Navigating Nigerian Payroll Compliance in 2026

Understanding and maintaining payroll compliance is crucial for Nigerian businesses. This comprehensive guide covers everything you need to know about PAYE, pension remittances, and statutory deductions in 2026.

Understanding PAYE Tax in Nigeria

Pay As You Earn (PAYE) is a method of tax collection where employers deduct income tax from employees' salaries before payment. The Federal Inland Revenue Service (FIRS) mandates this for all employers in Nigeria.

2026 PAYE Tax Bands

The current tax bands for 2026 are:

First ₦300,000 - 7%
Next ₦300,000 - 11%
Next ₦500,000 - 15%
Next ₦500,000 - 19%
Next ₦1,600,000 - 21%
Above ₦3,200,000 - 24%

Pension Remittances (PenCom)

The Pension Reform Act 2014 requires employers to remit 18% of employees' monthly emoluments to their Pension Fund Administrators (PFAs). This breaks down to:

Employer contribution: 10%
Employee contribution: 8%

Key Compliance Requirements

Employers must:

Remit contributions within 7 days of salary payment
Maintain accurate records of all contributions
Submit quarterly returns to PenCom
Ensure all employees are registered with a PFA

Other Statutory Deductions

National Housing Fund (NHF)

Employers must deduct 2.5% of basic salary for employees earning above ₦3,000 per month and remit to the Federal Mortgage Bank of Nigeria.

NSITF Contributions

The Nigeria Social Insurance Trust Fund requires 1% of total monthly payroll, paid entirely by the employer.

Industrial Training Fund (ITF)

Companies with 5 or more employees must contribute 1% of annual payroll to the ITF.

Best Practices for Compliance

To ensure smooth compliance:

Automate Your Payroll: Use reliable payroll software that automatically calculates all statutory deductions.
Maintain Accurate Records: Keep detailed records of all payments and remittances for at least 6 years.
Stay Updated: Regularly check for updates to tax rates and compliance requirements.
Timely Remittances: Set up automated reminders to ensure all payments are made on time.
Regular Audits: Conduct internal audits to identify and correct any compliance gaps.

Penalties for Non-Compliance

Non-compliance can result in:

Penalties of up to 10% of the amount not remitted
Interest charges on late payments
Legal action and potential business closure
Damage to company reputation

How Modulynx Can Help

Modulynx's payroll automation ensures 100% compliance with all Nigerian statutory requirements. Our platform automatically:

Calculates PAYE based on current tax bands
Computes pension contributions for each employee
Generates remittance schedules
Produces compliance reports for audits
Sends alerts for upcoming payment deadlines

With Modulynx, you can focus on growing your business while we handle the complexity of payroll compliance.