What severance pay means
Severance pay is compensation for losing a job you did nothing to lose.
It is most often associated with redundancy, where the role has gone rather than the employee having failed. The idea is to cushion the transition rather than to pay for work already done.
In Nigeria the crucial point is that there is no universal statutory severance formula for every employee. Whether you receive it, and how much, comes from your contract, the staff handbook, or a collective agreement.
How it is used
Where a scheme exists, it usually calculates a figure by reference to length of service and final salary, and it is paid alongside notice pay and any accrued entitlements when employment ends.
In unionised workplaces, collective agreements often provide considerably more generous terms than an individual contract would, which is one practical reason those agreements matter.
Key features
- Paid when employment ends for reasons unconnected with the employee's conduct
- Most commonly associated with redundancy
- Contractual in the Nigerian private sector rather than universally statutory
- Usually calculated on length of service and final salary
- Paid in addition to notice pay and accrued leave, not instead of them
How this works in Nigeria
Employees frequently accept whatever figure is offered because they assume there is nothing more. Often there is.
Before signing anything on exit, ask for the staff handbook, the redundancy policy and any collective agreement. Employers are not obliged to volunteer entitlements you did not ask about, and the difference between the offer and the entitlement can be substantial.
The National Industrial Court has been willing to enforce benefits where an employer created a clear expectation through its own documents or consistent practice.
Severance vs notice pay vs gratuity
Notice pay covers the notice period you were entitled to and did not work. It is due on most terminations regardless of the reason.
Severance compensates for the loss of the job itself, typically on redundancy, and depends on your contract or the employer's policy.
Gratuity rewards length of service and is paid on qualifying exits under a scheme the employer established.
They are separate, and an employee can be entitled to more than one. An employer presenting a single figure as covering everything should be asked to break it down.
Limits and risks
Where the contract and handbook are silent and there is no collective agreement, an employee generally has no severance entitlement beyond notice and accrued pay.
Schemes also commonly exclude employees dismissed for misconduct, which is one more reason the framing of an exit matters so much.
Worth knowing
Ask for the redundancy policy and any collective agreement before signing a release. Once you sign, renegotiating is close to impossible.
Questions people ask
Is severance pay compulsory in Nigeria?
There is no universal statutory severance formula for every private sector employee. Entitlement usually comes from the employment contract, the staff handbook, or a collective agreement.
How is severance pay calculated?
Where a scheme exists, typically by reference to completed years of service and final salary, using whatever formula the policy or agreement sets out. There is no single national formula.
Is severance the same as notice pay?
No. Notice pay covers the notice period you were entitled to. Severance compensates for the loss of the role itself. Where both apply they are paid in addition to each other.
Do I get severance if I am dismissed for misconduct?
Usually not. Severance schemes commonly exclude dismissal for misconduct, which is one reason the characterisation of an exit as redundancy, termination or dismissal matters so much.
What should I check before accepting a severance offer?
Your contract, the staff handbook, any redundancy policy, and any collective agreement, plus whether the figure separately accounts for notice, accrued leave and any gratuity. Ask for the breakdown in writing.