Employers in Nigeria risk huge financial penalties if they continue to make salary deductions not recognised by law, labour consultant and HR generalist Edozie O.N has warned.
Speaking in an exclusive interview with Anchor News Online, Edozie explained that many HR managers and business owners fall into what he described as a “silent trap” by deducting workers’ pay for lateness, poor performance or disciplinary reasons — actions that directly violate the Nigerian Labour Act.
Edozie, who heads content strategy and workforce solutions at Africa’s leading job platform MyJobMag, noted that such practices are widespread in the private sector and could expose companies to lawsuits at the National Industrial Court.
“It looks harmless until one employee challenges it legally, and then the organisation is exposed to serious risk. We’ve seen employers pay millions in damages for something as simple as unauthorised deductions,” he said.
He explained that while many HR managers implement deductions with good intentions, such as enforcing discipline, the law is strict on what employers can remove from wages. Only statutory deductions — PAYE tax, pensions, National Housing Fund, court-ordered deductions, trade union dues, or agreed repayments for overpayments — are lawful.
“Anything outside this list, including lateness deductions, is illegal, no matter what the staff handbook says,” Edozie stressed.
He cited court rulings underscoring the risk for employers. In Adebusola Adedayo Omole v. Mainstreet Bank Microfinance Bank (NICN/LA/341/2012), the court ruled that salary reduction breached both the Labour Act and ILO Convention No. 95. In another case, Mrs Evelyn Ugochi Okaranwolu v. Clear Essence California Spa & Wellness Resort (NICN/LA/613/2014), the employer was ordered to refund about ₦3 million in unlawful deductions.
Edozie urged employers to urgently review contracts and staff handbooks to remove clauses that contradict the Labour Act. “Instead of saying ₦5,000 will be deducted for lateness, organisations should use non-financial sanctions or performance systems that reward punctuality,” he advised.
He also recommended that payroll systems be audited to identify illegal deductions, HR staff be trained on compliance, and legal counsel sought before implementing policies.
“With the rising number of workplace disputes reaching the National Industrial Court, Nigerian employers who ignore payroll compliance are putting their businesses at financial and reputational risk,” Edozie warned.
He added that HR managers must rethink discipline strategies and align policies with labour law to avoid becoming the next costly example in court.
