How to hire and pay independent contractors in Nigeria

Looking to expand your team globally? Whether you want to find talented professionals abroad or build a team in Africa, you're in the right place.

With a young labor force and a growing tech sector, Nigeria is a great place to begin your search. The Nigerian government has committed to a national development plan, bringing in massive investment from tech giants like Microsoft.  Tapping into the Nigerian talent pool will open your business up to new opportunities.

But hiring independent contractors in Nigeria can be a complicated process. To start with, you’ll need to have a good understanding of local labor laws and ensure legal compliance; otherwise, your company may have to pay fines and penalties. You’ll also have to consider unique aspects of Nigerian culture, such as local languages, religions, and customs — which is good to keep in mind if you're hiring workers from the country.

But, all of this shouldn't stop you from growing your team in Nigeria. In this guide, we’re going to navigate labor laws, tax and compliance practices, and how you can pay your contractors in Nigeria efficiently. 

Ready to learn more? Grab yourself a drink and let’s begin.

Unique considerations of managing contractors in Nigeria

Here are some factors to consider while hiring independent contractors in Nigeria:

• Language. English is the official language of Nigeria. However, it is far from the only language used — in fact, there are over 500 different languages spoken in Nigeria. While communicating with a contractor, keep in mind that English may not be a contractor's first language.

• Religion. Nigeria’s population is made up of largely Muslims (53.5%) and Christians (45.9%) according to 2018 estimates. Factoring in religious holidays is essential when planning deadlines for contractors. 

• Business culture. Nigeria tends to follow a formal and hierarchical business culture. This means that meetings tend to be well-structured and proper names and titles are commonly used. Being clear about your company’s communication style will help your new contractor feel comfortable while working with you.

• Decision-making. Some cultures within Nigeria are highly family-driven and community-based. This means that many Nigerians don't take big decisions like changing jobs lightly. Before choosing to work with you, potential employees may consult family members or community leaders. Don’t be surprised if you wait longer than expected for a reply during the hiring process.

How do I pay an independent contractor in Nigeria?

You can pay independent contractors directly, but make sure you clearly lay out the contractor’s responsibilities and scope of the work, as well as payment terms, in your agreement with them. This helps to avoid confusion and reduces the risk of misclassification (which we’ll get to later on in the article).

Contractors typically invoice you for work they do and receive payment on a per-project basis. As Nigerian contractors are responsible for paying their own taxes, you don't need to factor their income tax into your payroll. 

You can use one of the following options when paying contractors in Nigeria.

SWIFT

SWIFT is a network made up of the world's leading financial institutions. This is a well-established and safe way to internationally transfer money directly from one bank to another. Companies have been able to take advantage of SWIFT transfers in Nigeria since the country adopted this method in 2014. To use SWIFT, you and your contractor must have an account with a major bank. 

SWIFT payments are reliable, secure, and widely accepted. Unfortunately, SWIFT payments can be slow, sometimes taking up to five days to complete. The fees may also vary, which can lead to the contractor receiving less than the agreed amount.

Money transfer services

Companies like Western Union and Moneygram provide traditional money transfer services. They are widely available and generally tend to have good exchange rates. On the flip side, they can charge hefty fees for payments and are typically slow to deliver funds.

You can also pay Nigerian contractors using digital money transfer providers like Wise, Remitly, or Xoom. These payment platforms use third-party banks to transfer funds, and they offer the option to convert your local currency to the currency your contractor uses. 

Digital money transfers are cheaper and faster than bank transfers. They aren’t as reliable or secure as bank transfers, though. Technically, you send the money to the transfer company, not directly to the individual contractor. This can make bookkeeping a little messy.

Money order

A money order is similar to a paper check, but it's more secure and payment is guaranteed. It is useful for paying people who don’t have a bank account. 

While money orders are reliable, they can also be expensive and slow. They are also inconvenient, as you must go to an in-person location — typically, to your local USPS office — to initiate the transfer.

Have a dedicated company run your international payroll. 

Using a payroll service like Remote to manage your global payroll allows you to pay contractors in multiple countries quickly and securely. You can set up recurring payments and keep all transactions in one place. And with our Fair Price Guarantee, you will always know exactly what you are paying upfront. You'll pay one flat rate to hire, pay, and manage your workforce.

What are the risks of misclassifying Nigerian independent contractors as employees? 

When you plan to hire an independent contractor in Nigeria, you must make sure that they are classified correctly. Independent contractors in Nigeria are not guaranteed the benefits of your company's full-time employees. They are considered self-employed and are responsible for paying their own taxes. 

