PAYE is deducted from an employee's pay by the employer, then remitted to the relevant state authority separately. Those are two different steps, and a gap can open up between them.
The Nigeria Tax Administration Act 2025 sets out what happens when tax that has been deducted or withheld, the category PAYE falls into, is not remitted on time.
The penalty on the employer
Tax deducted or withheld but not remitted attracts 10% a year of the amount not remitted, plus interest, calculated on the amount that should have been paid over. This sits on top of the underlying tax itself, not instead of it.
The interest that runs alongside it
Beyond the penalty, interest applies too. For naira-denominated amounts, the rate is the CBN Monetary Policy Rate plus 1 percentage point, calculated daily, as simple interest, from the due date until the tax is paid.
Both the penalty and the interest grow the longer a shortfall goes unaddressed, which is part of why the 10th day of the following month matters as a fixed, recurring date rather than an approximate one.
What this means for the employee
An employee's payslip showing a PAYE deduction is evidence that the amount was taken from their pay, regardless of whether the employer went on to remit it. Keeping payslips is the simplest way to hold onto that record.
This guide does not have a verified, step-by-step process for an employee to follow if a shortfall is suspected, beyond raising it with the employer directly. A tax adviser can help take it further if that conversation does not resolve things.
It is worth raising calmly and early. A shortfall that has only just started is a smaller problem for everyone involved than one that has run for months.
Why the gap can be hard to spot at first
From an employee's side, a payslip can look entirely normal even while remittance is falling behind, since the deduction itself still happens. The gap tends to surface later, often when a certificate or an audit asks for proof that deducted tax actually reached the state.
Why employers should not let this build up
Beyond the penalty and interest, an employer with unresolved PAYE shortfalls is not well placed to apply for a federal tax clearance certificate, issued by the Nigeria Revenue Service (NRS), formerly FIRS, which tenders and banks often ask for. Clearing a backlog before it is needed is more straightforward than doing so under pressure.
Keeping this from happening
Building the 10th day of the following month into a fixed monthly routine, rather than an occasional task, is the most direct way to avoid this altogether. See common payroll mistakes in 2026 for the wider pattern this sits inside, and the PAYE and state tax hub for the rest of this series.