Your Last Paycheque — What Nigerian Law Says Your Employer Owes You

A Relatable Story: She Counted the Days. The Law Said: Count the Months.

Adaeze had given everything to Pinnacle Corporate Solutions Ltd for five years. As Head of Client Relations, she built their biggest accounts, survived three restructurings, and trained two junior managers who now earned more than her. When she finally submitted her resignation letter in September, she felt a quiet, hard-won relief.

That relief lasted exactly eleven days — until payroll sent through her “final settlement.” Her monthly gross had been divided by 30, then multiplied by the 11 days she worked before her resignation took effect. The HR Manager explained matter-of-factly: “We only pay for days actually worked.”

What Adaeze did not know — and what her employer was counting on her not knowing — was that a court in Nigeria had already ruled on exactly this situation. The National Industrial Court of Nigeria (NICN) had been unequivocal: for salaried employees in periodic (monthly) employment, you cannot calculate payment by the day. That logic belongs to daily-wage workers, not corporate staff.

Adaeze’s story plays out across boardrooms and exit interviews in Lagos, Abuja, Port Harcourt, and beyond, every single week. At Lummina Law Firm, we believe knowledge is the first shield every Nigerian worker deserves. This edition of our newsletter is dedicated to making sure Adaeze’s story does not become yours.

The Landmark Judgment: Babalola v. Equinox International Resources Ltd

Court: National Industrial Court of Nigeria (NICN) — Lagos Division

Year: 2023

The court held as follows:

“Pro-rated or fractional payment of salary is not applicable to workers in periodic employment, as their salaries are calculated on a per calendar month basis. Pro-rated payment is only applicable to daily-paid workers.”

— Per the Honourable Judge of the National Industrial Court of Nigeria

In plain terms, this judgment means that where an employee is engaged on a monthly salary basis, the employer cannot divide that monthly salary by the number of days in a month and pay only for days worked when computing the employee’s final entitlement on resignation or termination.

The Core Legal Issue: What Is Pro-Rated Salary and Why Does It Matter?

When an employee leaves a company mid-month, many employers instinctively calculate the final pay by dividing the monthly salary into daily units and paying only for the days worked. The NICN has held this practice to be legally wrong for salaried employees.

Nigerian employment law recognises a fundamental distinction between two categories of workers:

(a) Periodic / Salaried Employees

These are employees engaged on a monthly basis with a fixed, predetermined salary per calendar month. The NICN has held that their pay cannot be divided into daily fragments for the purpose of computing final entitlement. This covers the vast majority of office, corporate and professional workers in Nigeria.

(b) Daily-Paid / Casual Workers

These are workers engaged on a day-to-day basis with no fixed monthly salary. Their pay is calculated strictly per day worked. Pro-rated calculation is appropriate and lawful for this category of workers only.

The court in Babalola v. Equinox firmly closed the door on employers applying the daily-rate logic to monthly employees. Once an employee is engaged with a stated monthly salary, that figure is their indivisible unit of pay for each completed month of employment.

“An employer cannot simply divide your salary by 30 and pay you for days worked. That is not what Nigerian law contemplates for salaried employees.” — NICN Principle: Babalola v. Equinox International Resources Ltd

The Statutory Framework: The Laws That Protect You

The court’s ruling draws on a web of statutes and constitutional provisions that together form the legal architecture of employee protection in Nigeria. Below is a detailed breakdown:

1. The Labour Act, Cap L1, Laws of the Federation of Nigeria 2004 (Sections 1, 7, 11)

The Labour Act is the primary federal legislation governing employment of workers in Nigeria. Section 7 requires employers to provide employees with written terms and conditions of employment within three months of engagement, including the rate of remuneration and how it is calculated.

Section 11(1) provides:

“Either party to a contract of employment may terminate the contract on the expiration of notice given to the other party of his intention to do so.”

