Pension contributions in Nigeria are split between employer and employee, unless the employer chooses to carry the whole cost. Here is how the Act sets the rate.
The standard split
Under the Pension Reform Act, an employee contributes a minimum of 8% of monthly emoluments. The employer contributes at least 10% of monthly emoluments on top.
Both figures are minimums. An employer and its staff can agree to pay more, provided PenCom is told about the change.
The employer deducts the employee's share at source, before the rest of the salary is paid out. PenCom's certificate requirements repeat the same minimums, so check your payroll against them.
The base for both rates: monthly emoluments
Both rates apply to monthly emoluments. Which parts of pay count towards that figure is not something this post can settle. Where a pay structure splits basic pay from allowances, ask a payroll professional to confirm the base before you set up deductions.
For example, if an employee's monthly emoluments rise, both shares rise with them, because both are set against the same base.
The employer-only option
Some employers choose a different route entirely. Instead of splitting the cost, the employer can elect to carry the whole contribution itself, at a minimum of 20% of monthly emoluments.
Under this option the employer bears the full responsibility for the scheme, so nothing is deducted from the employee's pay for pension.
The trade-off is cost. The employer carries a materially higher share. Whether that suits the business is a decision for its owners and their accountant.
Deducting is only half the job
Working out the rate correctly does not finish the task. The employer must deduct the employee's share, add its own, and remit both together.
The money goes to the pension fund custodian named by each employee's own pension fund administrator (PFA), not to PenCom directly. The Act sets a strict window for this: within 7 working days of the day salaries are paid. Miss it, and a separate penalty starts running under the Act, on top of the contribution itself.
Two different staff can have two different PFAs, so payroll needs to route each contribution to the right custodian, not one single account for the whole company.
Getting the headcount question right first
The contribution rate only matters once you know whether registration applies to your business at all. See how many staff before PenCom registration if you are not sure your company has crossed that line yet.
Common mistakes
- Using basic salary as the base without checking it is the right base for your pay structure.
- Choosing the employer-only option without checking the extra cost against payroll.
- Agreeing a higher rate informally without notifying PenCom, then having no record of it.
- Forgetting that the rate is only the calculation step; remittance still has its own deadline.
For the rest of the certificates a growing employer meets, see the tender compliance hub and keep every deadline on one compliance calendar.