Under the Pension Reform Act 2014, the employer pays at least 10% and the employee pays at least 8% of monthly emoluments: at minimum, basic salary plus housing and transport allowances. That's 18% in total, paid into each staff member's Retirement Savings Account (RSA) within 7 working days of payday.
On ₦300,000 of basic, housing and transport, that's ₦24,000 from the staff member's pay and ₦30,000 from you: ₦54,000 a month into their RSA.
1. Employer and employee pension contributions
Pension isn't a favour you do your staff. It's their money, and getting it right every month is one of the quietest ways to show your team you're serious about them.
| Who pays | Minimum | How |
|---|---|---|
| Employee | 8% of monthly emoluments | Deducted from their pay |
| Employer | 10% of monthly emoluments | Paid on top of their pay |
| Total into their RSA | 18% | Sent together by the employer |
You can pay more than the minimum, and some companies do as a benefit. You can also choose to carry the whole contribution yourself, with nothing deducted from staff. Then you must pay at least 20% of monthly emoluments.
2. What counts as monthly emoluments
The Act defines monthly emoluments as the total pay in the employment contract, but never less than basic salary plus housing and transport allowances (section 120). In practice, most employers use basic + housing + transport. Bonuses, overtime and one-off payments usually aren't included.
This is why your pay structure matters. If a ₦400,000 salary is split ₦150,000 basic, ₦90,000 housing, ₦60,000 transport and ₦100,000 other allowances, pension is worked out on ₦300,000, not ₦400,000.
3. Pension contribution calculator
Enter one staff member's monthly basic, housing and transport. The calculator shows the monthly split, and what the employer's share would be if the 2026 Bill's 12% becomes law.
Employee 8%: ₦24,000 (deducted from pay). Employer 10%: ₦30,000 (on top of pay). On ₦300,000 of basic, housing and transport.
If the Bill's 12% employer rate becomes law: ₦36,000 from you, ₦6,000 more a month.
WadataHR works out the 8% and 10% for each person on basic, housing and transport, builds one schedule per PFA with every PIN, flags anyone missing a PFA or PIN, and reminds you before the 7-working-day deadline. Free for up to 5 staff.
4. Who must contribute
- Private employers with 3 or more staff. PenCom applies the scheme from 3. The Act's own wording is untidy (section 2(2) mentions 15), and the Pension Reform Bill 2026 would write 3 into the law. Our view: if you have 3 staff, start.
- Fewer than 3 staff: not compulsory, but you can join voluntarily. It's an easy way to stand out when you're hiring against bigger companies.
- Every employee gets an RSA with a Pension Fund Administrator (PFA) of their choice, and keeps it for life, from job to job.
- No PFA yet? If a new staff member hasn't chosen a PFA within 6 months of starting, the employer asks a PFA to open an RSA for them.
5. The pension contribution schedule
Every payment needs a schedule, so the money lands in the right RSA. Make one schedule for each PFA your staff use:
| Staff ID | Name | PFA PIN | Employee (8%) | Employer (10%) | Total |
|---|---|---|---|---|---|
| 004 | Adaeze Okafor | PEN100XXXXXXXX | ₦24,000 | ₦30,000 | ₦54,000 |
| 007 | Tunde Bello | PEN200XXXXXXXX | ₦16,000 | ₦20,000 | ₦36,000 |
| Total for this PFA | ₦40,000 | ₦50,000 | ₦90,000 |
Add your PenCom employer code, your company name and the month at the top. Names and PINs above are made up.
6. How to pay: contribution channels
- Pay to the custodian, not to PenCom. Contributions go to the Pension Fund Custodian (PFC) that holds assets for each staff member's PFA. The PFA invests the money; the custodian keeps it safe.
- Use the channel the PFA gives you. Each PFA provides its custodian account details and accepted payment channels, such as bank transfer or Remita. Ask each PFA your staff use once, and keep the details on file.
- Send the schedule with the payment, so the PFA can credit each RSA. A payment without a schedule sits unallocated.