You'll need to specify that you're hiring a worker as an independent contractor or employee in the contractor or employment agreement. In Nigeria, it's important to clarify the contractor's classification in this document, as doing this protects both parties in case of a dispute.

An independent contractor’s agreement defines the following:

• The scope of work

• Payment terms

• Intellectual property rights

• Termination policy

• Confidentiality agreement

• Governing law

• Arbitration clause

Normally, the scope of the contractor's work is limited to a project or a timeframe. The independent contractor is free to work with other clients at the same time and has more freedom regarding their working hours than a full-time employee.

Misclassifying an employee in Nigeria can lead to heavy fines and penalties. You may also have to pay back benefits to your workers that full-time employees are entitled to.

You also risk losing your intellectual property rights if you misclassify an employee. This means that your company may not legally own the intellectual property produced by the contractor. This can lead to costly and damaging legal proceedings. 

If you're unsure whether your independent contractor has been misclassified, you can use our free Misclassification Risk Calculator to find out if you’re at risk and how you can fix it. Remote’s expert legal team can clarify exactly what is required from you to minimize any risks of misclassification. 

What are the labor laws in Nigeria?

The Nigerian Labor Act is the key legislation that defines the employment laws that protect employees in Nigeria. 

Some key labor laws are as follows:

• The current minimum wage at ₦30,000 per month as of 2023.

• Employers must provide six paid annual leave days, 12 sick leave days, and 12 weeks of maternity leave for women who have been employed for at least 12 months. 

• Employers can end the employment relationship anytime and are not required to provide employees with a reason

• However, the employer has to give notice to an employee before termination. Notice periods will vary depending on the duration of employment.

• There is no mandated pay for terminated workers.

However, keep in mind that the above laws don't apply to independent contractors in Nigeria. Although it is not your responsibility, you might want to advise your contractors to ensure they are compliant with Nigerian employment law. This will also give you confidence that there won’t be issues later when paying or managing your contractors in Nigeria. 

Tax and compliance practices for hiring independent contractors from Nigeria

The contractor must pay their own taxes, so you should ensure they are set up correctly. Sole traders are governed by the Nigerian Personal Income Tax Act and are required to submit a self-assessment tax return. Nigeria’s tax bands range from 7% to 24% depending on annual income. While you don't have to pay income tax for contractors based in Nigeria, there may still be regulations to follow in your home country.

If your company is based in the US, for example, you need to obtain a W-8 BEN Form from international contractors who:

• Are not US citizens

• Are not residents of the US

• Do not have a green card

• Are the beneficial owner of compensation for work done

As a US company, you may also need to file a 1096 Form, which is the Annual Summary and Transmittal of U.S. Information Returns. This form applies to all workers that are classified as contractors. This paper form acts as a physical cover sheet, so keep in mind you only have to use this form if you are submitting your returns by paper or mail. 

Remote's contractor management platform has a useful feature that makes tax compliance easy for US companies. When you onboard contractors using our system, your contractors will be automatically prompted to fill out and submit the relevant forms — which means you don't have to stress during tax season.

How do I convert an independent contractor in Nigeria to an employee?

If you feel that your contractor has become integral to your workforce, you may want to consider converting them to a full-time employee. Once they transition to employee status, they will receive the full benefits and protections entitled under the Nigerian Labor Act. 

Hiring and paying employees, rather than the relatively simpler process of hiring contractors, can seem daunting, especially if you don't have the knowledge and resources to hire in the country. But we have the ideal solution for you.

Whether you want to hire international employees directly or prefer to hire contractors and convert them to employees at a later stage — Remote can take the hassle out of the process for you.

From compliance and payroll to taxes and benefits, partnering with Remote can be a real game changer for your business.

The best way to hire an independent contractor in Nigeria

The combination of Nigeria's vibrant young workforce and the country's strong tech sector makes it an attractive location to grow your team. However, hiring contractors in Nigeria is not easy.

You’ll have to:

• Understand local laws, work culture, and business practices

• Ensure you’re compliant with employment and tax legislation, and

• Pay your contractors via a reliable payroll system.

If you don’t have time or resources to navigate the world of global employment, it’s best to use a trusted partner like Remote to do all the hard work for you. Our experts can handle the whole process of hiring, paying, and managing independent contractors in Nigeria, leaving you free to focus on business growth. With Remote, you can:

• Onboard contractors in minutes with customizable contracts

• Automate payments and pay your global contractors on time, in their local currency

• View and manage your global contractors in one location

• Stay compliant with Nigerian labor laws and tax practices.

Get in touch to learn how you can take your business to the next level in Nigeria. If you’re ready to onboard Nigerian workers, sign up for Remote today and get started in minutes!