Hire Contractors in Nigeria

Nigeria is Africa’s most populous nation. It is expanding its economic activities in sectors like manufacturing, finance, and technology. As such, it is a strategic location for businesses seeking to expand their operations. 

Interestingly, Nigerian laws require businesses to obtain a 12-month permit to hire foreign workers before officially incorporating. 

As a consequence, many companies choose to hire foreign independent contractors rather than employees. 

Continue reading this guide to get essential insights, from ways to hire contractors in Nigeria to managing payments and ensuring compliance with an Agent of Record (AOR) contractor management platform.

How to Hire Contractors in Nigeria

Hiring contractors in Nigeria and managing them is a straight-forward process involving: 

• (Although optional) Choosing any of the three recognized business structures in Nigeria, Limited Liability Company, Unlimited Company & Company Limited by Guarantee, will give better control over contractor management.
• To hire contractors in Nigeria, utilize online platforms like Upwork, Fiverr or local freelance marketplaces like Nairalance and Jobberman. 
• Creating a comprehensive contract outlining the scope of work, payment terms, intellectual property rights, and dispute resolution. 

While this is the process for directly hiring independent contractors in Nigeria, AOR acts as a better alternative to it.

You must consider using an AOR to handle HR and compliance matters for complex projects or large teams. 

By using an AOR, like Skuad, to hire contractors in Nigeria, you can

• Hire and onboard independent contractors, with ease
• Streamline contractor lifecycle management
• Automate compliance management per local laws
• Pay contractors in multiple currencies

Hiring contractors through Skuad AOR

Skuad is an AOR platform that simplifies hiring and managing independent contractors, especially in international markets. 

By partnering with Skuad, you can effectively outsource the complexities of contractor management, allowing you to focus on your core business operations. 

Skuad AOR works in the following way: 

• Skuad takes over the contractual obligations.
• Skuad ensures compliance with local labor laws, handles payroll, and manages taxes.   
• While not mandatory for contractors, Skuad can offer optional benefits packages.
• Skuad helps protect your business from employment-related risks, such as IP protection or converting contractors into full-time employees.    

How to pay contractors in Nigeria

Paying Nigerian contractors requires careful consideration of several factors, including payment methods, exchange rates, fees, and tax implications.

Here's a breakdown of your options:

Challenges of Hiring Contractors in Nigeria

The high rate of self-employment in Nigeria (approximately 88%) presents several challenges for businesses seeking to hire contractors:

1) Defining the contractor-client relationship

• There's a higher risk of misclassifying contractors in Nigeria as employees, leading to disputes over employment status, tax implications, and benefits.
• Otherwise, incorrectly classifying an employee in Nigeria as a contractor can result in a loss of ownership over the intellectual property (IP) created by that individual.

2) Skill assessment and verification

• The informal economy in Nigeria is estimated to be 58% of the country's GDP. 
• Many self-employed individuals operate within the informal economy, making verifying their qualifications and work experience challenging.

3) Talent pool and competition

• With a large pool of self-employed individuals, competition for skilled contractors can be intense, making attracting and retaining top talent challenging.
• Nigerian contractors may be more inclined to switch jobs for better opportunities due to the market's competitive nature.

4) Project management and control

• Many self-employed individuals are accustomed to working independently, making contractor management in Nigeria complex. 

5) Cultural and linguistic factors

• Even though English is the widely spoken language in Nigeria, the country boasts over 500 other languages, which indicates potential language barriers.
• Respect for Islamic and Christian holidays is crucial for project planning and scheduling.
• Family and community ties can influence decision-making processes, potentially extending hiring timelines.

Fortunately for global businesses like yours, contractor management software like Skuad can see you through contractor onboarding, drafting contracts, managing independent contractors, invoice tracking, and payment disbursement.

Hiring Contractors Directly vs Hiring Contractors via Skuad

Here’s a comprehensive table comparing the impact of directly hiring contractors and hiring contractors via Skuad.

Go through this checklist to avoid misclassifying employees as independent contractors in Nigeria.

Cost of Hiring Contractors in Nigeria

While Nigerian contractors are typically responsible for their taxes and benefits, other costs must be considered.

• Primarily Nigerian Naira (NGN), but USD payments might apply to specific roles.
• A monthly baseline of 30,000 Nigerian Naira is a general guideline, but actual salaries vary based on role, experience, and industry.

Moreover, there might be indirect costs associated with contractor engagement:

• Expenses related to managing and coordinating contractor activities.
• If the company provides tools or equipment for the contractor's use.
• Indirect taxes like VAT might be applicable depending on the nature of the project or services.

How to Convert a Contractor into an Employee in Nigeria

Converting a contractor to an employee in Nigeria is similar to switching employees from 1099 to W2 tax status in the US. You can go about it in two ways: 

• Through a local entity in Nigeria
• Through an Employer of Record (EOR) like Skuad 

Going through a local entity, you will have to consider the following steps: 

1. Terminate the contractor relationship and communicate the reasons for the conversion.
2. Extend a formal employment offer outlining the terms and conditions, including salary, benefits, and job description.
3. Enroll the new employee in the company's payroll system, ensuring accurate tax deductions and contributions.
4. Enroll the employee in applicable benefits plans, such as health insurance, pension schemes, and leave entitlements.
5. Comply with Nigerian labor laws to extend statutory benefits like minimum wage, pension contributions, etc.

However, the biggest benefit of using contractor management software like Skuad EOR is that it allows you to avoid the complexities of these processes. 

Skuad handles the transition, from terminating the contractor agreement to onboarding the new employee, payroll, and benefits administration, ensuring compliance with local labor laws.

Hire Contractors in Nigeria with Skuad

Leveraging a contractor management platform like Skuad can significantly streamline the hiring process. 

Skuad's AOR model empowers businesses to efficiently hire, pay, and manage independent contractors without the need for a local entity in Nigeria. 

With its global reach across 160+ countries, Skuad offers a comprehensive solution for organizations seeking to expand their workforce and tap into the Nigerian talent pool.

Book your demo today to learn more about hiring contractors globally.

FAQs

1) Who is an independent contractor in Nigeria?

In Nigeria, anyone who is self-employed and provides specific services in exchange for payment can be an independent contractor. Unlike employees, contractors have more autonomy in their work, set their hours, and are responsible for their taxes and benefits. 

2) How do I hire independent contractors in Nigeria?

You can source contractors through online platforms, job boards, or professional networks. Once you select a Nigeria contractor, create a detailed contract outlining the terms and conditions, including payment terms, intellectual property rights, and dispute resolution.

3) How do I pay an independent contractor in Nigeria?

Paying a Nigeria contractor typically includes bank transfers, online payment platforms like PayPal or Flutterwave, or digital money transfer services like Remitly. Moreover, global businesses are switching to contractor management software like Skuad to handle global payroll for independent contractors, even in Nigeria.

4) What is the difference between a self-employed person and an independent contractor in Nigeria?

An independent contractor is a specific type of self-employed individual who works on a project basis. While both are responsible for their taxes and benefits, independent contractors typically have more defined contracts and work relationships than self-employed individuals who run a business and might have a broader range of clients or services.

5) How does Skuad help hire, pay, and manage independent contractors in Nigeria?

Skuad simplifies the process of hiring, paying, and managing independent contractors in Nigeria. As an Agent of Record (AOR), Skuad ensures timely and accurate payments and mitigates employment-related risks, all while maintaining compliance with Nigerian regulations.