Salary Calculator
Nigeria

A salary calculator for Nigeria works by determining the net salary after deducting applicable taxes and statutory contributions from the gross salary. It considers personal income tax, pension contributions, and other deductions required by law. Employers can use this tool to estimate total salary costs, including both employee deductions and employer contributions, ensuring compliance with payroll obligations. By entering the gross salary amount, businesses can calculate the actual take-home pay and adjust salary structures accordingly.

The cost of salary in Nigeria consists of several components that employers must account for. Gross salary includes the base salary, allowances, and bonuses. Employers and employees contribute to the Pension Scheme, with a combined contribution of 18% of the gross salary, split between the employer (10%) and the employee (8%). 

Additionally, businesses must deduct Personal Income Tax, which follows a progressive tax structure, and remit it to the Federal Inland Revenue Service (FIRS). Certain industries may have additional levies or deductions, such as the National Housing Fund (NHF) contributions or the Industrial Training Fund (ITF) levy. Businesses must consider these elements when calculating salary expenses to ensure compliance with Nigerian labour laws.

Nigeria operates a progressive Personal Income Tax (PIT) system, where the tax rate increases with income. Employers are responsible for deducting and remitting this tax on behalf of employees. Taxable income includes salary, bonuses, and allowances, minus non-taxable deductions such as pension contributions and the consolidated relief allowance. The tax brackets are structured as follows: the first NGN 300,000 is taxed at 7%, the next NGN 300,000 at 11%, the next NGN 500,000 at 15%, the next NGN 500,000 at 19%, the next NGN 1.6 million at 21%, and any amount above NGN 3.2 million is taxed at 24%.

In addition to personal income tax, employers must contribute 1% of their total payroll to the Industrial Training Fund (ITF) if they have more than five employees. Employers with over 15 employees must also contribute to the Employee Compensation Scheme (ECS), which provides compensation for work-related injuries. The National Housing Fund (NHF) requires employees earning at least NGN 3,000 per month to contribute 2.5% of their basic salary, which goes toward affordable housing schemes. These mandatory deductions impact the total salary cost and must be considered when structuring payroll.

Employees in Nigeria benefit from mandatory contributions to the Pension Scheme, which ensures financial security after retirement. The scheme is funded by both employer and employee contributions, and participation is compulsory for businesses with at least three employees. In addition, the Employee Compensation Scheme (ECS) provides coverage for work-related injuries, disability, or death.

Employers may offer additional benefits such as private health insurance, transport allowances, housing allowances, and performance-based bonuses to attract and retain skilled workers. Paid leave entitlements include annual, maternity, paternity, and sick leave, all of which must be factored into employment costs. Businesses that provide these additional benefits may see improved employee retention and job satisfaction.

Beyond taxes and mandatory contributions, businesses in Nigeria must consider other employment-related costs. These may include severance pay, redundancy payments, and costs associated with workplace safety compliance. Employers in certain sectors must also adhere to industry-specific levies and regulatory fees. Training and development initiatives, particularly in industries requiring professional certifications, may also contribute to overall employment costs. Ensuring compliance with these financial obligations is essential for businesses operating in Nigeria.

Gross salary refers to the total earnings agreed upon before any deductions, including taxes and statutory contributions. This includes basic salary, allowances, and bonuses as stated in the employment contract. Net salary, on the other hand, is the amount an employee receives after all deductions have been made. The Nigeria salary calculator provides a detailed breakdown of these deductions, allowing businesses to clearly understand payroll costs and ensure employees receive the correct take-home pay.