An employee’s salary is a fundamental part of the employment relationship. Once an employee has earned salary under the terms of the employment contract, an employer cannot simply withhold it without a lawful basis.
Salary can only be withheld or deducted in certain circumstances permitted by law or by the terms of the employment relationship. However, an employer that arbitrarily refuses to pay an employee’s earned salary can be liable to the employee for the outstanding amount.
This article explains when an employer can lawfully withhold or deduct salary in Nigeria, what an employee can do when salary is withheld, and the legal remedies available for recovering unpaid salary.
What Does It Mean to Withhold Salary?
Withholding salary means failing to pay an employee remuneration that has become due and payable.
It is different from a lawful deduction.
For example, where an employee’s gross salary is ₦500,000 and the employer deducts an amount required by law, the employer has not necessarily withheld the employee’s salary unlawfully.
However, where the employer simply refuses to pay the employee’s ₦500,000 salary without a lawful basis, the situation is different.
The reason for the non-payment is therefore important.
Can an Employer Withhold Salary in Nigeria?
An employer cannot arbitrarily withhold salary that an employee has earned.
The legality of withholding or deducting salary depends on the employment contract, applicable legislation and the circumstances of the particular case.
The Labour Act contains provisions regulating deductions from wages, while the terms of the employment contract can also establish the employee’s remuneration and circumstances in which deductions can be made.
An employer should therefore have a lawful basis before withholding or deducting an employee’s salary.
When Can an Employer Lawfully Deduct Money from Salary?
There are circumstances in which deductions from salary are lawful.
Statutory Deductions
Certain deductions are required by law.
These can include applicable taxes and other statutory contributions or deductions imposed under Nigerian law.
An employer making a statutory deduction is not unlawfully withholding the employee’s salary merely because the employee receives a lower net amount than the gross salary.
Contractually Authorised Deductions
An employment contract can contain provisions authorising particular deductions in specified circumstances.
However, the existence of a contractual provision does not automatically make every deduction lawful.
The employer must still comply with applicable legislation and the terms of the contract.
Deductions Permitted by Law
The law permits certain deductions in specified circumstances.
Section 5 of the Labour Act regulates deductions from wages and places restrictions on deductions that an employer can make from an employee’s remuneration.
An employer should therefore identify the specific legal or contractual basis for any deduction from salary.
Can an Employer Withhold Salary Because an Employee Made a Mistake?
Not automatically.
An employee’s mistake does not give an employer an unrestricted right to deduct the cost of the mistake from the employee’s salary.
The employer must establish the legal or contractual basis for the deduction.
For example, if an employee causes financial loss to the employer through negligence, the employer should not simply decide the amount of the loss and deduct it from the employee’s salary without considering the applicable employment terms and law.
Where the employer believes that the employee is financially liable, the employer should use the appropriate disciplinary or legal procedure.
Can an Employer Withhold Salary Because an Employee Owes the Company Money?
An employer cannot simply treat an alleged debt owed by an employee as permission to withhold whatever amount of salary it chooses.
The alleged debt should be established, and any deduction from salary must comply with applicable law and the employment contract.
If the employer has a genuine claim against an employee, it can pursue the appropriate contractual or legal remedy.
The existence of an alleged debt and the employee’s entitlement to earned salary are separate issues.
Can an Employer Withhold Salary Because an Employee Resigns Without Notice?
An employee who resigns without giving the required notice can potentially be liable for the consequences of failing to comply with the employment contract.
However, this does not automatically give the employer an unrestricted right to confiscate or withhold all salary owed to the employee.
The employer should determine the employee’s contractual liability and the lawful means of enforcing it.
An employer should also distinguish between:
- salary already earned;
- salary payable during a notice period;
- payment in lieu of notice; and
- any separate debt allegedly owed by the employee.
These are not automatically the same thing.
Can an Employer Withhold Salary During an Investigation?
An employer may need to investigate allegations of misconduct, but the existence of an investigation does not automatically entitle the employer to withhold salary indefinitely.
The employer should examine the employment contract, staff handbook, disciplinary policy and applicable law to determine the employee’s position during the investigation.
If the employee has been suspended, the terms governing suspension become particularly important.
The employer should not use an investigation as a blanket justification for withholding earned salary where there is no lawful basis for doing so.
Can an Employer Suspend an Employee Without Salary?
The answer depends on the terms of the employment relationship and the circumstances of the suspension.
An employer should examine the employment contract, applicable workplace policies and relevant law before placing an employee on suspension without pay.
Where the contract expressly permits suspension without pay in specified circumstances, that provision becomes relevant.
Where there is no contractual or legal basis for withholding remuneration during suspension, the employer can face a claim from the employee.
The mere use of the word “suspension” does not automatically determine whether salary is payable.
Can an Employer Withhold Salary Because of Poor Performance?
Poor performance does not automatically entitle an employer to withhold an employee’s earned salary.
Performance management and salary payment are separate issues.
Where an employee has performed work for the relevant period and earned the agreed salary, the employer should not simply withhold the salary because the employee did not meet a performance target unless there is a lawful contractual basis for doing so.
Where the employee’s remuneration includes a performance-based bonus or commission, the terms governing that particular payment must be examined.
A bonus that is conditional on achieving specified targets is different from basic salary.
Can an Employer Withhold Salary Because an Employee Is Absent from Work?
The answer depends on the reason for the absence and the applicable employment terms.
Where an employee is absent without authorisation and the applicable rules provide for loss of pay for the period of unauthorised absence, the employer can apply the relevant rule.
However, an employer should distinguish between unauthorised absence and legitimate absence, such as approved leave.
