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The short answer
Under the Pension Reform Act 2014, a private employer covered by the scheme must pay at least 10% of each employee's monthly emoluments and deduct at least 8% from the employee, then remit both to the employee's RSA within seven working days of paying salaries, according to PenCom's 2023 FAQ. PwC's summary of the Act puts the mandatory threshold at 15 or more employees, while PenCom's own pages describe the scheme as covering private organisations with three or more employees, so small employers should confirm their position with PenCom.
Which private employers are covered
The Contributory Pension Scheme (CPS) was set up by the Pension Reform Act 2004 and re-enacted, with changes, by the Pension Reform Act 2014 (PRA 2014). Two readings of the coverage rule are in circulation, and an employer should know both.
- PwC's July 2014 summary of the Act says contributions are mandatory for organisations with 15 or more employees, up from 5 under the 2004 Act. It says organisations with fewer than three employees take part under PenCom guidelines and is silent on firms with 3 to 14 staff.
- PenCom's own pages, including its 2023 FAQ and its Micro Pension Framework, describe the scheme as covering private organisations with three or more employees, with businesses below three staff and the self-employed able to join through the Micro Pension Plan.
Because the regulator itself applies the three-employee wording, an employer with between 3 and 14 staff should not assume it is outside the scheme. Write to PenCom or ask a PFA for a written position before deciding not to remit. This is information, not legal advice.
What you must deduct and pay
The rates are minimums. Both are calculated on the employee's monthly emoluments, which PwC's summary describes as total emolument under the contract of employment and never less than basic salary plus housing and transport allowances.
| Item | Minimum under PRA 2014 | Who bears it |
|---|---|---|
| Employer contribution | 10% of monthly emoluments | Employer |
| Employee contribution | 8% of monthly emoluments | Deducted from pay |
| Employer pays all instead | Not less than 20% of monthly emoluments | Employer |
| Voluntary extra | Allowed if total deductions stay within one-third of emoluments (PenCom FAQ) | Employee |
Worked example
Example only. A Lagos firm pays a sales officer ₦180,000 basic, ₦60,000 housing and ₦30,000 transport a month, so the pensionable base is at least ₦270,000. The employer adds ₦27,000 (10%) and deducts ₦21,600 (8%) from the officer's pay. The PFA should receive ₦48,600 for that month. If the employer chose to bear the whole contribution, it would have to pay at least ₦54,000 (20%), with nothing deducted from the officer.
Registration, RSAs and the seven-day rule
Before the first remittance the business needs an employer code. PenCom's 2023 FAQ says the code is free and is obtained by a written request through any PFA, on company letterhead, with the certificate of incorporation or registration and evidence of a Tax Identification Number.
- Get the employer code through a PFA.
- Ask each new employee to open a Retirement Savings Account (RSA) with a PFA of their choice and give you their PIN. If an employee has not done so within six months of starting, the employer may ask a PFA to open a nominal RSA so contributions are not held back.
- Deduct the employee's share in every payroll run and add the employer's share.
- Remit both to each employee's PFA, with a schedule showing names, PINs and amounts, within seven working days of paying salaries (PenCom FAQ 2023).
- Keep remittance evidence; employees will check it against their RSA statements.
Penalties and enforcement
PenCom's 2023 FAQ says an employer that remits late pays a penalty of not less than 2%, which goes into the affected employees' RSAs, on top of the contributions owed. The FAQ also says employees can report non-remittance directly to PenCom and that the complaint is treated as confidential.
Misuse of pension money is treated far more seriously than lateness. PwC's summary of the Act lists, for misappropriation, 10 years' imprisonment, a fine of three times the amount involved, refund of the money and forfeiture. For directors it lists a ₦5 million fine, five years' imprisonment, or both. Penalty amounts can change by regulation, so check PenCom's current rules before relying on a figure.
Other duties that sit beside pension
- National Housing Fund: since the Business Facilitation Act amendment signed in 2023, private-sector staff contribute to the NHF voluntarily, according to Templars' summary. Deduct only for staff who opt in. See our NHF explainer.
- PAYE: the employee's pension contribution is a deduction in working out taxable pay under the Nigeria Tax Act 2025. See pension and PAYE relief.
- Compliance certificate: if a client or tender asks for proof that you are up to date, see the certificate guide.
What to check first
- Count every employee on payroll, not only permanent staff, and get PenCom's written view if you have between 3 and 14.
- Confirm your pensionable base includes at least basic, housing and transport.
- Diary the remittance deadline: seven working days after each salary date.
- Collect each employee's PIN and PFA name at onboarding.
- Reconcile remittance schedules to bank debits every month.
For the rates in more depth see pension contribution rates, and for how the system fits together, how the RSA system works.
Where Pryme fits
A Pryme Business Account includes payroll and a Finance agent that prepares the monthly run and the remittance schedule so the deadline is not missed; a person approves payments above the ceiling you set, and each action is recorded.
Questions people ask
Is pension compulsory for a small business in Nigeria?
PwC's summary of the PRA 2014 says it is mandatory from 15 employees, but PenCom's own pages describe coverage from three employees. If you have 3 to 14 staff, get PenCom's written view rather than assuming you are exempt.
When must an employer remit pension in Nigeria?
PenCom's 2023 FAQ says within seven working days of paying salaries, to each employee's PFA.
What is the penalty for late pension remittance?
PenCom's 2023 FAQ says a penalty of not less than 2%, credited to the affected employees' RSAs, on top of the contributions owed.
Can an employer pay the whole 18% pension?
Yes. An employer may bear the full contribution, but PwC's summary of the Act says it must then be at least 20% of monthly emoluments.
Sources
- PwC Nigeria, Tax Bites: Pension Reform Act 2014 (July 2014) · accessed Oct 2026
- PenCom, Frequently Asked Questions (2023 edition) · accessed Oct 2026
- PenCom, Framework for Micro Pension Plan (2018) · accessed Oct 2026
- Templars, Amendment of the National Housing Fund Act and contribution into the NHF (Apr 2023) · accessed Oct 2026
- Mondaq (S.P.A. Ajibade & Co.), Understanding the taxation of income of employees under the tax reform Acts (10 Nov 2025) · 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.