A practical guide to running your first compliant payroll

Your first payroll on a new system sets the pattern for every month after it. Get the foundations right and month two is routine. Rush them, and you spend the first quarter correcting. This guide follows the order we use when we set up a new company in Vintage People, but the steps apply to any system.

1. Set up the company

Start with the legal identity: registered name, RC number, employer TIN and registered address. Add the statutory registration codes: the PenCom employer code, NHF employer number, NSITF code and ITF code. These head each remittance schedule, so a wrong code can get a schedule rejected. Set the fiscal year start, which drives the tax year and the pay calendar.

2. Set the payroll policy

The payroll policy is the rulebook every run follows. Decide:

• Pay frequency, which also sets the number of PAYE periods in the year
• The proration basis for joiners and leavers: calendar days or working days
• Rounding
• The PAYE method and the minimum-wage exemption threshold
• Whether you pay a 13th month
• The order in which deductions are taken when net pay is tight

Write these decisions down with the reason for each. Your auditor will ask.

3. Check the statutory tables

Confirm the PAYE bands are the NTA-2025 bands, effective from 1 January 2026: 0% on the first ₦800,000 of taxable income, then 15%, 18%, 21%, 23% and 25% on higher slices. Check rent relief at 20% of annual rent, capped at ₦500,000. Switch on NSITF and ITF if they apply to you. They are employer costs, not deductions from staff.

4. Build pay elements and salary structures

Each line on a payslip is a pay element: Basic, Housing, Transport, other allowances, and deductions such as union dues or cooperative contributions. Mark each earning as taxable or not. Statutory elements take a rate and a base: Pension at 8% of Basic + Housing + Transport, NHF at 2.5% of basic salary.

Then group the elements into salary structures, one per grade or pay group. A structure is a template: place many employees on it, and a change to the band reaches all of them. Avoid building a structure for one person. Use a per-employee override instead.

5. Load your people

For each employee you need, at minimum:

• Hire date and, for anyone leaving, the last day
• A salary structure and base pay
• An active contract that covers the pay period
• A valid bank account: a 10-digit NUBAN at an active bank
• Tax state, TIN, PFA and RSA PIN
• Any exemption from pension or NHF, recorded with the reason
• Declared annual rent, if they claim rent relief

Load staff in bulk through a staged import with a preview, so errors show before anything is saved. If you are starting mid-year, load each employee's year-to-date gross, tax and pension as opening balances. Without them, cumulative PAYE for the rest of the year will be wrong.

6. Set the first period and check readiness

Choose the first processing period. Before you run, look at the readiness view. It lists anyone who cannot be paid and why, such as a missing bank account or no contract for the period. Fix these at the source, on the employee record, not in the run.

7. Run, read and reconcile

Run payroll for the open period and read the pre-run checks first. Then review the result: check a sample of payslips by hand, compare the totals with your previous payroll or your expected figures, and read the variance report. On a first run, a parallel run against your old payroll is the best evidence that the new one is right. Every difference should be explained before you approve.

A first run that matches your old payroll to the naira is worth more than any sign-off.

8. Approve, pay and remit

Approving the run locks the period and releases payslips to staff. Then:

• Create the payment batch, then download the bank file or send it through your payouts provider
• Reconcile each line as paid, returned or failed
• Generate the remittances: PAYE per state, pension per PFA, NHF, and NSITF and ITF where they apply
• Download each schedule in the receiving body's layout and record the payment reference

If you want a second person to approve the run, the payment batch or bank changes, switch on the payroll controls in your payroll policy. They are off by default. We recommend them for any team with more than one payroll user.

9. Close the month

Roll the period over to close it and open the next. The rollover preflight shows anything that blocks it. After your first rollover, structural settings such as the tax bands and the pay frequency lock, and later changes are made as new dated versions. That is what keeps your first payroll defensible a year from now.