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LEGAL IMPLICATION OF THE NEW MINIMUM WAGE IN NIGERIA

  1. INTRODUCTION

1.1   As part of its measures to curb the adverse effects of economic degradation and mitigate the inflation-induced hardship in the country, the Federal Government of Nigeria in conjunction with the organised labour union approved a new national minimum wage of N70,000 monthly remuneration on the 18th of July 2024, following the strike action by the Nigeria Labour Congress.

1.2   This birthed the National Minimum Wage Amendment Act 2024 which amended the National Minimum Wage Act 2019 by increasing the minimum wage for all workers in Nigeria from N30,000 to N70,000 and reducing the period of review of the minimum wage from 5 years to 2 years.

  1. THE APPLICATION OF THE NEW MINIMUM WAGE

The minimum wage is the lowest amount of remuneration an employer of labour is expected to pay his employee for work done during a given period.

Is the minimum wage subject to any deduction?

Under the Act, wage is defined as ‘remuneration or earning (however designated or calculated) capable of being expressed in terms of money fixed by mutual agreement or by law which is payable by virtue of a contract by an employer for work done it to be done for service rendered’ and by virtue of section 9(2) of the Act, an employer is mandated to pay nothing less than the minimum wage, subject to statutory deductions. The combined reading of both provisions makes it clear that the N70,000.00 is not the take-home/net pay of the employee as it is subject to other statutory deductions such as Pension, National Housing Fund and Life Assurance.

It is however not subject to tax deductions by virtue of the provisions of the Finance Act, 2020. The Finance Act 2020 amended the Personal Income Tax Act by including a new paragraph 33 after paragraph 32, in the Third Schedule of PITA (dealing with exemptions) by adding to the exemptions – ‘The income of a person from an employment where such person earns gross income of National Minimum Wage or less from such employment.’ Likewise, a new proviso was inserted in Section 37 of PITA which provides that, minimum tax shall not apply to any person who earns in any year of assessment national minimum wage or less from an employment.

What are the obligations of the employer under the Act?

Section 3(1) of the National Minimum Wage Act (as amended) (the Act) enjoins every employer to pay their employees a minimum of N70,000 per month. The employer and the employee cannot enter into an agreement to vary this minimum sum fixed by the law as, section 3(3) of the Act, provides that “any agreement for payment of wages less than the national minimum wage is void”. The employer cannot also unilaterally reduce this fixed sum.

The new wage legislation introduces binding obligations for employers in both the public and private sectors to comply with a statutory minimum wage as non-compliance can lead to sanctions, fines, and legal action by employees or unions. Employers are legally required to update employment contracts, reflecting the new wage threshold. Any discrepancies or outdated contractual wage agreements could result in litigation or administrative penalties/fines. However, where workers have collective bargaining agreements that stipulate higher wages, such agreements remain enforceable. It is also important to state that the new minimum wage does not override previously negotiated agreements that are more favourable to employees.

It should be noted that by virtue of Section 3(4) of the Act, the national minimum wage expires at the end of 3 years and will be reviewed accordingly by the legislature in line with the provisions of the Act.

  1. EXEMPTION FROM THE MINIMUM WAGE REQUIREMENT

The following set of employers are exempted from complying with the minimum wage prescribed in Section 4 of the Amendments Act 2024;

  • An establishment where workers are employed on a part-time basis and their remuneration is commission-based or piece-rates. Part-time work means ‘work of a duration shorter than those for comparable full-time work in a sector or occupation’ and piece-rate means ‘any type of employment in which a worker is paid according to the quantity produced regardless of time.’
  • An establishment with less than 25 employees.
  • Workers in seasonal employment such as agriculture, construction, and tourism are not entitled to minimum wage.
  • Workers in vessels or aircraft to which merchant shipping or civil aviation laws apply are not entitled to minimum wage.

4.  LEGAL IMPLICATION FOR NON-COMPLIANCE

Failure to comply with the national minimum wage amounts to an offence and upon conviction, the employer would be liable to payment of a fine not more than five percent of the employee’s monthly salary and all outstanding arrears of such salary.  The court can compel also the erring employer to pay interest equivalent to the prevailing Central Bank of Nigeria’s lending rate on the salary owed by the employer for each month of persistent failure to pay the minimum wage fixed by the law.

In order to ensure compliance with the minimum wage, the law enjoins employers to keep records of salaries and conditions of employment of their employers. Non-compliance with the requirement to keep such records is an offence punishable with payment of a fine not exceeding N75,000 and a further punitive penalty of up to N10,000 for each day the non-compliance continues. The watchdogs for compliance with the law are Authorised Officers employed at the Federal Ministry of Labour and Employment and other officers employed in the Civil Service of the Federation and state Civil Service authorized by the Minister of Labour and Employment to ensure implementation of the law.

These officers are entitled to direct an employer to provide his records of wages and conditions of employment for inspection and examination, to ascertain whether the employer complies with or defies the law. Where it is observed that the employer is in defiance of the law, the officer customarily instructs the employer to remedy the contravention within a specific period of time. In the event that the employer neglects to rectify the infringement, the Authorised Officer conventionally submits his findings of non-compliance to the Minister of Labour and Employment, most often, recommending prosecution of the culpable employer.

CONCLUSION

The 2024 National Minimum Wage Amendment Act represents a significant step towards addressing Nigeria’s socio-economic challenges, particularly for low-income earners in Nigeria. Employers of labour are advised to adhere to the new minimum wage requirement especially if their establishment does not fall within the purview of the exempted organisations because criminal prosecution is often utilised to ensure compliance with the law if the culprit is a corporate organisation or an individual other than the government.

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