Are you an employer of labour? The law requires that you contribute to your employees’ retirement savings accounts (RSAs).
Your contribution not only shows that you value your employees’ contribution to the growth of your business, but that you also care about their future beyond their time with you.
Here are some basic things you need to know about pensions in Nigeria, no matter the size of your business:
Pension in Nigeria is mandatory for all employees in the public service and private sector (with minor exceptions)
The employee is empowered by the Pension Reform Act (PRA), 2014, to choose the pension fund administrator (PFA) of his / her choice
The Contributory Pension Scheme (CPS) is, as the name implies, contributory in nature. This means that the employer and employee are both expected to make contributions to the employee’s retirement savings account
The minimum contribution by the employer is 10%, of monthly emoluments while that of the employee is 8%
The employer is to assist the employee in making his / her contribution by deducting it at source, from the monthly salary, and remitting it to the employee’s selected PFA no later than 7 working days from the payment of the employee’s salary
Although the employer is mandated to contribute a minimum of 10%,of your monthly emoluments you are allowed to contribute more if you so desire.
The employer may elect to bear full responsibility for funding the employee’s retirement savings account. However, in this scenario, the contribution must be at least 20% of the employee’s monthly emolument
If the employee fails to open a retirement savings account within 6 months of employment, the employer is to request a PFA to open a ‘Nominal Retirement Savings Account’ for the employee
Failure to deduct or remit pension contributions within the timeframe stipulated by the law is an offence
Upon the death of an employee, the funds in his / her pension account are paid to his / her named beneficiary / beneficiaries.
Finally, it is important to note that, apart from being mandatory by law, contributing to the retirement savings accounts of employees has been proven to result in an increase in productivity by keeping employees motivated. In turn, this yields higher profitability for companies.