For many Nigerian workers, especially civil servants, salary structures can be confusing. Understanding the difference between your gross income and net income is crucial for financial planning and ensuring you are paid correctly. Gross income refers to your total earnings before deductions, while net income (commonly called “take-home pay”) is what remains after all statutory and voluntary deductions are subtracted. In Nigeria, civil servants under the Integrated Payroll and Personnel Information System (IPPIS) often see multiple deductions on their payslips. Here’s a detailed breakdown to help you understand these deductions.

What is Gross Income?

Gross income is the total amount an employer agrees to pay you annually or monthly before any deductions. It includes your:

• Basic salary (the fixed amount paid for your role).
• Allowances such as housing, transport, utility, medical, leave, and other special benefits.

For example, a Nigerian civil servant earning ₦300,000 monthly as gross pay will see deductions from this amount to arrive at their take-home pay.

What is Net Income?

Net income is your take-home pay after all mandatory and voluntary deductions. These deductions fall into two main categories: statutory deductions (required by law) and voluntary deductions (agreed by the employee).

Statutory Deductions on Nigerian IPPIS Payslips

Here are the common deductions you will see on your IPPIS payslip:

1. Pension Contribution (8% of Gross Salary)

1. Under the Pension Reform Act of 2014, employees contribute 8% of their gross salary (basic salary, housing allowance, and transport allowance combined) to a pension fund.
2. Employers also contribute an additional 10%, but this is not deducted from your salary—it is paid directly by the employer to your Pension Fund Administrator (PFA).

For instance, if your gross salary is ₦300,000, and your pensionable salary (basic + housing + transport) is ₦200,000, your pension contribution will be ₦16,000 monthly.

• National Housing Fund (NHF) Contribution (2.5% of Basic Salary)

2. This is a contribution to the Federal Mortgage Bank of Nigeria (FMBN) aimed at providing affordable housing loans for contributors.
3. The deduction is 2.5% of your basic salary.

For example, if your basic salary is ₦100,000, your NHF deduction will be ₦2,500.

• Personal Income Tax (PAYE Tax)

3. PAYE (Pay As You Earn) is calculated based on the Personal Income Tax Act (PITA), using a graduated tax rate:
   • First ₦300,000 = 7%
   • Next ₦300,000 = 11%
   • Next ₦500,000 = 15%
   • Next ₦500,000 = 19%
   • Next ₦1,600,000 = 21%
   • Above ₦3,200,000 = 24%

For a worker earning ₦300,000 monthly (₦3,600,000 annually), their taxable income will fall within these brackets after tax reliefs and allowances.

• Group Life Insurance Contribution (varies by employer)

4. Some employers deduct a small percentage for group life insurance schemes, ensuring beneficiaries receive compensation in the event of an employee’s death.
5. National Health Insurance Scheme (NHIS)
6. While NHIS contributions are often covered by employers, some organizations deduct 1% of gross salary from employees.

Voluntary Deductions

1. Union Dues
2. Most workers under a labor union, such as ASUU or NLC-affiliated unions, pay monthly dues. This is usually a fixed amount or a small percentage (e.g., 1% of gross salary).
3. Cooperative Contributions

2. Many Nigerian civil servants join cooperative societies for savings or loan benefits. Monthly contributions are deducted directly from their salaries based on agreements with the cooperative society.
3. Example: If you agree to save ₦10,000 monthly or repay a loan at ₦20,000, this amount is deducted automatically.
4. Loan Repayments
5. Civil servants with existing loans (e.g., from cooperative societies, banks, or employer-assisted loans) will see monthly deductions until the loan is fully repaid.

Example Breakdown of a Payslip

Let’s assume a Nigerian civil servant earns a gross salary of ₦300,000 monthly:

Description	Amount (₦)	Percentage/Deduction
Gross Salary	₦300,000	—
Pension Contribution	-₦16,000	8% of pensionable salary
NHF Contribution	-₦2,500	2.5% of basic salary
PAYE Tax	-₦15,000 (est.)	Graduated tax rates (PITA)
Union Dues	-₦3,000	1% of gross salary
Cooperative Loan Repayment	-₦20,000	Fixed by agreement
Total Deductions	-₦56,500	—
Net Income	₦243,500	Take-home pay

 

Why Understanding This Matters

• Financial Planning: Knowing your gross and net income helps you create a realistic budget.
• Avoiding Debt: Awareness of deductions ensures you avoid overcommitting your income to expenses.
• Cross-Checking Accuracy: Mistakes can occur in payroll systems. Understanding your payslip helps you identify errors.

Understanding the deductions on your payslip is essential for every Nigerian worker, especially civil servants under the IPPIS platform. Take time to study your payslip monthly, confirm the deductions, and plan your finances accordingly. Always aim to save at least 20-30% of your take-home pay for future investments and emergencies. With a clear understanding of your salary structure, you’ll be better positioned to achieve financial stability despite challenges like inflation and delayed salaries.