Employment Agreement

What is an employment agreement?

An employment agreement (also known as an employment contract) is used when an employer wants to retain the employee to provide services in exchange for a fee. An employment agreement outlines the terms and conditions of the employment.

What are the different types of employment agreements?

There are several employment agreements. Here are the most common types:

• Permanent Employment Agreement: This is a long-term contract without a specified end date. The employee works for the employer indefinitely until either the employer or the employee terminates the contract.
• Fixed-Term Employment Agreement: This type of employment is set for a specific duration and terminates at the end of that period unless the parties agree to renew the contract.
• Temporary Employment Agreement: This is for a short period. It can be for a few days, weeks, or months.
• Full-Time Employment: This is a type of employment that requires employees to work at least 30 to 40 hours per week.
• Part-Time Employment Agreement: This type of employment requires employees to work fewer hours than full-time employees, usually 20 hours per week.

It is important to note that employment contracts can often combine elements of different types of contracts. For instance, an employment agreement might be for a part-time fixed-term position or a full-time permanent position.

What is the most common type of employment agreement?

The most common type of employment agreement is the full-time permanent employment. In this type of employment, the employee works full-time (35-40 hours per week) in a permanent position. The contract continues until terminated by either of the parties.

What is the difference between an employment agreement and a service agreement?

In an employment agreement, the employer controls the manner in which the work is done. Employees receive statutory benefits and protections, such as insurance and pension benefits, annual holidays, etc. The employer also handles tax withholdings and social security contributions.

On the other hand, a service agreement establishes a client-contractor relationship where the contractor maintains control over how the work is done. Contractors do not receive employee benefits and are responsible for their taxes.

For more information, see our legal guide "What's the Difference Between an Employee and an Independent Contractor?"

Is it mandatory to have an employment agreement?

Yes, in Nigeria, an employment contract must be given to the worker within three months of commencement of employment.

What must an employment agreement contain?

A valid employment agreement must contain at least the following mandatory clauses:

• Information about the parties, including the full names and addresses of the employer and employee.
• The type of employment, including whether the employment is full-time, part-time, permanent, or temporary.
• The duration of employment, if it is a fixed employment.
• Job position or designation of the employee.
• Work schedule or hours of work.
• The specific duties of the employee, including the employee's scope of work or the responsibilities expected from the employee.
• The employee's compensation or salary.
• Vacation period, as all employees who have worked for up to 12 months are entitled to vacation with pay.
• Other benefits like health insurance, pension, annual leaves, etc.

What is not allowed in an employment agreement?

The law strictly regulates employment agreements. Hence, among other points, it is not permitted to:

• Compensation below the minimum wage: The minimum wage for Nigeria is ₦30,000 (thirty thousand Naira). It is illegal to provide compensation below the minimum wage.
• Unpaid overtime: Employers are required to pay employees overtime wages if employees work beyond their stipulated hours.

What are the prerequisites of an employment agreement?

Before having an employment contract, the employee must have signed an employment offer letter. This demonstrates that the employee has accepted to work for the employer.

The employment agreement includes basic terms of the employment, including the job position, job description, compensation and other benefits, and work schedule.

After signing the employment agreement, the employer should send the employment agreement at least within three months from the commencement of employment. However, in practice, many employers send the employment agreement shortly after the employee accepts the employment offer.

Who can enter into an employment agreement?

The parties to an employment agreement are the employer (who hires a person to work) and the employee (a person who is hired for a job).

An employee can be any individual of 18 years old or older, who has the right to legally reside in Nigeria.

Under the law, a child and young persons under the age of 15 may work but there are strict rules regulating the employment of a minor. Generally, a child cannot work except when they are employed to do light work. Additionally, young persons below the 15 will require parental consent to work.

An employer should be a national or international organization based and officially registered as a legal entity in Nigeria.

Who cannot enter into an employment agreement?

An employment agreement cannot be used in a situation when an employee is less than 18 years old.

In cases where a minor is hired, the employer must comply with the rules and obtain the consent of their parent or guardian.

What is the duration of an employment agreement?

The duration of employment is a crucial aspect of an employment agreement, and it is mutually decided by the employer and the employee based on their needs and preferences. The duration can be categorized into two main types: indefinite period and fixed term.

When an employment agreement is indefinite, it means that the employment relationship continues until either the employer or the employee decides to end it. On the other hand, employment is for a fixed term if it is set for a specific duration, with a clear start and end date.

What has to be done after an employment agreement is ready?

The employment agreement should be signed by both parties in two original copies. The employment agreement can be signed in person or electronically. After signing, each party should keep one signed copy for their record.

Which documents should be attached to the employment agreement?

In some cases, the following documents may be attached to the employment agreement:

• Non-Disclosure Agreement;
• Employee Handbook;
• Employee Code of Conduct Policy;
• Employee Privacy Policy;
• Employee Expense Reimbursement Policy.

Which documents is the employee required to provide to the employer?

To proceed with further employment, an employee would need to provide an employer with the following list of additional documents:

• ID (passport or driving license);
• guarantor agreement;
• tax number;
• bank account details;
• proof of address;
• medical certificate of fitness (if applicable);
• police clearance certificate (if applicable); and
• completed forms, which include emergency contacts and personal information forms.

Is it necessary to register the employment agreement?

No, employment agreements are not registered with any authority or agency in Nigeria.

Is it necessary to have witnesses for an employment agreement?

Yes, the employment agreement needs to be witnessed to be valid.

After the parties have signed, the document must be witnessed by at least one person. The witness is required to hand fill in their names, addresses, and occupations and also sign the document.

What are the costs involved in the finalization of an employment agreement?

No costs are associated with the finalization of an employment agreement.

How is the payment of the wages done in an employment agreement?

Every employer is responsible for the payment of the wages of their employees, as well as the corresponding social security and income tax. There are different types of wages including hourly, monthly, and annual payments. However, the most common form of payment is monthly compensation. Employees typically receive monthly salaries at the end of the month by bank transfer.

Which laws apply to an employment agreement?

Employment and employment agreements are subject to Federal laws as issues relating to employment and labour matters in Nigeria are within the exclusive purview of the federal legislature. The Federal laws applicable to this agreement include:

• Labour Act, 2004.
• The Constitution of the Federal Republic of Nigeria, 1999 (as amended).
• Employees' Compensation Act, 2010.
• Factories Act, 2004.
• National Health Insurance Scheme Act, 2004.
• Personal Income Tax (Amendment Act), 2011.
• Trade Disputes Act, 2004.

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