How to Run Payroll for a Bakery, School or Pharmacy in Nigeria Without an Accountant

Running a small business in Nigeria is hard enough without payroll giving you a headache at the end of every month. Whether you own a bakery with four members of staff, manage a community pharmacy, or run a private school, the challenge is the same: how do you pay your employees correctly, deduct the right taxes, and stay compliant with Nigerian law, without hiring an accountant you may not be able to afford yet?

The good news is that small business payroll in Nigeria has become far more manageable in recent years, especially for businesses with fewer than 15 staff. With the right process and the right tools, you can handle payroll yourself, accurately, legally, and in a fraction of the time most business owners expect.

This guide walks you through exactly how to run payroll in Nigeria without an accountant, what deductions you need to make, how NTA 2025 compliance affects your business, and how Built For Small Business (BFSB) makes the whole process free and straightforward.

Why Small Business Payroll in Nigeria Feels Complicated

For many small business owners in Nigeria, payroll feels intimidating for a few reasons:

• The tax rules PAYE, pension, and NHF involve multiple calculations that interact with each other.
• The penalties for getting it wrong can be significant, especially for PAYE non-compliance.
• Most payroll software on the market is designed for larger businesses and comes with monthly subscription fees that don't make sense for a small team.
• Accountants who specialise in payroll often charge fees that eat into the margins of a business still finding its feet.

The result is that many small businesses in Nigeria either guess at their payroll deductions, rely on outdated spreadsheet formulas, or skip proper compliance entirely, leaving themselves exposed to penalties from the relevant state tax authority or the Federal Inland Revenue Service (FIRS).

None of that is necessary. The fundamentals of small business payroll in Nigeria are learnable, and once you understand them, the process becomes routine.

The Core Payroll Deductions Every Nigerian Small Business Must Know

Before you can run payroll correctly, you need to understand the three main statutory deductions that apply to most employees in Nigeria.

1. PAYE (Pay As You Earn)

PAYE is income tax deducted from your employees' salaries and remitted to the relevant State Internal Revenue Service (SIRS), the state where your business operates. The rate is progressive, meaning higher earners pay a higher percentage. Under the Personal Income Tax Act and the NTA 2025 guidelines, the tax bands are applied to an employee's taxable income after allowable reliefs.

As an employer, you are responsible for deducting the correct PAYE amount from each employee's gross pay every month and remitting it to the state revenue authority by the 10th of the following month.

Important: PAYE is calculated on taxable income, not gross salary. Each employee is entitled to a Consolidated Relief Allowance (CRA) of the higher of ₦200,000 or 1% of gross income, plus 20% of gross income. This relief reduces the amount of income that is actually taxed.

2. Pension (PFA Contribution)

Under the Pension Reform Act, employees earning above the minimum wage threshold are entitled to pension contributions. The standard rates are:

• Employee contribution: 8% of the monthly emolument
• Employer contribution: 10% of monthly emolument (minimum)

Monthly emolument" covers basic salary, housing allowance, and transport allowance. Both contributions are remitted to the employee's chosen Pension Fund Administrator (PFA) monthly. Note that businesses with fewer than three employees are currently exempt from mandatory pension contributions, though voluntary participation is encouraged.

3. NHF (National Housing Fund)

The NHF requires eligible employees earning ₦3,000 or more per month to contribute 2.5% of their basic salary to the Federal Mortgage Bank of Nigeria. As an employer, you deduct this from the employee's salary and remit it monthly. NHF is often overlooked by small businesses, but it remains a legal obligation.

NTA 2025 note: The Nigeria Tax Act 2025 consolidates and updates several tax administration rules. BFSB's payroll module is built to reflect NTA 2025 compliance, so your deductions are always calculated against the current legal framework, not outdated tax tables.

How to Calculate Net Salary in Nigeria: A Simple Example

Let's say you employ a staff member at your bakery with the following monthly package:

• Basic salary: ₦80,000
• Housing allowance: ₦20,000
• Transport allowance: ₦15,000
• Gross monthly salary: ₦115,000

Here's how the deductions work:

• CRA: Higher of ₦200,000 annually or 1% of gross annual income (₦16,667/month equivalent), plus 20% of gross (₦23,000/month) = approximately ₦39,667/month relief
• Taxable income: ₦115,000 − ₦39,667 = ₦75,333/month
• PAYE: Applied progressively to annual taxable income
• Pension (employee 8%): ₦9,200 (on emolument of ₦115,000)
• NHF (2.5% of basic): ₦2,000

The net salary is what's left after all deductions. As you can see, even for a relatively simple salary structure, there are several moving parts. Doing this manually for five or ten employees every month and making sure the remittances go to the right authorities on time is where most small business owners start to struggle. This is exactly the kind of calculation BFSB handles automatically.

