duties:
- A minimum total contribution of 18%: 10% from the employer and 8% from the employee. The employer may choose to bear the whole amount.
- Each employee needs a Retirement Savings Account (RSA) with a Pension Fund Administrator (PFA) of their choice.
- The employer gets an employer code through any PFA, by written request on letterhead with its registration certificate and evidence of a Tax ID. The FAQs say this is free.
- Contributions must be remitted within 7 working days of paying salary.
- Late remittance attracts a penalty of not less than 2%, paid into the employees' RSAs.
- An employer can open a nominal RSA for an employee who has not chosen a PFA after six months.
Employees may make extra voluntary contributions, as long as total deductions from pay stay within one third of their emoluments, according to the FAQs.
A worked example of the cost
Example only. A bakery has 6 staff, each with ₦200,000 a month of pensionable pay. Each month:
| Item | Per employee | All 6 staff |
|---|---|---|
| Employer contribution (10%) | ₦20,000 | ₦120,000 |
| Employee contribution (8%, deducted from pay) | ₦16,000 | ₦96,000 |
| Total remitted to PFAs | ₦36,000 | ₦216,000 |
The bakery's own extra cost is the ₦120,000 a month employer share, or ₦1,440,000 a year. The ₦96,000 comes out of staff pay. All ₦216,000 must reach the PFAs within 7 working days of each payday. Employee pension contributions are deductible for PAYE, which lowers each employee's tax; see our PAYE worked example.
If you have fewer than three staff
You are not required to run the scheme, but you can. PenCom's position is that employees of organisations with fewer than three employees, and self-employed persons, are entitled to participate under section 2(3) of the Act. Its FAQs point such people to micro pension, a plan designed for the self-employed and very small employers, invested through a separate fund (Fund V). A small employer can also simply help staff open their own RSAs and pay an agreed contribution into them.
Doing this voluntarily has practical benefits: it helps you keep staff, and it means the business is already set up when it hires its third person.
Common questions from small employers
Do apprentices or part-time staff count? PenCom's statements refer to employees without spelling out how part-time or apprentice roles are counted, so ask your PFA or PenCom if your headcount depends on them. What if staff refuse to contribute? The 8% employee contribution is part of the minimum set by PenCom, not an optional extra, so explain this before the first deduction. Can I pay the 18% myself? Yes; the FAQs say the employer may bear the whole contribution.
Steps to get compliant
- Count your employees. At three or more, the scheme applies.
- Request an employer code through a PFA.
- Ask each employee to open an RSA with a PFA of their choice and give you their PIN. PenCom's FAQs list an employment letter, valid ID and NIN slip among what the PFA needs.
- Set the pension base in your contracts and payroll, and deduct 8% from each employee.
- Remit employer and employee contributions together within 7 working days of each payday.
- Keep proof of each remittance; you will need it for a pension compliance certificate.
Related: pension contribution rates, how to remit and the compliance certificate. Complaints about non-remittance can go directly to PenCom, according to its FAQs. This is general information, not legal advice.
Where Pryme fits
Pryme Business Accounts include payroll, and the Finance agent can prepare each month's pension schedule alongside salaries so remittances are ready to approve on payday; nothing moves above a set ceiling without a person's approval.
Questions people ask
How many employees before pension is compulsory in Nigeria?
PenCom says the contributory pension scheme applies to private organisations with three or more employees.
Is pension compulsory for small businesses in Nigeria?
If you have three or more employees, yes, according to PenCom. With fewer than three, you may join voluntarily.
How much pension does an employer pay in Nigeria?
PenCom's FAQs set a minimum of 10% from the employer and 8% from the employee, a total of 18%.
When must pension be remitted?
Within 7 working days of paying salary, according to PenCom's FAQs. Late remittance attracts a penalty of at least 2%.
Sources
- PenCom: Framework for Micro Pension Plan (2018) · accessed Oct 2026
- PenCom: Frequently Asked Questions (2023 edition) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.