The Employees’ Compensation Act of 2010 (‘the ECA’ or ‘the Act’), requires every employer to make a monthly contribution of 1% of ‘payroll’ cost to Nigeria Social Insurance Trust Fund (NSITF).
Since the ECA has not provided a clear definition of ‘payroll’, the stipulated 1% had hitherto been applied on total emoluments.
However, following a recent interactive session on <em>‘the Implementation and Administration of the ECA 2010’</em>, between NSITF and Nigeria Employers’ Consultative Association (NECA), both bodies have signed a Memorandum, clarifying amongst other things, the definition of ‘payroll’ for ECA levy computation purposes. This Memorandum was effective, 01 January 2017.
Both bodies have now agreed to adopt the definition of ‘Remuneration’ as provided in the Act, as the new definition of ‘payroll’, with the exception of the following:
Pension contributions
Bonuses – performance related payments (whether monthly, quarterly or yearly)
Overtime payments
Irregular one-off payments (e.g. driver’s allowances, medicals, 13<sup>th</sup> month salary, etc.)
The Act defines ‘Remuneration’ as basic wages, salaries or earnings designated or calculated, capable of being expressed in terms of money and fixed by mutual agreement, or by law, which are payable by an employer to an employee, for work done or to be done or services rendered or to be rendered; and allowances which include rental, transport, meals and utility or other allowances as may be determined by the Board, from time to time.
Our interpretation of the above is that the ECA levy is still based on total employment benefits (including benefits-in-kind), but with the exception of the afore-listed items.