Running Payroll for Specific Business Types in Nigeria

Different types of small businesses have slightly different payroll considerations. Here's what to keep in mind for the three most common cases.

Payroll for a Bakery in Nigeria
Bakeries typically employ a mix of full-time staff (bakers, managers) and casual or part-time workers. Key considerations include:

• Casual workers paid daily or weekly still attract PAYE obligations if their annualised income exceeds the tax-free threshold.
• Overtime pay is common in bakeries and must be factored into the gross salary before deductions are calculated.
• Staff often receive benefits in kind (meals, transport), which may be treated as taxable emoluments depending on how they are structured.

Tip for bakery owners: Keep your full-time and casual worker payrolls separate. BFSB lets you manage multiple employee types within the same payroll run, making it easy to handle both.

Payroll for a School in Nigeria
Private schools, from nursery and primary to secondary, often have a larger number of staff than other small businesses, including teachers, administrative staff, and support workers. Key payroll considerations include:

• Teachers may be on term-based contracts, meaning their pay structure differs from that of month-to-month employees.
• Schools often make contributions to teachers' NUT (Nigeria Union of Teachers) dues these are separate from statutory deductions.
• End-of-year bonuses and 13th-month payments are common in the school sector and affect annual PAYE calculations.

Tip for school owners: NTA 2025 compliance is especially important for schools, as education sector employers are often targeted in state-level PAYE audits. Keeping clean, timestamped payroll records in BFSB protects you if questions arise.

Payroll for a Pharmacy in Nigeria
Pharmacies typically employ licensed pharmacists (who command higher salaries), pharmacy technicians, and counter staff. Key considerations include:

• Higher-earning pharmacists will fall into higher PAYE tax bands, accurate calculation matters more at this salary level.
• Professional allowances and call-out fees are common and must be treated as part of gross emoluments.
• Pension contributions are particularly important for pharmacy staff, who tend to be career-oriented and pension-aware
  

Tip for pharmacy owners: Pharmacists are often familiar with compliance requirements and will notice if their pay slip deductions look wrong. Using a platform like BFSB that generates detailed, itemised payslips builds trust with your professional staff

How BFSB Makes Small Business Payroll in Nigeria Free and Simple

Built For Small Business (BFSB) includes a fully integrated payroll module designed specifically for Nigerian small businesses with up to 15 staff. Here's what it covers:

• NTA 2025-compliant calculations: PAYE, pension, and NHF are calculated automatically using current Nigerian tax rules, with no manual tax tables required.
• Automated deduction breakdowns: Every payroll run produces a clear breakdown of gross pay, each deduction, and net pay for every employee.
• Payslip generation: Professional payslips are generated for each employee, ready to share or download.
• Payroll history: Every payroll run is stored securely, giving you a full audit trail if the tax authority ever comes calling.

And like everything on BFSB, the payroll module is free. No subscription, no per-employee fees, no hidden charges.

Worth knowing: BFSB is a cloud-based platform, which means your payroll data is accessible from any device, anywhere. Whether you're at your bakery, your school office, or your pharmacy counter, you can run payroll from your phone or laptop in minutes.

Step-by-Step: Running Your First Payroll in BFSB

Here's how to process payroll for your Nigerian small business using BFSB:

Step 1: Add your employees
Enter each employee's details: name, role, salary structure (basic, housing, transport), PFA details, and tax identification number (TIN) if available. BFSB stores these securely and uses them for every future payroll run.

Step 2: Review and confirm the pay period
Select the month you're processing payroll for. If any employees had salary changes, bonuses, or additional allowances that month, update their records before running the calculation.

Step 3: Run the payroll calculation
BFSB calculates PAYE, pension, NHF, and net pay for every employee automatically, using NTA 2025-compliant tax rules. You can review the full breakdown before confirming.

Step 4: Generate payslips
Once confirmed, BFSB generates a payslip for each employee. You can download and share these digitally, no printing required.

