If you employ three or more people in Nigeria, you are bound by the Contributory Pension Scheme under the Pension Reform Act 2014. Yet a significant proportion of Nigerian employers remain non-compliant — not because they choose to be, but because they do not fully understand the obligations or the consequences of missing them.
This guide covers the essential facts every Nigerian employer needs to know about PenCom compliance in 2025.
Who Must Comply?
Any private sector employer with a minimum of three employees is legally required to participate in the Contributory Pension Scheme (CPS). This threshold is absolute — it is not based on turnover, industry, or business structure.
Federal government organisations, including their parastatals, are separately governed. But for private sector organisations of three employees and above, there is no exemption.
What Are the Contribution Requirements?
The minimum statutory contribution under the CPS is:
- Employee contribution: 8% of monthly emolument
- Employer contribution: 10% of monthly emolument
- Total minimum: 18% of monthly emolument
Monthly emolument includes basic salary, housing allowance, and transport allowance — not just basic salary alone. Many employers incorrectly calculate contributions on basic salary only, creating an underpayment liability that accumulates over time.
The Seven-Day Rule
Contributions must be remitted to the employee's Retirement Savings Account (RSA) manager within seven working days of salary payment. This is non-negotiable.
Late remittance attracts a penalty of 2% per month on the outstanding amount. Over a year of late remittance, this compounds into a significant liability — separate from and in addition to the outstanding contributions themselves.
Common Compliance Failures
The most frequent PenCom compliance failures we encounter include:
- Calculating contributions on basic salary only rather than full monthly emolument
- Failing to enrol new employees within the prescribed onboarding window
- Remitting contributions late due to cash flow management decisions
- Maintaining inaccurate records of employee RSA details
- Not updating contribution calculations when salaries are revised
Each of these is avoidable with proper systems and oversight.
The Consequences of Non-Compliance
PenCom has statutory authority to investigate, issue compliance notices, impose penalties, and refer persistent non-compliant employers for prosecution. Penalties include the 2% monthly surcharge on outstanding contributions, additional regulatory fines, and in serious cases, criminal liability for responsible officers.
Beyond regulatory sanctions, non-compliance with pension obligations creates employment tribunal exposure and reputational risk with employees, particularly as the workforce becomes more aware of their statutory entitlements.
Building a Compliant Pension Process
A robust pension compliance process requires three elements: accurate calculation of monthly emolument for each employee, a reliable payroll system that triggers contribution remittances within the prescribed window, and a proper record-keeping framework that can demonstrate compliance in any PenCom review.
At CHOLAL Professional Services, our pension advisory service is built on 15+ years of direct PFA industry experience. We design and implement pension compliance processes that guarantee zero infractions, every cycle.