The contract of employment in Nigeria is used under the employment and labour relations to attribute rights and responsibilities between parties to a bargain. It emphasizes the power of the employer to control the work of the employee.

Contract of employment is defined under section 91 of the Labour Act 2004 as “an agreement whether oral or written, express or implied whereby one person agrees to employ another as a worker and that person agrees to serve the employer as a worker”.

In Nigeria, with the enforcement of the laws that guide employment relationship, a contract of employment must be signed and agreed by parties to the contract, when signed it becomes binding on the parties. Where there is a breach of the contract, the aggrieved party can enforce his rights at the National Industrial Court within the jurisdiction of the aggrieved party.

The main legislation that regulates employment and labour relations in Nigeria is the Labour Act Cap L1, Laws of the Federation of Nigeria 2004 (the Act). Other legislation regulating contract of employment include;

  • The constitution of the Federal Republic of Nigeria
  • The Trade Unions Act 2004
  • The Trade Dispute Act 2004
  • The National Industrial Court Act 2006

Element of contract of employment

The element of the contract of employment is dependent on the right and obligations of the employer and employee. In a contract of employment, an employer must give the employee a written contract within three (3) months of the commencement of the employment according to Section 7 of the Act. The provisions of the contract of employment regulate the relationship between employer and employee.

A written contract of employment must contain the following according to the provisions of the Act.

  • It must contain the name of the employer or group of employers
  • The name and address of the employee, the date and place of his engagement
  • The nature of the employment
  • If the contract is for a fixed term, it must state the date the contract expires.
  • The appropriate period of notice to be given by the party wishing to terminate the contract.
  • The rate of wages/salaries and method of calculation, the manner and periodicity of payment of wages.
  • Any terms and condition relating to; hours of work; holiday and holiday pay; incapacity to work due to sickness, injury and provisions for a sick day if any and insurance etc
  • And finally any special conditions of the contract.

Generally, the important provisions to be included when drafting a contract of employment entail the following;

  1. The position: it is fundamental that a contract of employment expressly provides a prospective employee with a clear understanding of the position, job requirements and the essential duties the service entails. The contract must not be ambiguous but clear enough to leave no doubt as to the expectations of the employer.
  • Length of the contract: the employer must bear in mind that when drafting a contract of employment, the interest of both parties is protected and favourable. For this reason, the contract of employment must dictate and stipulate conditions applicable to the employer and employee to extend, reduce or terminate the contract term.
  • Compensation and means of calculation: it is fundamental that all prospective employers ensure that a contract of employment defines the wages and compensation of employees.

When salaries are negotiated by parties, the wage must be specified and dictate the method of payment either monthly, weekly or if by the commission, it must state the percentage rate.

  • Performance expectation and requirements: in a standard contract of employment, the performance review of the employee is usually inserted. These are performance measures for which the employer would hold the employee accountable. The production goals and revenue enhancement of the employer should also be included.
  • Benefits and Severance: the employee benefits package should also be expressly spelt out where applicable, which includes health or other insurance offered, the percentage of benefit premium to be paid by the employee. It is fundamental that benefits such as holiday, leave, vacations, profit sharing and retirement plans for the employees are enshrined in the contract of employment.
  • Termination of employment: the termination of the contract must be in compliance with section 11 of the Labour Act. The contract of employment must make provisions of the intention of parties to terminate the employment on expiration or otherwise. Thus, a notice of termination must be given by the party of the intention to do so. The Court may impose damages against an employer for wrongful termination of a contract of employment.

The notice to be given according to the provisions of the law is:

  • one day, where the contract has continued for a period of three months or less;
  • one week, where the contract has continued for more than three months but less than two years;
  • two weeks, where the contract has continued for a period of two years but less than five years; and
  • one month, where the contract has continued for five years or more.

A contract of employment defines the relationship that exists between an employer and an employee. For a contract of employment to be binding, the parties must sign and agree to the contract.

The purpose of having a contract of employment cannot be overemphasized. A well-drafted contract, which clarifies expectations, protects the parties in event of termination, resignation or wage dispute.

By Resolution Law Firm


Tel | WhatsApp: +2348099223322