Outsourcing and the Nigerian Labour Law



The search for talent in Nigeria reveals a variety of options for getting the desired. One way of hiring in-house is by posting job openings on employment boards. Another option is the placement of traditional vacancies ad in local newspapers.

In the past decade, the methods of hiring have widened dramatically, resulting in the emergence of new employment models, one of which is the Triangular Employment model. The demand for the Triangular Employment model has made it the favoured alternative among corporate organizations because of its benefits when compared to the obligations that accompany the traditional means of employment and employer-employee relationships.

Outsourcing or Triangular Employment Model

Over the last decade, outsourcing has been a prominent trend in human resources. According to the National Outsourcing Policy (Nigeria) 2007, “Outsourcing occurs anytime one enterprise makes a contract with another to perform a process that is normally done internally by the first enterprise.” It is a process in which one company hires another company to provide a set of its services.

Outsourcing is thus a three-party (Triangular) employment relationship that includes the client, the contractor (labour contractors, staffing firm or consulting firm), and the contractor’s employees (outsourced employees).

Outsourced employees are individuals hired by a contractor’s company to work for a client’s company. Outsourced employees are employed by the contractor and sent to render services to another organization – the client. Outsourced employees are still considered contractor’s employees even if they work for and on the premises of the client’s company under this arrangement. While outsourced employees work for the client’s firm, they are compensated by their primary employer, the contractor, who in turn is compensated by the client.

Due to its benefits as well as being a successful strategy to expand while lowering payroll and overhead costs, outsourcing is becoming increasingly popular among large and small businesses.

The Legal Framework

While the National Industrial Court is the only court that has the authority to hear and decide issues involving labour or employment problems, the Constitution of the Federal Republic of Nigeria (1999) and the Labour Act of the Laws of the Federation of Nigeria (2004) are two of Nigeria’s most important sources of employment compliance legislation. Employment ties are governed by all federal legislation approved by the National Assembly and all state laws enacted by the House of Assembly.

Section 254C (1)(a) of the 1999 Constitution of the Federal Republic of Nigeria (Third Alteration) Act provides for this, as follows:

“Notwithstanding the provisions of sections 251, 257, 272 and anything contained in this Constitution and in addition to such other jurisdiction as may be conferred upon it by an Act of the National Assembly, the National Industrial Court shall have and exercise jurisdiction to the exclusion of any other court in civil cases and matters –

(a) relating to or connected with any labour, employment, trade unions, industrial relations and matters arising from the workplace, the conditions of service including health, safety, the welfare of labour, employee, worker and matter incidental thereto or connected therewith.”

Labour contractors are widespread in Nigeria – particularly in the banking and oil and gas sectors – to recruit workers and then deploy them to third parties to fulfil labour supply agreements.

In May 2011, the Federal Ministry of Labour and Productivity issued guidelines to regulate manpower outsourcing and contract staffing in the Nigerian oil and gas industry.

Section 91 of the Labour Act CAP. L1, Laws of the Federation of Nigeria 2010, covers the outsourcing employment practice as it defines an employer as:

“any person who has entered into a contract of employment to employ any other person as a worker either for himself or for the service of any other person, and includes the agent, manager or factor of that first mentioned person and the personal representatives of a deceased employer.

According to Section 73 of the Employee Compensation Act, 2010, an employee means:

“a person employed by an employer under an oral or written contract of employment whether on a continuous, part-time, temporary, apprenticeship or casual basis and includes a domestic servant who is not a member of the family of the employer including any person employed in the Federal, State and Local Governments, and any of the government agencies and in the formal and informal sectors of the economy.”

While the Labour Act does not define the term “employee,” it defines a ‘worker’ under Section 91 as:

“Any person who has entered into or works under a contract with an employer, whether the contract is for manual labour or clerical work or is expressed or implied or oral or written, and whether it is a contract of service or a contract personally to execute any work or labour.”


Outsourcing is a welcome development in today’s market that can proffer solutions to many problems faced by organizations in Nigeria. The authorities must acknowledge the change in today’s business landscape and come up with the right strategies to ensure successful practice.

Clients and Contractors signing outsourcing agreements (Service Level Agreement) must examine and seek appropriate guidance towards understanding the goals, expected benefits, and what performance measurement criteria are. All of these must be spelt out in the SLA. When one party does not fulfil the conditions of the agreement, the Court will interpret the SLA to decide the rights and protections available to parties under the agreement since no legislation states the obligations and liabilities of the respective parties.

funmilola oparinde

Funmilola T. Oparinde, Esq.

Legal & HR Administrator


1 Comment

  • Ita Ekpe

    If an outsourced staff has accident that leads to permanent disability, is the company to which he was deployed to work, on whose premises, and whose machine(s) injured him, liable to pay the injured and rendered permanently disabled, any Compensation? This is a real case and not fiction.

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