Introduction
The National Minimum Wage (Amendment) Act 2024 (the "Amendment Act") represents a significant step in ensuring fair labor practices in Nigeria amidst the country's soaring inflation and economic downturn. The Act, which came into effect on the 29th of July 2024, introduces an increase in the minimum wage rate for all workers in Nigeria and also shortens the review period for the minimum wage rate from five years to three years.
In this newsletter, we highlight key provisions of the Amendment Act and provide practical tips to employers to guide them in complying with these provisions.
Key Updates under The National Minimum Wage (Amendment) Act
1.What is the Minimum Wage?
The National Minimum Wage is the minimum total amount of money which the Act stipulates and requires an employer of labour to pay to the lowest paid worker or employee monthly in his establishment. Employers are bound to pay, subject to statutory deductions, an amount no less than is stipulated.
2.What is the New Minimum Wage Rate?
The National Minimum Wage Act 2019, which was the previous law governing remuneration of workers in Nigeria, had set the national minimum wage at #30,000 (Thirty Thousand Naira). The Amendment Act has now increased the minimum wage rate to #70,000 (Seventy Thousand Naira). This represents a 12.9% increase from the previous minimum wage rate.
3.What is the Effective Date of the New Minimum Wage Rate?
The new Minimum Wage rate was stated to take effect on the 1st of May 2024, with the previous rate having expired in April 2024. However, the legislation introducing the new rate was passed into law on the 29th of July 2024. The implication of this therefore, is that employers who previously paid less than the Minimum Wage would be required to pay their employees the difference in salaries between May and July, 2024.
4.Who is a Worker under the Act?
A Worker under the Act is defined as a person who has entered into or works under a contract of employment whether oral or written, or express or implied, with an employer. This definition aligns with the scope of employees covered by the Nigerian Labour Act, encompassing both clerical workers and manual labourers such as maids, drivers, cleaners, who work in both private and public sectors.
5.What is the New Wage Rate Review Period?
The Amendment Act has shortened the wage rate review period from 5 years to 3 years, meaning that the current wage rate is expected to expire in 2027.
6.Who is Exempted from complying with the new Minimum Wage?
All Employers are required to pay the new Minimum Wage to all workers as described above. The following employers are, however, exempted from complying with the Amendment Act:
- establishments where workers are employed on a part time basis and paid on commission or piece-rate (paid according to the quantity produced regardless of time);
- establishments with less than 25 employees;
- workers in seasonal employment such as agriculture, construction, tourism, etc;
- workers employed in vessels or aircrafts to which merchant shipping or civil aviation laws apply.
7.What are the Implications for Employers who fail to comply?
Failure to comply constitutes an offense and is punishable by both conviction and payment of a fine not exceeding 5% of the employer's monthly wages and of all outstanding arrears of the workers' wage. Additionally, the Employer will be liable to pay a penalty, which is not less than the prevailing Central Bank of Nigeria lending rate on the wages owed for each month of continuing violation.
Practical Tips for Employers
To ensure compliance, Employers are encouraged to:
- Review their existing wage structures for all employees/workers.
- Identify which employees within the organization are earning below the new minimum wage rate.
- Implement the wage increase on their payroll systems to bring the employees up to the new minimum wage.
- Record deductions, taxes or contributions made from its employees' salaries/wages
- Document and keep records of all wage increases and adjustments, and also conditions of employment for the purpose of compliance audits. All such records are required under the Act to be kept for a period of 3 years after the period to which they refer. Non-compliance with this requirement constitutes an offence under the Act and attracts both conviction and payment of a fine not exceeding #75,000 (Seventy-Five Thousand Naira) and an additional penalty not exceeding #10,000 (Ten Thousand Naira) for each day the offense continues.
Conclusion
The increase in the minimum wage rate provides some relief to millions of workers in Nigeria amidst the country's economic challenges. Both State and Federal Governments have initiated the implementation of the new wage rate across Nigeria. Private establishments are encouraged to follow suit by adhering to the updated wage requirements and ensuring compliance to avoid penalties.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.