Navigating employment termination in Nigeria requires a thorough understanding of the applicable labour laws and contractual obligations. Both employers and employees must adhere to specific procedures and entitlements to ensure a lawful and fair process. Failure to comply with these regulations can lead to significant legal challenges and financial penalties for the employer.
Nigerian labour law, primarily governed by the Labour Act, Cap L1, Laws of the Federation of Nigeria 2004, alongside common law principles and individual employment contracts, sets out the framework for ending an employment relationship. Understanding these provisions is crucial for employers operating in the country, whether they are local entities or international companies employing staff remotely via an Employer of Record.
Notice Period Requirements
The required notice period for terminating an employment contract in Nigeria depends on the duration of employment, as stipulated by the Labour Act, unless a longer period is agreed upon in the employment contract. The contractually agreed notice period, if more favourable to the employee than the statutory minimum, will prevail.
Here are the minimum statutory notice periods:
| Duration of Employment | Minimum Notice Period |
|---|---|
| 3 months or less | 1 day |
| More than 3 months but < 2 yrs | 1 week |
| 2 years or more but < 5 yrs | 2 weeks |
| 5 years or more | 1 month |
Notice must be given in writing. Payment in lieu of notice is permissible, meaning the employer can pay the employee their wages for the notice period instead of requiring them to work through it.
Severance Pay Calculations and Entitlements
Nigerian law does not mandate a statutory severance pay entitlement for all employees upon termination, particularly in cases of termination with cause or resignation. However, severance pay (often referred to as redundancy pay) is typically required in cases of redundancy. Redundancy is defined as an involuntary and permanent loss of employment caused by an excess of manpower.
Where redundancy occurs, the Labour Act requires the employer to use their best endeavours to negotiate redundancy payments with any affected workers or their representatives. While there is no fixed statutory formula for redundancy pay, it is common practice and often stipulated in employment contracts, collective agreements, or company policies. Common approaches to calculating redundancy pay include:
- A certain number of weeks' or months' salary per year of service.
- Negotiated lump-sum payments.
Entitlement to redundancy pay usually arises when an employee's position is eliminated due to operational requirements, restructuring, or economic reasons, provided the employee is not being terminated for misconduct.
Grounds for Termination
Employment contracts in Nigeria can be terminated on various grounds, broadly categorised as termination with cause and termination without cause.
Termination With Cause
Termination with cause occurs when an employee's conduct or performance provides a valid reason for dismissal. Grounds for termination with cause typically include:
- Gross misconduct (e.g., theft, fraud, insubordination, harassment).
- Persistent poor performance after warnings and opportunities for improvement.
- Breach of company rules or policies.
- Absenteeism without valid reason.
- Dishonesty or conflict of interest.
In cases of termination with cause due to gross misconduct, the employer may be entitled to dismiss the employee summarily, potentially without providing notice or payment in lieu of notice, although this is subject to strict legal interpretation and procedural fairness requirements.
Termination Without Cause
Termination without cause occurs when the employer ends the employment relationship for reasons not related to the employee's conduct or performance. This often includes:
- Redundancy (as discussed above).
- Restructuring or reorganisation.
- Expiration of a fixed-term contract (though this is technically non-renewal rather than termination).
- Mutual agreement between the employer and employee.
When terminating without cause, the employer must provide the required notice period or payment in lieu of notice, and may be liable for redundancy pay if the termination is due to redundancy.
Procedural Requirements for Lawful Termination
To ensure a termination is lawful and to mitigate the risk of wrongful dismissal claims, employers must follow specific procedural steps, especially when terminating with cause. Key requirements include:
- Investigation: Conduct a fair and thorough investigation into the alleged misconduct or performance issue.
- Notice of Allegations: Inform the employee in writing of the specific allegations against them.
- Opportunity to be Heard: Provide the employee with an opportunity to respond to the allegations, often through a disciplinary hearing.
- Fair Hearing: Conduct a fair hearing, allowing the employee to present their case, potentially with a representative.
- Decision: Communicate the decision to the employee in writing, clearly stating the reason for termination and the effective date.
- Payment of Final Dues: Pay the employee all outstanding wages, accrued leave pay, and any other entitlements (like redundancy pay if applicable) promptly.
Failure to follow a fair procedure, even if there are valid grounds for termination, can render a dismissal procedurally unfair and potentially wrongful.
Employee Protections Against Wrongful Dismissal
Employees in Nigeria are protected against wrongful dismissal. A dismissal can be deemed wrongful if:
- It is carried out without a valid reason (grounds).
- The correct procedure is not followed (procedural unfairness).
- It violates the terms of the employment contract or collective agreement.
- It is discriminatory (e.g., based on gender, religion, ethnicity, union membership).
Employees who believe they have been wrongfully dismissed can seek redress through internal grievance procedures, mediation, or by filing a claim in the National Industrial Court of Nigeria (NICN). The NICN has jurisdiction over labour and industrial relations matters and can order remedies such as reinstatement, payment of damages (including back wages), or compensation. Employers must therefore ensure all terminations are substantively justified and procedurally fair to avoid costly legal disputes.
