Your Legal Obligations to Your Employees
Customers are king, right?
However, for a ‘king’ to be comfortable and enjoy his reign, they must be ‘technocrats, the military, palace workers’, etc who ensure things go well. Well, in your business kingdom, those technocrats, military, and workers are your employees.
As an employer, therefore, you have some responsibilities or obligations to your employees. These are literally what you owe them and could get into trouble with the law for not complying with.
So, what are those responsibilities?
The relationship between an employer and an employee is a contractual one where the employee offers his skills and services to the employer who in turn pays the employee a stated amount on a monthly basis or as per their agreement.
This means you are obligated to pay your employees compensation for their services. Failure to pay this or a breach in payment (amount paid) without prior agreement or notice means the employee has the right to withdraw his services or not perform optimally. If you don’t want your employees carrying placards and singing ‘solidarity forever, please pay o!
A growing trend amidst businesses (especially small businesses), is the offering of equity to employees. This would mean that beyond present monetary compensations, the employee becomes a shareholder in the business.
Pay as You Earn is a method of collecting personal income tax from employees’ salaries and wages through deduction at source by an employer as provided by the relevant sections of the Personal Income Tax Act (PITA) (S.81 of Personal Income Tax Act Cap P8 LFN 2011).
In simpler terms, it is how employees pay tax. Every employer is expected to make this deduction from the employee’s gross salary and remit it to the state’s Inland Revenue Service (LIRS for Lagos State).
Pension is a kind of payment that reduces tension(Feel the rhyme?). Lol
This is a series of regular money payments made to a person who retires from employment due to age or stipulated years of service. These payments are made from an investment fund account that both the employee and his employer contributed to during his active service years.
In Nigeria, the Pension Reform Act(which administers the pension structure) has established a contributory pension scheme whereby the employers and the employees contribute minimum percentages of the employees’ salary to the scheme every month.
The minimum contribution for the employer is 10% and 8% for the employee. This would mean that if Titi your software programmer earns #250,000 a month, you as the employer is expected to contribute a minimum of #25,000 while Titi will contribute a minimum of #20,000 monthly till she retires. Even if her pay increases, the percentage remains the same.
4. Health Insurance:
This is an insurance policy that covers the employee’s medical expenses or treatments for a stipulated fee. It could cover the entire medical bills of the service such an employee is entitled to or a part of the medical bills. Depending on the level of the employee and the policies of your organization, some even cover for family members of the employee.
5. Paid Leave:
Paid leave benefits package ensures employees are entitled to remuneration for the number of leave days (at least 6 days according to S18 of the Labour Act (Cap L1 LFN 2004)).
The actual number of days also depends on your policy as a company and or industry. You may insist on a 12-month timeframe before an employee is permitted to go on leave (you might be flexible on this though). The 12-month period starts from their date of employment.
With these stated, you must know that you need to ensure that you create a conducive and challenging atmosphere for your employees. Also, you could throw in some other incentives such as Training incentives, Travel benefits, Lunch, or last Friday shawarma/small chops and palm wine(highly recommended, lol), etc. These, however, are subject to you and your capacity for such.
All of these obligations should, of course, be stated in your employment contract offered to your employee at the point of employment.
You can create a standard one here for your employees.