How to Run Payroll in Nigeria — A Step-by-Step Guide for HR (NTA 2026)

The monthly payroll cycle at a glance

Running payroll in Nigeria under the NTA 2026 is a six-phase cycle: capture clean employee data, validate changes, compute, review and finalize, pay, then remit and keep evidence. Each phase has statutory rules attached, and the errors that hurt — wrong PAYE at band boundaries, blanket NHF deductions, missing rent documentation — all trace back to a phase being rushed. This guide walks the full cycle in order.

1. Employee master data
2. Pre-run validation
3. Computation
4. Review and finalize
5. Payment and payslips
6. Remittance and evidence

Phase 1 — Employee master data

Identity and tax data

TIN and state of residence, at minimum. The state matters more than most teams realise: it decides which State Internal Revenue Service receives the employee's PAYE.

Compensation structure

Basic, housing, transport, and other allowances, each tagged taxable or not. The basic + housing + transport split drives pension and NHF, so it must be explicit, not implied.

Statutory participation

Pension RSA number and PFA, the NHF opt-in flag, and NHIA enrolment. Under the NTA, NHF is per-employee consent — record it, don't assume it.

Rent data for rent relief

Annual rent and tenancy documentation. No documents, no relief — an undocumented claim is a disallowed deduction waiting for an audit.

Phase 2 — Pre-run validation

• Salary changes confirmed and effective-dated.
• New hires and exits flagged for proration.
• Leave affecting pay applied.
• Rent updates and their documentation captured.
• NHF flag changes (opt-ins and opt-outs) recorded before the period closes.

Phase 3 — Computation

The computation follows one path: gross pay → statutory reliefs (pension, NHF where opted in, rent relief) → annual chargeable income → progressive NTA bands → annual PAYE ÷ 12 → other deductions → net pay. Employer-side lines — pension 10%, NSITF, ITF, NHIA — are accrued in the same run.

• PAYE is computed annually first, then divided — never a flat monthly rate.
• Proration is handled at contract rate: a mid-month joiner earns a fraction of the month at their annual terms — you don't re-band a part-month salary as if it were a smaller annual income.
• You can see the PAYE arithmetic live for any single salary.

Phase 4 — Review and finalize

• Reconcile against the prior month — headcount, gross, each statutory line.
• Investigate every variance to the kobo; unexplained small differences are how systematic errors hide.
• Finalizing locks the period: one finalized run per employer per period, stamped by whom and when.

Phase 5 — Payment and payslips

• Disburse net pay from the bank schedule the run produced — not a re-keyed copy.
• Distribute payslips showing every deduction line.
• Give employees self-service access so questions answer themselves.

Phase 6 — Remittance and evidence

• PAYE to the correct SIRS by the 10th of the following month.
• Pension within 7 working days of salary payment.
• NSITF monthly; ITF annually by 1 April; NHIA per scheme.
• Retain schedules and receipts — NRS analytics compares your filings to your patterns, and evidence is what closes a query quickly.

Common pitfalls (and what they cost)

• Monthly-rate PAYE shortcuts — drift at every band boundary that compounds into a filing discrepancy.
• Prorating salary before banding — treats a part-month as a low annual income and under-taxes it.
• Blanket NHF deduction post-NTA — an unlawful deduction for every employee who never opted in.
• Missing rent documentation — the relief is disallowed on audit and the under-deducted tax lands on the employer.
• Running a 2025 correction under 2026 rules — the Act applies prospectively; prior-year corrections need prior-year rules.

Do this with KoboHR

The six phases above are KoboHR's workflow, not a checklist beside it: master data with the statutory flags built in, validation before the run, annual-first computation, locked finalization, bank schedules and payslips, remittance schedules with due/overdue tracking. And the parallel-run guarantee means you can prove it against your current process before you switch. For the rules behind each line, see the statutory deductions reference and what changed under the NTA 2026; quick answers live in the Nigeria payroll FAQ.