AI agents for business finance: what they can and can't do
What AI agents can do in bookkeeping, close, collections and compliance today, where a person must stay in charge, and how to judge a product.
The short answer
In most outsourcing arrangements the contractor that hires and pays the guard, cleaner or driver is the employer, and it owes their wages, pension and statutory deductions. Nigerian courts have, however, treated the client company as a co-employer where it controlled the worker, so the contract and day-to-day practice both matter. Anyone recruiting workers for others needs a permit or licence under the Labour Act.
The basic structure
Outsourcing in Nigeria usually means three parties: your business (the client), a service company (the contractor or labour provider) and the worker. You pay the contractor a monthly fee; the contractor recruits, pays and manages the staff. On paper, the worker's contract of employment is with the contractor, and you have a service agreement with the contractor.
That split decides who carries the employer duties: written terms under section 7 of the Labour Act, payment of wages, PAYE, pension and the NSITF 1% contribution. If the contractor is the employer, those duties are its own, not yours.
Licensed recruiters: what the Labour Act says
Section 23 of the Labour Act says no person shall recruit any citizen for employment as a worker in Nigeria or elsewhere except under an employer's permit or a recruiter's licence. Section 25 lets the Minister licence "fit and proper persons" to recruit, and section 27 requires every recruiter to keep records in the prescribed form. A labour provider that only supplies staff to clients is acting as a recruiter, so ask for evidence of its licence from the Federal Ministry of Labour before you sign.
Private security firms raise a further point: guarding is a regulated activity with its own licensing, separate from the Labour Act. Ask a security contractor for its operating licence as well as its labour documents, and check it with the issuing body.
When the client can become the employer
Courts look beyond labels. A Legal 500 article by SimmonsCooper Partners (14 January 2025) reports two decisions that point in different directions:
- Wambai v. Bourbon-Interoil (Nigeria) Ltd (National Industrial Court, Owerri, 31 January 2019): the court held the end-user company to be a co-employer even though the crew management agreements named the contractor as employer.
- Luck Guard Ltd v. Adariku (Court of Appeal, CA/A/1061/2020): the National Industrial Court had held the end-user and the service providers jointly responsible, but the Court of Appeal reversed, finding no direct employment or contractual relationship between the workers and the end-user, and giving weight to the absence of written contracts.
The same article notes that section 91 of the Labour Act recognises oral as well as written contracts and the conduct of the parties. In practice, the more you hire, discipline, set pay for or directly instruct the outsourced worker, the stronger the argument that you are an employer too.
Who pays if wages are not paid
The worker's first claim is against the contractor that employs them. The risk for you is practical as much as legal: unpaid guards leave posts, and a court applying the co-employer reasoning above could look to you. Build protection into the service agreement.
What to check first
- The contractor's CAC registration, Tax ID and recruiter licence or permit.
- Its NSITF certificate of compliance and PenCom compliance certificate.
- Written contracts between the contractor and each worker; ask to see a sample.
- A clause requiring monthly evidence that wages, PAYE and pension for staff on your site were paid.
- A right to pay workers directly and deduct it from the contractor's fee if wages are late.
- Who supervises the staff day to day; keep instructions going through the contractor.
Worked example: is the fee enough to pay the guard?
Example only. A contractor quotes ₦130,000 a month per guard. The national minimum wage is ₦70,000 under the National Minimum Wage (Amendment) Act 2024. If the contractor pays the guard ₦80,000 gross, employer pension of 10% (₦8,000, PenCom's minimum employer share) and NSITF at 1% (₦800) bring direct staff cost to ₦88,800, leaving ₦41,200 for uniforms, supervision, insurance, overheads and margin. A quote close to the wage itself is a warning sign that something, often pension, is being skipped.
Drivers and domestic staff: a different picture
A company that hires a driver through an agency usually follows the outsourcing model above. A household that pays a driver, cleaner or nanny directly, even if an agent made the introduction, is normally the employer, because the worker is paid by and takes instructions from the household. The agent's fee is a recruitment charge, not a transfer of employer duties.
For a business, the mixed arrangement is the riskiest one: the contractor issues the contract, but your managers hire, fire and set shifts, and the worker's pay passes through you. That pattern resembles the facts in which a court found an end-user to be a co-employer. Decide which model you are using and run it consistently.
Questions to ask before signing
- Who issues the worker's letter of appointment and payslip?
- Who can remove a worker from your site, and how?
- What happens to the workers, and to any arrears owed to them, if you end the service contract?
Where Pryme fits
If you pay contractors from a Pryme Business Account, the Compliance agent can keep a checklist of each contractor's certificates and their expiry dates for your review; see Compliance agent. For hiring staff directly instead, read hiring your first employee and employer of record vs contractors.
Questions people ask
Who pays pension for outsourced staff in Nigeria?
The contractor that employs and pays them. Ask for its PenCom compliance certificate and monthly evidence of remittance for staff on your site.
Can outsourced workers sue the company they work for?
They can try. The National Industrial Court has treated an end-user company as a co-employer, though the Court of Appeal reversed a similar finding where there was no direct relationship.
Do labour outsourcing companies need a licence in Nigeria?
Section 23 of the Labour Act bars recruiting workers without an employer's permit or a recruiter's licence granted by the Minister under section 25. Security firms also need their own operating licence.
Is my company liable if a cleaning contractor does not pay staff?
The contractor is the first party liable, but control over the workers can expose you. Protect yourself with payment-evidence and direct-payment clauses in the contract.
Sources
- Labour Act, Cap L1 LFN 2004 (PLAC Laws of Nigeria) · accessed Oct 2026
- Legal 500 (SimmonsCooper Partners): Hired, Fired, and Outsourced: Nigeria's Employment Maze (14 Jan 2025) · accessed Oct 2026
- PaySpace: Nigeria National Minimum Wage (Amendment) Act 2024 · accessed Oct 2026
- PenCom: Frequently Asked Questions (2023 edition) · accessed Oct 2026
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