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The short answer
If you employ staff in Nigeria, PAYE is paid to the state where each employee lives on 1 January, at the Nigeria Tax Act 2025 bands. Pension is at least 18% of monthly emoluments, 10% from you and 8% from the employee, remitted within seven working days of salary. NHF is 2.5% of basic salary, and group life cover of at least three times annual emoluments is required.
Once an Australian business decides to employ people in Nigeria, rather than engage contractors, it takes on Nigerian payroll duties. They are not complicated, but they are spread across several bodies: a state internal revenue service for PAYE, PenCom and a PFA for pension, FMBN for the housing fund, and an insurer for group life cover. This guide sets them out in order. It is information, not tax advice; Nigeria's 2025 tax reforms are new and practice is still settling.
PAYE: which state, which rates
Under the Nigeria Tax Act 2025, in force from 1 January 2026, an employee is taxed by the state of their place or principal place of residence on 1 January of the tax year, or on the date they took up the job if they start mid-year, according to Streamsowers & Köhn. If the employee was on leave on 1 January, it is the place they lived just before the leave. An employee with no place of residence in any state is treated as in foreign employment and the NRS administers the tax.
The bands, as summarised by DLA Piper Africa in August 2026:
| Annual taxable income | Rate |
|---|---|
| First ₦800,000 | 0% |
| Next ₦2,200,000 | 15% |
| Next ₦9,000,000 | 18% |
| Next ₦13,000,000 | 21% |
| Next ₦25,000,000 | 23% |
| Above ₦50,000,000 | 25% |
Employees on the national minimum wage, ₦70,000 a month, are exempt. Pay set in a foreign currency is converted at the CBN official rate at the time of payment. Pension and NHF contributions are deductible, and rent relief is 20% of rent up to ₦500,000, according to a Mondaq review of the Act. DLA Piper lists penalties: ₦100,000 for the first month of failing to file and ₦50,000 for each further month, 40% for failing to deduct, and 10% plus interest for failing to remit. Check each state's remittance deadline with its internal revenue service. Our Nigeria library has the PAYE bands for 2026 worked through.
Pension under the Pension Reform Act 2014
- Who: PenCom says the contributory scheme covers private organisations with three or more employees.
- How much: at least 18% of monthly emoluments, 10% from the employer and 8% from the employee; the employer may bear all of it.
- Where: to each employee's Retirement Savings Account with the PFA the employee chooses. PenCom notes an employer may open a nominal RSA for an employee who has not chosen after six months.
- When: within seven working days of paying salary. Late remittance attracts a penalty of at least 2%, paid into the RSAs.
- Employer code: free, by written request through any PFA, with a letterhead request, certificate of incorporation or registration, and evidence of tax ID.
- Group life: PenCom requires a group life insurance policy for all employees of at least three times annual total emolument, with the certificate displayed.
Onboarding a new employee
Each new employee needs an RSA if they do not already have one. PenCom's FAQ says the employee registers with the PFA they choose, using the PFA's form, a letter of employment, a valid ID and the NIMC slip showing their NIN, and the PFA issues a PIN. Ask for the PIN and the PFA's name on day one, because remittances cannot be made without them.
National Housing Fund
LawCare Nigeria's summary of the NHF Act puts the contribution at 2.5% of basic monthly salary, paid through the Federal Mortgage Bank of Nigeria. Employers register using form NHF1 and get an employer number; employees register using NHF2. Other payroll levies, such as NSITF and ITF, are covered in our Nigeria library's guide to NHF, NSITF and ITF.
The registration problem for foreign employers
The employer code requirements assume a registered Nigerian employer with a tax ID. A company registered only in Australia does not have those, and we found no PenCom guidance on a foreign company remitting directly for staff in Nigeria. Most Australian businesses therefore employ through a Nigerian subsidiary or an employer of record; see hiring through an employer of record. If you are not sure the person should be an employee at all, read contractors or employees in Nigeria first.
Monthly checklist
- Confirm each employee's state of residence for the year.
- Compute PAYE after deducting pension and NHF and applying rent relief where claimed.
- Pay net salaries on the agreed day.
- Remit pension to each PFA within seven working days.
- Remit PAYE to each state by its deadline and NHF through FMBN.
- Keep payslips, remittance receipts and exchange records together for both Nigerian audits and the ATO.
For the cash side, including a worked example, see paying staff in Nigeria from an Australian business.
Where Pryme fits
A Pryme Business Account holds AUD and naira, and payroll pays the team in one run. The Compliance agent can prepare the monthly remittance diary and the Finance agent the payroll schedule; a person approves above a set ceiling, and every action is recorded.
Questions people ask
Which state do I pay PAYE to for a remote employee in Nigeria?
The state of the employee's place or principal place of residence on 1 January of the tax year, or when they started if they joined mid-year, under the Nigeria Tax Act 2025.
What is the employer pension contribution in Nigeria?
At least 10% of monthly emoluments, with 8% from the employee, for a minimum total of 18%, remitted within seven working days of paying salary.
Is NHF compulsory for employees in Nigeria?
The NHF Act provides for a contribution of 2.5% of basic monthly salary through FMBN, with employers and employees registering on forms NHF1 and NHF2.
Can a foreign company get a PenCom employer code?
The requirements assume a Nigerian-registered employer with a tax ID. We found no PenCom guidance on direct registration by a foreign company, so most use a Nigerian entity or employer of record.
Sources
- Mondaq (Streamsowers & Köhn): Taxation of employment income under the Nigerian tax reform Acts (11 Mar 2026) · accessed Oct 2026
- DLA Piper Africa: FAQs on payroll taxes and employer liability in Nigeria (28 Aug 2026) · accessed Oct 2026
- Mondaq (Adeola Oyinlade & Co): Understanding personal income tax under the Nigeria Tax Act 2025 (5 Jan 2026) · accessed Oct 2026
- PenCom: Frequently Asked Questions, 2023 edition · accessed Oct 2026
- PenCom: Notice on Group Life Insurance under section 4(5) PRA 2014 · accessed Oct 2026
- LawCare Nigeria: Overview of the National Housing Fund scheme (17 Oct 2024) · 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.