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
Yes. The duty to deduct PAYE applies to any employer paying any employee; there is no minimum headcount. Under the Nigeria Tax Act 2025 the first ₦800,000 of annual taxable income is taxed at 0% and minimum-wage earners are exempt, so a low-paid single employee may owe nothing, but the employer must still register, run the calculation and file the annual return.
Why headcount does not matter for PAYE
Section 51(6) of the Nigeria Tax Administration Act 2025 (NTAA) says income tax chargeable on an employee "shall be deducted from any emolument payable" by the employer. It does not say "employers with five staff" or any other number. One employee is enough.
Section 105 then sets a penalty for anyone who has an obligation to deduct tax and fails to: 40% of the amount not deducted. For a small employer that is a heavy cost on top of the tax itself.
When there is nothing to deduct
Two rules in the Nigeria Tax Act 2025, in force from 1 January 2026, mean many single employees owe no PAYE:
- The zero band. The first ₦800,000 of annual taxable income is taxed at 0%, as reported by BusinessDay (12 January 2026) and Mondaq (5 January 2026).
- Minimum-wage exemption. Employment income of a person earning the national minimum wage or less is exempt. The national minimum wage is ₦70,000 a month under the 2024 Amendment Act.
So a shop assistant on ₦60,000 a month owes no PAYE. The employer still records the calculation and includes the employee in the annual return.
Worked example: one employee on ₦250,000
Example only. A one-person business in Kaduna employs an assistant at ₦250,000 a month. The employer has fewer than three staff, so it is not in the Contributory Pension Scheme and no pension relief is deducted. Rent relief is ignored for simplicity.
| Step | Calculation | Amount |
|---|---|---|
| Annual pay | ₦250,000 x 12 | ₦3,000,000 |
| First ₦800,000 at 0% | ₦0 | |
| Next ₦2,200,000 at 15% | ₦2,200,000 x 15% | ₦330,000 |
| Annual tax | ₦330,000 | |
| Monthly PAYE | ₦330,000 / 12 | ₦27,500 |
If the assistant pays rent and declares it, rent relief of 20% of annual rent, capped at ₦500,000, would reduce taxable income. See rent relief and calculating PAYE step by step.
What a very small employer must still do
- Register. Section 4 of the NTAA requires every taxable person to register and obtain a Tax ID; failure costs ₦50,000 in the first month and ₦25,000 a month after (section 100). Then register as an employer with the state revenue service; see registering as an employer for PAYE.
- Deduct and remit monthly. See the monthly PAYE deadline.
- File monthly and annual returns. Section 28 requires monthly returns from anyone deducting tax; section 14 requires the annual return by 31 January.
- Give written terms. Section 7 of the Labour Act requires a written statement of terms within three months.
- Pay NSITF. 1% of total monthly payroll, for every employer.
- Keep records for at least six years (section 31 NTAA).
Pension for fewer than three staff
PenCom's FAQ says the Contributory Pension Scheme covers private organisations with three or more employees, and that people in organisations with fewer than three, and the self-employed, can join through the Micro Pension Plan. A one-employee business is not obliged to run CPS deductions but can offer it.
Household staff and family members
The same logic applies to a household that employs a driver, cook or nanny, and to a business that pays a relative a salary. If the person is an employee receiving emoluments, section 51(6) applies. In practice many household staff earn at or below the minimum wage, so the calculation produces nil tax, but writing it down protects the employer if the arrangement is ever questioned. Paying a family member a salary that is far above the work done can also draw questions from the tax authority about whether it is a real expense.
Common questions from first-time employers
Can I treat my one employee as a contractor instead?
Calling someone a contractor does not change what they are. If the person works set hours under your direction, uses your tools and is paid a monthly sum, they look like an employee and PAYE applies. Genuine independent contractors invoice for work, can work for others and decide how the work is done; payments to them may attract withholding tax instead. Our guide to contract staff versus permanent staff explains the difference.
What if I pay my employee in cash?
The tax duty is the same. Cash makes it harder to show what was paid, and section 31 of the NTAA requires records sufficient to work out tax for six years. A salary paid by transfer from a business account, with a payslip, leaves a clear trail for both sides.
Which state do I pay to?
PAYE on employees normally goes to the internal revenue service of the state where the employee is resident, which may differ from where your shop is.
Where Pryme fits
Even one salary benefits from a clean record. Paying it from a Pryme Business Account keeps the monthly payment and the PAYE remittance side by side, and the Finance agent can prepare the monthly figure for you to approve.
Questions people ask
Do I need to pay PAYE for one staff in Nigeria?
Yes, the deduction duty applies from the first employee. If the employee earns the minimum wage or less, or within the ₦800,000 zero band, the tax may be nil.
What is the penalty for not deducting PAYE?
Section 105 of the NTAA sets an administrative penalty of 40% of the tax not deducted.
Does a small business need to register for PAYE?
Yes. Obtain a Tax ID under section 4 of the NTAA and register as an employer with your state internal revenue service.
Do I need to pay pension for one employee?
The Contributory Pension Scheme covers employers with three or more staff, per PenCom. Smaller employers can use the Micro Pension Plan.
Sources
- Nigeria Tax Administration Act 2025 (Act No. 5), ss.14, 28, 31, 51, 65, 101-107 · accessed Oct 2026
- BusinessDay: Who is required to pay personal income tax in Nigeria under the 2026 reforms? (12 Jan 2026) · accessed Oct 2026
- Mondaq (Adeola Oyinlade & Co): Understanding Personal Income Tax under the Nigerian Tax Act 2025 (5 Jan 2026) · accessed Oct 2026
- PaySpace: Nigeria National Minimum Wage (Amendment) Act 2024 · 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.