Step 5: Handle your remittances
Your payslip statement in BFSB shows the calculated deduction amounts for PAYE, pension, NHIS, and NHF for each employee. Armed with these figures, you remit each amount to the relevant authority manually, SIRS for PAYE, your employees' PFA for pension, and the Federal Mortgage Bank for NHF. Keep a copy of your remittance receipts alongside your BFSB payroll records for a complete audit trail.

Heads up: The remittance process is currently manual, BFSB gives you the correct figures on each payslip statement, but the actual transfers to SIRS, the PFA, and the Federal Mortgage Bank are made by you directly. This is the standard approach for small businesses in Nigeria and keeps you in full control of your compliance obligations.

Frequently Asked Questions

Q: Do I legally need to run payroll if I have only one or two employees?
Yes. As soon as you pay an employee a salary in Nigeria, you have a legal obligation to deduct PAYE and remit it to the relevant State Internal Revenue Service. The number of employees does not change this obligation. Pension contributions have a minimum threshold (businesses with fewer than three employees are currently exempt from mandatory pension), but PAYE applies from the first employee.

Q: What is the penalty for not remitting PAYE in Nigeria?
Under the Personal Income Tax Act, failure to deduct or remit PAYE can result in penalties of 10% of the tax due plus interest. State Internal Revenue Services also have powers to audit and enforce compliance. For a small business, these penalties can be significant, which is why running payroll correctly from the start matters.

Q: Can I run payroll in Nigeria without registering for PAYE?
No. Before you can remit PAYE, you need to register your business with the relevant State Internal Revenue Service as an employer. You will receive an employer tax ID. This registration is straightforward and typically free. BFSB's payroll module assumes you have completed this registration. If you haven't, this should be your first step

Q: What is NTA 2025, and how does it affect my payroll?
The Nigeria Tax Act 2025 is a comprehensive update to Nigeria's tax administration framework. For small businesses, the most relevant changes relate to PAYE calculation rules, relief allowances, and compliance deadlines. BFSB's payroll module is built to reflect NTA 2025 requirements, so your calculations are always current without you needing to track legislative changes yourself.

Q: Does BFSB support payroll in Naira?
Yes. BFSB supports Naira-denominated payroll for Nigerian businesses. Salary inputs, deductions, and payslips are all processed in Naira. Paystack integration for Naira invoice payments is also in development, which will further streamline financial management for Nigerian businesses on the platform.

Q: How do I handle payroll for part-time or casual staff at my bakery or school?
Part-time and casual workers are handled the same way as full-time employees in BFSB. You enter their pay details for the relevant period, and the system calculates the appropriate deductions. For daily-rate workers, you can calculate their monthly equivalent earnings and process them accordingly. BFSB supports multiple employee types within the same payroll run.

Q: Is BFSB payroll really free for Nigerian businesses?
Yes. BFSB's payroll module is part of the platform's permanently free core offering. There are no monthly fees, no per-employee charges, and no trial periods. Visit builtforsmallbusiness.com to create your free account and run your first payroll.

Q: What records do I need to keep for payroll compliance in Nigeria?
You should keep records of each employee's gross salary, all deductions made, remittance receipts from SIRS and the PFA, and payslips for each pay period. BFSB stores all of this automatically, giving you a full, timestamped payroll history that satisfies audit requirements.

Q: Can BFSB generate the reports I need for my state tax authority?
BFSB generates detailed payroll breakdowns and payslips for every pay run. While specific tax authority report formats vary by state, the data BFSB holds covers everything a state revenue authority would need to verify your PAYE compliance.

Q: What if my employees' salaries change month to month?
You can update any employee's salary details before running each payroll cycle. BFSB recalculates deductions based on the updated figures, so changes to basic salary, allowances, or bonuses are always reflected correctly in the current pay run without affecting historical records.

The Bottom Line

Running payroll for your bakery, school, or pharmacy in Nigeria does not require an accountant it requires the right system. Once you understand the three core deductions (PAYE, pension, and NHF) and have a platform that calculates them correctly, payroll becomes a routine monthly task rather than a monthly headache.

BFSB gives Nigerian small business owners a free, NTA 2025-compliant payroll tool that handles the calculations, generates payslips, and keeps your records organised, all in the same platform where you manage your invoices, expenses, and clients. You built your business without an accountant. You can run payroll without one, too.

Run your first payroll for free at builtforsmallbusiness.com