Barely three days to the commencement of its threat of crackdown on non-pension compliant employers, labour and pension sector analysts have cautioned the NLC to handle the situation with care to avoid closure of small businesses, which will lead to employment, Ebere Nwoji reports.
The Nigerian Labour Congress (NLC), has said that effect from June 1, 2026, it would crack down on non-pension remitting employers as well as employers who have not keyed into the Contributory Pension Scheme (CPS) for their workers in line with the Pension Reform Act 2014.
The Chairperson NLC Lagos State Chapter Council, Funmi Sessi, who stated this at an interactive session between the executive members of the congress and the National Pension Commission (PenCom) recently in Lagos insisted that from June 1st, the congress would declare a statewide enforcement action against government institutions, private companies and any employer that failed to remit workers’ pension deductions and those that have failed to set up pension plan for their workers. She warned that defaulting employers would face prosecution and public exposure beginning from June 1, 2026. Sections 3(1) and 2(2) of the Pension Reform Act (PRA) 2014 mandate employers to set up and participate in the CPS for their workers. The Act states that in keying into the scheme, every employee should open a Retirement Savings Account (RSA) with any Pension Fund Administrator of his choice and at the end of every month his employer should deduct 8 percent of his salary and save into the RSA account while contributing 10 per cent of his fund into the same savings account for the employee.
According to the law, such deductions from the employee ‘s accounts should be remitted into his RSA not later than seven days after payment of his monthly salary. However, under Section 2(3) of the Pension Reform Act (PRA) 2014, employers with fewer than three employees are not automatically mandated to operate the CPS but they are legally entitled to participate voluntarily or enroll in the Micro Pension Plan established by the National Pension Commission (PenCom) which is now called Personal Pension Plan.
The statutory guidelines for sections 1, 2 and 3 say that organisations with 3 to 14 employees are not under obligation to key into the conventional CPS. The PRA 2014 sets the mandatory minimum threshold for private sector employers at 15 employees. In other words, the law does not strictly mandate standard CPS compliance for small businesses with 3 to 14 staff; however, such organisations may still set up pension plans by formally applying to PenCom for an employer code. Organisations with 1 to 2 employee such as small businesses, informal sector employers, and self-employed individuals with less than three workers are classified under the Micro Pension Plan guidelines, now personal pension plan. This is the position of the law on the CPS and business categories that are obliged to key into it.
PenCom’s Efforts
It is pertinent to state that since the establishment of the CPS in 2004 and the review of the PRA in 2014, PenCom’s efforts in ensuring that Nigerian workers retire with dignity is laudable. This effort became much more pronounced since the regime of the present Director General, Ms Bridget Omolola Oloworaran. With her launch of what she tagged “Pension Revolution 2.0”. Since then, a lot of reforms have been brought into the pension system all targeted at redefining the pension system and give hope of better future for an average Nigerian worker. In her effort to address this, she sought for collaboration with workers’ labour unions to support the effort of the commission’s compliance unit. The commission first had interaction with the Trade Union Congress (TUC) in Lagos and secured the support of its executive members then had interaction with the NLC. During the interactive session with NLC, the congress set up enforcement squad that will effect from June 1 crack down on employers that have not keyed into the CPS especially those that deduct employees’ contributions without remittances.
Analysts’ Caution
As laudable as the plan is, labour analysts have sounded a note of caution here.According to them, given the present economic reality on ground in Nigeria, the planned action stands as two edged sword that can make and mar present and future interest of Nigerian workers. Of truth, Pension is one of the major sources of long term investible funds as such PenCom and Pension Fund Administrators need to take actions that will boost pension assets mainly through inclusive pension planning for all Nigerians that engage in genuine means of livelihood.The quantum of pension assets now stands at over N29 trillion.According to the labour and pension sector analysts, already Nigerian workers especially those that work with micro and small scale businesses with up to 15 employees are at present passing through untold hardship as a result of increase in cost of transportation and inability of their employers to increase their salaries to cushion the effects of the new transport fare.On their part, their employers have turned down their requests of new salary scale on account of the high transport, high cost of housing in Lagos among others saying they themselves are no longer breaking even with profitability beaten down to the skin on account of high cost of fuel, gas and other expenses. Critical examination of operations of these set of micro and small business shows that their employers are actually not breaking even as such they are averse to any request for salary increase.