- Within 7 working days of payday. Pension has one of the shortest deadlines in payroll, so prepare the schedules the day you approve payroll.
7. What's changing in 2026
Pension has had a busy year. Here's what's actually happened, and what's only proposed:
| Change | Status (19 Oct 2026) |
|---|---|
| Automatic late-payment penalties. PenCom's system now works out penalties for late remittance by itself, and you can't get a Pension Compliance Certificate until they're paid. | In force. Announced 13 October 2026 |
| Tougher enforcement. PenCom and NLC Lagos began joint action against defaulting employers from 1 June 2026, and PenCom has recovered ₦36.6 billion from defaulters in total. | Happening now |
| Higher employer rate. PenCom wants to raise the employer's share. The employee's 8% wouldn't change. Employer groups (NECA, MAN) have asked for it to be suspended. | Proposed, not decided (July 2026) |
| Pension Reform Bill 2026. Employer minimum 10% → 12%. Late-payment penalty 2% → 6% a month. Scheme compulsory from 3 staff in the Act itself. Group life fines. Higher general fines. | A Bill, not yet law |
What to do now: pay on time, because late payment now costs you automatically and blocks your certificate. And when you set salaries for 2027, allow for the employer's share rising to 12%. On ₦300,000 of basic, housing and transport, that's ₦6,000 more a month per person.
8. Group life insurance: the duty most small companies miss
The Pension Reform Act (section 4(5)) also requires every employer to keep a group life insurance policy for each employee, worth at least 3 times their annual total emoluments, with the premium paid before cover starts. If an uninsured staff member dies in service, the employer can be liable to pay that amount to their family.
It costs far less than people expect, and it's the kind of thing a good employer has sorted before anyone needs it. Ask a licensed insurer or broker for a quote.
9. Penalties for late or missed remittance
- Late payment: a penalty of at least 2% of the unpaid amount for each month it stays unpaid, on top of the contributions themselves. The 2026 Bill would raise it to 6%.
- No compliance certificate: you need a Pension Compliance Certificate for government contracts, and since October 2026 you can't get one with penalties outstanding.
- Recovery and prosecution: PenCom uses recovery agents and works with the ICPC and labour unions to collect from defaulters.
Deducting 8% from staff pay and not sending it is the worst version of this. It's their money. Keeping it, even for a few weeks, breaks the trust your team gives you every payday.
Pension questions employers ask
What is the employer pension contribution in Nigeria?
At least 10% of each employee's monthly emoluments (at minimum basic, housing and transport), paid by the employer on top of salary. PenCom has proposed raising it, and the Pension Reform Bill 2026 would make it 12%, but as of October 2026 the minimum is still 10%.
What is the employee pension contribution in Nigeria?
At least 8% of monthly emoluments, deducted from the employee's pay and sent to their RSA by the employer, together with the employer's 10%. The 2026 proposals don't change the employee's 8%.
What counts as monthly emoluments for pension?
The total pay in the employment contract, but never less than basic salary plus housing and transport allowances (section 120 of the Pension Reform Act 2014). Most employers work pension out on basic, housing and transport.
What is a pension contribution schedule?
A list sent with each pension payment, one for each PFA, showing each staff member's name, PFA PIN, the 8% employee amount, the 10% employer amount and the total, with your PenCom employer code and the month. It lets the PFA credit each person's RSA.
When must pension contributions be remitted?
Within 7 working days of paying salaries. Late payment attracts a penalty of at least 2% of the unpaid amount for each month, and since October 2026 PenCom works it out automatically and withholds the compliance certificate until it's paid.
Where do employers pay pension contributions?
To the Pension Fund Custodian of each staff member's PFA, using the account details and payment channels the PFA provides, such as bank transfer or Remita, with a schedule so each RSA is credited. Not to PenCom itself.
Must employers with fewer than 3 staff pay pension?
No. PenCom applies the scheme from 3 employees, and employers with fewer can join voluntarily. The Pension Reform Bill 2026 would write the 3-employee threshold into the Act.
Related guides and tools
Pay your people right, and on time, every month.
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