Pension is the second-largest line on most Nigerian payrolls after salary itself, and it is the one employers most often get slightly wrong — usually by misunderstanding who pays what.
Two contributions, not one
There are two separate amounts, and confusing them is the root of most errors.
The employee contributes 8%. This is deducted from their pay. They see it on their payslip, and it reduces their take-home.
The employer contributes 10%. This is on top of salary. It is a cost to the business and it does not come out of the employee's pay.
Together that is 18% of the employee's pay going into their retirement savings account each month. Only the smaller portion is a deduction; the larger portion is your cost.
It lowers the tax bill
The employee's contribution comes off before PAYE is calculated. So pension does two useful things at once: it builds retirement savings, and it reduces taxable income.
This is why a payroll that ignores pension overtaxes staff. The tax is being charged on money that should never have been in the taxable figure.
What it is calculated on
The law frames pension on an employee's emoluments — broadly, basic salary plus housing and transport allowances.
In practice most Nigerian SMEs pay a single monthly figure with no breakdown at all. Where that is the case, calculating on the full gross is the straightforward approach: it is never below the statutory minimum, and it results in more going into the employee's savings.
If you do split salary into basic, housing and transport, record those components properly and calculate on them. What you must not do is guess a split that does not exist in anyone's contract.
What you need on file
You cannot actually remit anything without two pieces of information for each employee:
- Their Pension Fund Administrator — the institution managing their savings
- Their Retirement Savings Account number
Collect both when someone joins. Chasing them at remittance time, from someone who does not have the letter to hand, is a bad month.
Staff who have never worked in a pension-covered job before will not have an RSA yet. They open one with a PFA of their choosing — the employer does not choose it for them.
Timing
Pension is remitted after salaries are paid, within a short window set by law. The exact number of working days is the kind of detail worth confirming with your accountant, and worth putting a reminder against, because it is measured in working days rather than calendar days — which makes it easy to miscount around public holidays.
The employer's real obligation
It is not just remitting the money. It is:
- Deducting the right amount from the right base
- Adding your own portion rather than taking it from the employee
- Remitting both to the correct PFA for each person
- Doing it on time, every month
- Being able to show the schedule afterwards
Komply works out both contributions for every employee, builds a pension remittance schedule with each person's PFA and account number on it, and puts the deadline on your compliance calendar with a reminder before it falls due.
Figures here come from the Nigeria Tax Act 2025 — effective January 2026, rule set 2026-01. Please confirm anything you intend to rely on with your accountant.