Navigating Labour Compliance In Nigeria: What Every HR Pofessional Needs To Know About The New Minimum Wage Amendment Act
In recent years, Nigeria has witnessed significant updates to its labour laws, particularly in employee compensation. The National Minimum Wage (Amendment) Act of 2024 introduces substantial changes to labour compliance in the country. Human Resource (HR) professionals must stay informed and adapt to these new regulations to ensure their organizations remain compliant while promoting a fair workplace environment. This article highlights the key aspects of the new legislation and offers practical guidelines for HR professionals to navigate the transition effectively.
OVERVIEW OF THE AMENDMENT ACT: INCREASE IN MINIMUM WAGE
The Act raises the National Minimum Wage from ₦30,000 to ₦70,000 per month, effective July 2024. This 133% increase aims to improve the standard of living for Nigerian workers amid ongoing economic challenges and rising inflation. Additionally, the review period for adjusting the minimum wage has been shortened from five years to three years, ensuring wage rates are updated more frequently to reflect current economic conditions and the cost of living.
WHO IS CONSIDERED A “WORKER” UNDER THE NEW ACT?
The Act defines a worker as any individual engaged under a contract with an employer, whether the contract is for manual labour, clerical work, or other services, and whether it is express or implied, oral or written. However, the Act excludes certain categories of workers:
1.      Establishments where workers are employed on a part-time basis or are paid by commission or piece rate.
2.      Establishments with fewer than 25 employees.
3.     Seasonal employment, such as in agriculture.
4.     Workers employed on vessels or aircraft subject to merchant shipping or civil aviation laws.
PRACTICAL STEPS FOR HR PROFESSIONALS
1.      Update Payroll Systems: HR teams must update payroll systems to reflect the new minimum wage. This includes retroactively compensating employees for the difference between the old and new rates for the period from May 1, 2024, to July 29, 2024.
2.      Training and Development: Providing training on the implications of the Minimum Wage Amendment Act is essential for HR staff. This proactive approach not only aids compliance but also fosters a culture of fairness and respect within the organization.
3.     Employee Communication: Clear communication with employees about changes in the minimum wage and its impact on their pay is crucial. Transparency helps manage expectations and reinforces trust within the organization.
4.     Ongoing Compliance Monitoring: Regular audits and assessments are vital to ensure compliance with the new standards. Non-compliance can lead to legal penalties, including fines and potential lawsuits, which could harm an organization’s reputation and financial stability.
Also read: The Key to Control for Producers, Content Creators and Filmmakers: Exercising Film Option Rights
BENEFITS OF COMPLIANCE
Adhering to the new minimum wage law offers advantages beyond avoiding penalties:
1.      Enhanced Employee Morale: Fair compensation boosts employee morale and productivity.
2.      Reduced Turnover Rates: Ensuring fair pay can reduce turnover and increase job satisfaction.
3.     Positive Company Reputation: Compliance fosters a positive reputation, attracting both talent and customers.
4.     Economic Stability: Supporting fair labour practices contributes to national economic stability and growth.
CHALLENGES ASSOCIATED WITH THE NEW MINIMUM WAGE
While the new minimum wage aims to improve employee welfare, it presents challenges for employers:
1.      Increased Financial Pressure on Employers: The higher wage bill could strain budgets, particularly for small and medium-sized enterprises (SMEs), leading to cost-cutting measures, including potential workforce reductions.
2.      Wage Compression: The increased minimum wage may narrow the pay gap between entry-level and more experienced roles, potentially causing dissatisfaction among employees with greater skills and experience.
3.     Impact on Morale and Motivation: Wage compression might create resentment among employees just above the minimum wage level, potentially leading to decreased motivation and productivity. Companies unable to adjust higher-level salaries may face increased turnover as employees seek better compensation elsewhere.
4.     Reduced Hiring and Growth Opportunities: To cope with increased wage expenses, some companies may impose hiring freezes, limiting opportunities for job seekers and stunting organizational growth. Funds may also be diverted from employee development programs, reducing career advancement options.
Â
LEGAL IMPLICATIONS AND PENALTIES FOR NON-COMPLIANCE
Non-compliance with the national minimum wage constitutes a legal offence. Upon conviction, employers could face a fine of up to five per cent of the employee’s monthly wages, alongside any unpaid salary arrears. Courts may also impose interest on overdue wages at the current Central Bank of Nigeria lending rate for each month of non-payment.
Employers are required to maintain detailed records of employee salaries and employment conditions. Failure to do so is an offense, attracting fines of up to ₦75,000, with additional penalties of ₦10,000 for each day the non-compliance persists. Compliance is monitored by Authorized Officers from the Federal Ministry of Labour and Employment, as well as designated civil service officers.
These officers are empowered to request access to wage records and employment conditions for inspection. If a violation is identified, employers are typically instructed to rectify the issue within a specified timeframe. Failure to comply may lead to the Authorized Officer reporting the matter to the Minister of Labour and Employment, often recommending legal action against the non-compliant employer.
Â
CONCLUSION
The National Minimum Wage (Amendment) Act 2024 marks a significant milestone in promoting fair labour practices in Nigeria. For HR professionals, staying informed and implementing these changes is essential. By updating payroll systems, revising employment contracts, and maintaining open communication with employees, HR teams can ensure compliance and foster a positive work environment that benefits both employers and employees.
Contributors
