How to Run Your First Payroll in Nigeria (New-Employer Guide, 2026)

You just hired your first employee. Congratulations. Now you have a legal obligation you cannot ignore: withhold the right tax, remit the right pension, and pay everyone on time. Get it wrong and you inherit penalties, angry staff, and a compliance mess that compounds every month. This guide walks a brand-new Nigerian employer through a first payroll run, end to end, under the Nigeria Tax Act 2025 (NTA 2025), which took effect on 1 January 2026.

Step 1 — Register for PAYE with your State Internal Revenue Service

PAYE (Pay As You Earn) is administered by the State Internal Revenue Service (SIRS) of the state where your employee works, not by the federal Nigeria Revenue Service. If your team sits in Lagos, you register with the Lagos Internal Revenue Service (LIRS); in Abuja, with the FCT Internal Revenue Service. Each state runs its own portal and its own employer ID.

You will need your CAC incorporation documents, a company TIN, and details of each employee. Once registered, you file and remit PAYE monthly, on or before the 10th day of the following month in most states. Confirm your state's exact due date and portal, since procedures vary.

Step 2 — Enrol for pension with a PFA (if you have 3+ staff)

Nigeria's Contributory Pension Scheme is mandatory for private-sector employers with three or more employees. Under one or two staff you are not yet compelled, but many employers opt in early.

Your employee picks a Pension Fund Administrator (PFA) and opens a Retirement Savings Account (RSA); you cannot choose it for them. There are around 15 licensed PFAs as of 2026. You then remit both contributions to the RSA each month.

The rates, per PenCom, are a minimum of 8% from the employee and 10% from the employer, calculated on basic salary, housing and transport allowances combined.

Step 3 — Understand NHF, NSITF and ITF

Three more schemes sit around payroll. Know which apply to you:

Scheme	Who pays	Rate	Applies when
NHF (National Housing Fund)	Employee	2.5% of basic salary	Now voluntary under NTA 2025 — the employee opts in
NSITF (Employee Compensation Scheme)	Employer only	1% of total monthly payroll	All employers; remit before the 16th of the next month
ITF (Industrial Training Fund)	Employer only	1% of annual payroll	Employers with 5+ staff OR ₦50m+ annual turnover

Two things worth flagging. NHF is now voluntary — the mandatory 2.5% deduction is gone unless your employee chooses it (ITF/NSITF overview, Andersen Nigeria). And ITF lets you claim back up to 50% of your contribution if you spend it on approved staff training.

Step 4 — Structure the salary (basic / housing / transport)

Nigerian payroll is built on a split pay structure, because pension and several reliefs key off specific components. A common, defensible structure allocates gross pay across basic, housing, transport and other allowances. The three named components form the pensionable base.

Here is our worked example. One employee, monthly gross ₦400,000 (₦4,800,000/year):

Component	Monthly	Share
Basic	₦200,000	50%
Housing	₦80,000	20%
Transport	₦80,000	20%
Other allowances	₦40,000	10%
Gross	₦400,000	100%

Pensionable pay (basic + housing + transport) = ₦360,000/month, so:

• Employee pension (8%): ₦28,800/month
• Employer pension (10%): ₦36,000/month — your cost, not deducted from staff

Step 5 — Compute PAYE under NTA 2025

NTA 2025 rewrote the rules. The Consolidated Relief Allowance is abolished and replaced by Rent Relief = min(20% × annual rent, ₦500,000). The first ₦800,000 of taxable income is tax-free. The annual bands, effective 1 January 2026, are:

Annual taxable income	Rate
First ₦800,000	0%
Next ₦2,200,000 (up to ₦3,000,000)	15%
Next ₦9,000,000 (up to ₦12,000,000)	18%
Next ₦13,000,000 (up to ₦25,000,000)	21%
Next ₦25,000,000 (up to ₦50,000,000)	23%
Above ₦50,000,000	25%

Source: Nigeria Tax Act 2025 personal income bands, PwC Tax Summaries.

Now compute taxable income. Start from annual gross, subtract allowable deductions:

Taxable income = Gross − Employee pension − Rent relief

Assume the employee pays ₦1,200,000 annual rent, so rent relief = min(20% × 1,200,000, ₦500,000) = ₦240,000. Employee pension for the year = ₦28,800 × 12 = ₦345,600.

Taxable income = ₦4,800,000 − ₦345,600 − ₦240,000 = ₦4,214,400.

Apply the bands:

Band	Amount taxed	Rate	Tax
First ₦800,000	₦800,000	0%	₦0
Up to ₦3,000,000	₦2,200,000	15%	₦330,000
Remaining	₦1,214,400	18%	₦218,592
Annual PAYE			₦548,592

Monthly PAYE = ₦548,592 ÷ 12 = ₦45,716

So the employee's monthly take-home is roughly ₦400,000 − ₦28,800 (pension) − ₦45,716 (PAYE) = ₦325,484, before any voluntary NHF.

Step 6 — Remit and issue payslips

Money out the door, in order:

1. PAYE to your SIRS portal, by your state's monthly deadline (commonly the 10th).
2. Pension (employee 8% + employer 10%) to the employee's RSA via your PFA.
3. NSITF 1% of payroll, before the 16th of the following month.
4. ITF annually, if you cross the 5-staff or ₦50m threshold.

Then issue every employee a payslip showing gross, each deduction, and net pay. It is both good practice and your proof of compliance if a state auditor ever asks.

Does AnooreHR handle this?

Yes — this is exactly what AnooreHR is built for. Nigeria is live today: the tax engine runs on a country profile pack, so the NTA 2025 bands, rent relief cap, and pension base above are held in data, not buried in code — when a rate changes, the pack changes, not your payslips. You structure basic/housing/transport once, and every run computes PAYE, pension, NSITF and voluntary NHF, then posts straight into your general ledger on one shared books. Staff see payslips on their own phones through the self-service portal. Free for up to three staff, priced in Naira after that. Book a quick demo to see a first run end to end.

Related reading: How to compute PAYE in Nigeria · Nigerian pension contribution guide · NSITF & ITF employer obligations 2026