Remittance of Contributions to the Employees’ Compensation Fund
Legal Nuggets
- The Employees’ Compensation Act, 2010 (the “Act”); establishes the Employees’ Compensation Fund and has wide and far reaching provisions on the compensation of employees and their dependants in the event of death or injury occurring in the course of employment. The Act applies to all employers and employees in the public and private sectors in the Federal Republic of Nigeria.
- An “employer” is defined under the Act as “including any individual, body corporate, Federal, State or Local Government or any of the government agencies, who has entered into a contract of employment to employ any other person as an employee or apprentice.
- An “employee” is defined as a person employed by an employer under oral or written contract of employment, whether on a continuous, part-time, temporary, apprenticeship or casual basis and includes a domestic servant, who is not a member of the family of the employer including any person employed in the Federal, State and Local Governments, and any of the government agencies and in the formal and informal sectors of the economy.
- In relation to contributions into the Fund, the Act provides that within the first 2 years of the commencement of the Act, every employer shall make a minimum monthly contribution of 1% (one per cent) of the total monthly payroll into the Fund.
- The Act further provides that the Board shall assess employers for such sums in such manner, form and procedure as the Board may, from time to time, determine for the due administration of the Act and that payment in respect of any assessment made shall be due on the 1st January in the year for which it relates.
- The import of Sections 33 and 35 of the Act discussed in paragraphs 10 and 11 above is unclear as one cannot readily decipher whether the provisions of sections 33 and 35 are intended to operate contemporaneously or complementarily, or whether section 34 operates subsequent to section 33 after the expiration of the 2- year period referred to.
- In one breath, the Act stipulates that contributions must be made monthly in the first two (2) years of the commencement of the Act (section 33(1)); In another breath, the Act provides that payments in respect of any assessment made pursuant to section 33 of the Act are due on 1 January in the year in which the payment relates.
- Though the Act is new and judicial pronouncement on the interpretation of the above stated provisions has not been sought in court, we are of the opinion that generally the scheme of the Act requires monthly remittances. Further it would seem that the provisions stipulating that payments are due on 1 January relates to cases in which the NSITF has made an assessment of contributions due from an employer.
- It is noteworthy that the Act prohibits employers from directly or indirectly deducting from the employees’ remuneration, the contributions required to be made into the Fund.
- Failure to make the required remittances under the Act is an offence punishable with a penalty in an amount equal to 10% of the unpaid sum. In addition, the directors, managers, secretary and other officers of the body corporate or persons purporting to act in such capacity committing the offence are also deemed to have committed the offence.