Small Businesses Expresses Concern
These set of employees often reject any deduction from their salary for savings as pension. For instance shortly after the interactive session between PenCom and NLC and the proposed action by the congress enforcement squad on June 1, THISDAY visited one of the chapters of the National Association of Proprietors of Private Schools (NAPPS) in Lagos during their monthly meeting, the April edition to find out their status as regards establishment of pension plan for private school teachers. During an interaction with some of the members which comprised of small and medium size schools that employ between 15 to25 teachers, each in his response showed that while the employers were willing to obey the law by establishing the pension plan, the employees are the problem regarding compliance.
Mobility Rate Among Private School Teachers
There is no doubt that there is very high rate of mobility among private school teachers. It was gathered that a private school teacher can change working place three times in a year. In such circumstance, setting up pension plan for them is difficult because though the pension window transfer is now operational, the law establishing it says an employee can change pension fund administrator just once a year. Asked if they had explained the issue of CPS to their employees majority of the proprietors said they have and even brought PFAs for their teachers to choose but the workers vehemently refused to comply. In fact, one of them said his teachers threatened to leave the service of the school if the proprietor tries to impose the CPS law on them. During a visit to one of the privates schools in Iba, Ojo Local Government Area, as THISDAY was interacting with the proprietor on the willingness of the teachers, to key into the CPS, he called one of them to join the discussion and the teacher said they have agreed to leave the service of the school enmass if their proprietor makes joining the pension schools compulsory. Asked whether they don’t want to save for their old age, the teacher who did not want his name in print said their main reason is that the rate of inflation in the country is so high that the salary teachers in private schools receive is not feeding their families let alone deducting anything from it every month in the name of pension. Again he said if leaves one school for another and the new school does not have c p s perhaps because of size his deducted salary in the other school would be a loss for him.With this he’s said he preferred having his salary complete every month. According to him they preferred their employers to pay the 10 per cent the law says employers should contribute into their workers’ RSA as salary increase instead of saving it for them as pension. The teachers argued that it is somebody that feed well that lives to see old age . On the other hand he blamed government for not encouraging private school owners especially the growing ones to be in a better poison to pay good salaries. According to one of the teachers, a school owner with less than one hundred pupils whose termly school fees is N40,000 per term cannot pay good salary that will sustain his staff because salaries are paid every month while school fees are paid once in a term.
Medium Scale Private Hospitals
A visit to some private hospitals depicts similar picture as in some cases, salaries of private school teachers are higher than those of registered nurses working in private hospitals. Like the teachers, some of the private hospital workers threatened to quit their jobs if their employers try to force pension deductions on them.Their reason being that their take home package is not enough to pay for their daily transport to their places of work and solve family problems let alone pension deductions.Among factory workers THISDAY findings show that some prefer to receive their wages on daily or weekly basis.
Task Before PenCom
Against this backdrop, PenCom has got a big work at hand concerning the June 1 crack down proposal by NLC in order to see that the proposed action does not do more harm than good to Nigerian workers. Going by the determination and zeal seen on the faces of NLC enforcement squad to see all employers open RSA for their employees, the commission’s starting point according to stake holder should be to ensure that the squad engaging in the enforcement is conversant with the aspect of the law that says the pension law is compulsory only for organisations that employed up to 15 workers.
Analysts said NLC should be well educated on who the law is compulsory for and whom it is not in order to avoid wrong application of the law and forcing of people out of jobs. When the Lagos State Chapter of Nigerian union of Journalist embarked on similar crackdown on media houses owing journalist, they succeeded in shutting down some newspaper houses that were owing their workers and rendered their workforce jobless. Some of the workers lamented that NUJ should have allowed the newspaper houses to operate at their comatose state so that they retain their jobs and use the names of the newspapers to fend for their families. This being the case, the analysts however insisted that both PenCom and the NLC squad should identify companies, firms that could be seen as high brow jobs with big package for their workers and ensure that they allign with CPS but trade with caution among small businesses that have even up to 20 workers to avoid closing down already dying firms and throw workers out of jobs. Also, as the NLC said, the focus should be more on those employers that deduct workers’ own portion of the pension contributions and fail to remit the same into their workers’ RSA while refusing to contribute their portion as employees. The analysts said more focus should be on such organisations instead of small and micro businesses. The target according to them, should not be to enforce all business firms especially the micro businesses that have up to 15 workers as such action will amount to disincentive to workers and also may trigger unemployment as a result of downsising.