Section 11(2) further specifies minimum notice periods upon resignation:

One day — for contracts of less than three months

One week — for contracts of three months to two years

Two weeks — for contracts of two to five years

One month — for contracts of five years or more

Critically, the Act also permits payment of wages in lieu of notice, which — per the NICN — must be calculated using the employee’s gross salary, not merely the basic component.

1. Constitution of the Federal Republic of Nigeria, 1999 (as amended) — Section 254C

The Third Alteration to the Nigerian Constitution in 2010 was transformative. It vested the National Industrial Court with exclusive civil jurisdiction over all labour and employment matters, and authorised the Court to apply international best practices and ILO conventions.

Section 254C(1) provides:

“Notwithstanding the provisions of sections 251, 257, 272 and anything to the contrary in this Constitution, the National Industrial Court shall have jurisdiction to the exclusion of any other court in civil causes and matters relating to or connected with any labour, employment, trade unions, industrial relations...”

This provision is the constitutional basis upon which the NICN has progressively expanded employee protections, drawing on ILO conventions and international labour standards to interpret Nigerian employment law generously in favour of workers.

1. National Industrial Court Act, 2006 (Sections 7, 12, 13)

The NIC Act formally establishes the court and defines its remedial powers. Under this Act, the court may award salary arrears, damages for wrongful termination, reinstatement orders, and declaratory relief. It is before this court that disputes over final salary calculations — like the one in Babalola v. Equinox — are properly brought.

1. ILO Convention No. 95 — Protection of Wages Convention, 1949 (Ratified by Nigeria)

Nigeria has ratified ILO Convention 95, which requires that wages be paid regularly and that deductions from wages be restricted to those permitted by law, collective agreement, or arbitration award. The NICN routinely invokes this Convention to reinforce domestic statutory protections.

Article 8(1) provides:

“Deductions from wages shall be permitted only under conditions and to the extent prescribed by national laws or regulations, or fixed by collective agreement or arbitration award.”

1. Western Development Corporation v. Jimoh Abimbola (1972) ANLR — Supreme Court of Nigeria

This Supreme Court authority established the foundational principle on damages for wrongful dismissal in Nigeria:

“The measure of damages for wrongful dismissal is prima facie the amount the plaintiff would have earned had he continued with the employment up till the period of judgment.”

Courts apply this principle to ensure that an employee is, as far as money can achieve it, restored to the economic position they would have occupied had there been no unlawful act by the employer.

Practical Breakdown: What This Means When You Resign

1. Earned Salaries — Always Payable, No Exceptions

No matter how you resign — whether with full notice, short notice, or immediate effect — your earned salaries cannot be withheld. The NICN has been emphatic: resignation, even immediate resignation, does not disentitle an employee from salaries already earned. The employer must pay all outstanding salary up to the effective date of resignation.

1. The Monthly Salary Rule

For salaried (monthly) employees, the salary for any given month is an indivisible unit. If your employment runs through any part of a calendar month, the question of entitlement to that month’s pay is governed by your contract and the court’s interpretation — not by a simplistic day-rate calculation. The employer cannot unilaterally convert your monthly salary into a daily rate to reduce your final payment.

1. Payment in Lieu of Notice — Gross, Not Basic

Where an employer terminates an employee or waives the notice period, payment in lieu of notice must reflect the employee’s gross salary. This means it must include all salary components, not just the “basic” line on your payslip.

NICN Principle: “The employees are entitled to gross salary in lieu and not basic salary unless the terms of employment expressly state otherwise.”

1. Fringe Benefits — A Different Rule Applies

It is important to distinguish between earned salaries and discretionary benefits. While earned salaries must be paid on resignation, an employer may lawfully withhold fringe benefits — such as bonuses, non-contractual allowances, and performance-linked incentives — particularly if the employee resigned without serving the required notice period. What constitutes a contractual entitlement versus a fringe benefit depends on the terms of your employment contract.

