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How to Run Payroll and Generate Payslips for Your Nigerian Business in 2026

· 4 min read
Taiwo Oshodi
Taiwo Oshodi
Co-founder Digit-Tally

Payroll is one of the most sensitive operations any business runs. Get it right and your employees trust you, your tax obligations are met, and your books are clean. Get it wrong and you face penalties from FIRS, disputes from employees, and hours of corrective work every month.

If you are looking for payroll software Nigeria employers can rely on, or a payslip generator Nigeria teams can use without manual rework, compliance needs to be built into the process.

In 2026, with the new Nigeria Tax Act now in effect, payroll calculation for Nigerian businesses has changed. The PAYE bands are different. The relief structure is new. And the compliance bar has moved. This guide covers exactly what you need to know and how to get it right consistently.

What Has Changed Under the 2026 Nigeria Tax Act​

  • The first ₦800,000 of annual income is now completely tax-free.
  • The Consolidated Relief Allowance has been replaced with a simplified structure.
  • Rent relief is now capped at 20 percent of annual rent paid or ₦500,000, whichever is lower.
  • New progressive tax bands from 0 percent to 25 percent apply above the tax-free threshold.
  • The 1 percent minimum tax rule has been removed for 2026.

If you are still running payroll using 2025 calculations, every figure you are producing is wrong. The impact on employees and on your PAYE remittance obligations is material.

What Every Nigerian Payroll Must Include​

Gross Salary Breakdown​

Basic salary, housing allowance, transport allowance, and any other regular allowances must all be captured separately. This matters because pension is calculated on specific components, not total gross.

Statutory Deductions​

  • Pension: 8 percent of pensionable income (basic + housing + transport) deducted from employee, 10 percent contributed by employer.
  • PAYE: calculated on chargeable income after pension and applicable reliefs, using 2026 bands.
  • NHIS: 5 percent of basic salary where applicable.
  • NHF: 2.5 percent of basic salary, capped at ₦200 per month for most employees.

Net Pay​

The amount the employee actually receives after all deductions. This must be clearly shown on the payslip alongside each deduction line.

What a Proper Payslip Must Show​

A payslip is not just a payment summary. It is a legal document. Every Nigerian employee is entitled to a detailed payslip that shows:

  • Employee name, ID, and department.
  • Pay period and payment date.
  • Full gross salary breakdown by component.
  • Each statutory deduction itemised separately.
  • Employer pension contribution.
  • Net pay clearly stated.
  • PAYE reference and remittance details where required.

A payslip that does not show all of these leaves the business exposed to disputes and potential labour complaints.

How Digit-Tally Handles Payroll and Payslip Generation​

Digit-Tally’s payroll module was built specifically for Nigerian businesses operating under Nigerian tax law.

  • Automatically applies 2026 PAYE bands for every employee based on their individual salary structure.
  • Calculates pension, NHIS, and NHF correctly per employee.
  • Generates detailed, professional payslips for every employee with a single click.
  • Produces PAYE remittance schedules formatted for FIRS or state IRS submission.
  • Handles different salary structures across departments and levels.
  • Payroll costs post directly to the accounting module automatically.
  • Priced in Naira, supported locally, with no USD subscription costs.

Run compliant payroll with www.digit-tally.io

The Cost of Getting Payroll Wrong in Nigeria​

  • Underpaid PAYE: FIRS imposes a 10 percent penalty on outstanding amounts plus 21 percent annual interest from the due date.
  • Late remittance: penalties apply from the 11th of the following month.
  • Incorrect pension: PenCom regulations impose sanctions on employers who remit pension incorrectly.
  • Employee disputes: incorrect payslips erode trust and can escalate to formal labour complaints.

Conclusion​

Payroll is not the place to cut corners. The 2026 tax changes have raised the stakes for every Nigerian employer. Manual calculation using old formulas is a liability.

Digit-Tally automates the entire payroll process, from PAYE calculation to payslip generation to remittance reporting, so your business stays compliant, your employees are paid correctly, and you have the documentation to prove it.

Generate your first payslip with www.digit-tally.io