An employer should also comply with its contractual and statutory obligations before making deductions.
Can an Employer Withhold the Final Salary After Termination?
Termination of employment does not automatically extinguish an employee’s entitlement to salary already earned.
If an employee has worked for a period and earned salary before the employment ended, the employer remains responsible for the amount properly due, subject to lawful deductions.
The employee’s final payment can also include other contractual entitlements that have become due.
However, the employee should distinguish these entitlements from salary in lieu of notice and any other claim arising from the termination.
What If an Employer Says It Will Pay the Salary Later?
An employer’s promise to pay later does not eliminate the employee’s existing entitlement.
If the employer genuinely needs additional time, the employee can negotiate a payment arrangement.
The agreement should preferably be in writing and state:
- the total amount outstanding;
- the agreed payment dates;
- the amount of each instalment;
- the method of payment; and
- what happens if the employer fails to honour the arrangement.
This provides evidence of the employer’s acknowledgment of the debt.
What Should You Do If Your Employer Withholds Your Salary?
An employee should take practical steps before commencing litigation.
1. Review Your Employment Contract
Check the provisions dealing with:
- salary;
- payment dates;
- deductions;
- suspension;
- disciplinary action;
- resignation;
- termination; and
- employee benefits.
2. Confirm the Amount Outstanding
Calculate exactly what the employer owes.
Do not rely on an estimate where the claim can be calculated from payslips, bank statements and employment records.
3. Ask the Employer for the Reason
Ask the employer to explain why the salary was withheld.
If the employer claims that the deduction is lawful, ask the employer to identify the contractual or legal basis.
4. Make a Formal Demand
If the employer fails to resolve the matter, send a formal demand for payment.
The demand should identify the amount outstanding and provide a reasonable deadline for payment.
5. Preserve Evidence
Keep copies of:
- your employment contract;
- payslips;
- bank statements;
- emails;
- WhatsApp messages;
- salary schedules;
- staff handbook;
- disciplinary correspondence; and
- any communication acknowledging the unpaid salary.
6. Seek Legal Advice
If the employer refuses to pay after receiving a demand, obtain legal advice on the appropriate remedy.
The circumstances will determine whether negotiation, mediation or litigation is appropriate.
Can You Sue an Employer for Withholding Salary?
Yes.
Where an employer unlawfully withholds salary, an employee can commence an action to recover the amount due.
Employment-related claims generally fall within the jurisdiction of the National Industrial Court of Nigeria, subject to the court’s jurisdiction over the particular claim.
The employee must establish the employment relationship, the contractual entitlement and the amount outstanding.
The employment contract and documentary evidence of salary payments are particularly important.
What Can an Employee Claim?
Depending on the circumstances, an employee can claim:
- outstanding salary;
- unpaid contractual allowances;
- other remuneration that has become due;
- interest where legally recoverable; and
- other appropriate reliefs supported by the facts and law.
If the withholding of salary forms part of a wider dispute, such as wrongful termination or unlawful suspension, additional reliefs can arise.
Each claim must, however, be established on its own legal basis.
Can an Employee Recover Unpaid Salary Without Going to Court?
Yes.
Litigation is not the only means of recovering unpaid salary.
An employee can first make a formal demand and attempt to negotiate payment with the employer.
Where appropriate, the parties can also use alternative dispute resolution.
This can result in faster recovery and reduce legal costs.
However, where the employer refuses to pay or negotiations have failed, legal proceedings can become necessary.
Where Can an Employee Sue for Unpaid Salary?
The National Industrial Court of Nigeria has jurisdiction over employment and labour disputes falling within its statutory jurisdiction.
An employee should therefore obtain legal advice before commencing proceedings to ensure that the appropriate court, parties, claims and reliefs are identified.
The procedure and evidence required will depend on the particular dispute.
How Can an Employee Prove That Salary Was Withheld?
The employee should provide evidence establishing the contractual entitlement and the failure to pay.
Useful evidence includes:
Employment Contract
This establishes the agreed salary and other contractual terms.
Payslips
Payslips can establish the employee’s regular remuneration and deductions.
Bank Statements
Bank statements can show whether salary was actually paid.
Correspondence
Emails, letters and messages between the employee and employer can demonstrate that the employee complained about the non-payment and that the employer acknowledged the outstanding amount.
Other Employment Records
Attendance records, work schedules, payroll records and other documents can become relevant where the employer disputes the employee’s entitlement.
What If the Employer Claims the Employee Was Not Entitled to the Salary?
The employer’s position should be examined against the employment contract and applicable law.
For example, if the employer claims that an employee was absent without authorisation, the relevant attendance records and workplace policies should be considered.
If the employer claims that the employee’s salary was subject to a performance condition, the contractual provision creating that condition should be examined.
The employer cannot simply create a new condition for payment after the employee has earned the salary.
Conclusion
An employer in Nigeria cannot arbitrarily withhold salary that an employee has earned.
There are circumstances in which deductions or withholding can be lawful, including deductions required by law and deductions properly authorised by the employment relationship. However, the employer must have a valid legal or contractual basis for the action.
An employee whose salary has been withheld should first review the employment contract, determine the amount outstanding and ask the employer to explain the reason for the non-payment.
Where the employer fails to resolve the matter, the employee can make a formal demand and, where necessary, commence proceedings before the appropriate court.
The employee should also preserve all relevant evidence, including the employment contract, payslips, bank statements and correspondence with the employer.
If your employer has withheld your salary without a lawful basis, Lexforte Attorneys can review the circumstances, determine your contractual and legal entitlements and advise you on the appropriate steps for recovering the outstanding amount.