Summary: Employee’s Rights on Resignation

An employee who resigns is generally entitled to the following:

All earned salary up to the date of resignation

Full month’s pay — not pro-rated by day

Gross salary in lieu of notice, where applicable

Accrued leave pay, as per contract or company policy

Gratuity, if the company policy provides for it

Pension contributions owed to the employee’s PFA

Any other entitlements provided for in the contract of employment

What Employers May Lawfully Withhold

Discretionary bonuses not yet earned

Non-contractual allowances

Benefits contingent on serving out the required notice period

Refund of training costs, where the contract so provides

Amounts owed by the employee to the employer

Outstanding loans or advances

A Note on Constructive Dismissal

If an employer made working conditions so unbearable — through deliberate humiliation, denial of salary, demotion, or sustained harassment — that the employee had no reasonable choice but to resign, the NICN may treat this as constructive dismissal. In that case, the employee is entitled to bring a claim for wrongful termination and damages, even though they technically submitted the resignation letter.

Pre-Resignation Checklist for Nigerian Employees

Before submitting your resignation, ensure you do the following:

Review your contract of employment: Understand your notice period obligations, salary components, and any repayment clauses for training or relocation costs.

Calculate what you are owed: Tally your outstanding salary, unused annual leave balance, and any other contractual entitlements before your last day.

Submit a written resignation: Always resign in writing (letter or email). This creates a paper trail and starts the notice clock definitively.

Request a full and final settlement statement: Ask HR in writing to provide a breakdown of all amounts to be paid and deductions, before your last day if possible.

Check that your pension contributions are up to date: Under the Pension Reform Act 2014, your employer must remit both employee and employer contributions to your PFA every month. Confirm no arrears exist before you leave.

Do not sign away your rights: Be cautious about signing any exit document or deed of release without legal advice. Some companies use these to waive your right to sue for unpaid entitlements.

Keep copies of all key documents: Payslips, your offer letter, and all correspondence are your primary evidence if a dispute arises.

Send a formal demand letter if underpaid: Before filing at the NICN, send a written demand to the employer specifying exactly what is owed and the legal basis.

Dispute Resolution: Where to Go When Your Employer Refuses to Pay

Step 1: Internal Resolution

Raise the issue formally with HR and management in writing. Document all responses. Many employers will correct errors rather than face the costs of litigation.

Step 2: Federal Ministry of Labour and Employment

The Ministry can receive complaints and mediate disputes, particularly for workers covered under the Labour Act. This is a free, informal first step.

Step 3: National Industrial Court of Nigeria (NICN)

The NICN has exclusive jurisdiction over all employment matters in Nigeria. It sits in Lagos, Abuja, Port Harcourt, Kano, Enugu, and other state divisions. Filing fees are accessible. This is the appropriate court for salary disputes, wrongful termination, and related claims.

Step 4: Legal Aid Council of Nigeria (LACON)

If you cannot afford a lawyer, LACON provides free legal representation to qualifying individuals in employment disputes before the NICN.

About Lummina Law Firm

Lummina Law Firm specialises in employment law and workers’ rights in Nigeria. If your employer has underpaid your final settlement, withheld earned salaries, or treated your resignation unfairly, our team is ready to advise and represent you. We illuminate the path to justice.

Editor’s Note: Knowledge Is Your First Line of Defence

The gap between what employers pay and what the law requires is, in many cases, not malice — it is simply the assumption that employees will not know their rights. The ruling in Babalola v. Equinox is not new law. It is the articulation of a principle the courts have long upheld: a salary is a monthly entitlement, not a daily commodity to be rationed at exit.

Share this newsletter with a colleague. Send it to a friend who just resigned. Post it in your WhatsApp group. The more Nigerian workers understand their rights, the harder it becomes for those rights to be quietly ignored.

The law is on your side. Lummina is on your side.

“The goal of a final settlement is not charity from the employer. It is the lawful discharge of a legal obligation.” — Lummina Law Firm

LUMMINA LAW FIRM | Illuminating Justice. Empowering Rights.

This newsletter is for general information and awareness purposes only and does not constitute legal advice.

For specific legal issues, consult a qualified lawyer or contact the Legal Aid Council of Nigeria (LACON). © 2026 Lummina Law Firm.