Office Practice · Lesson 8

Wages and salaries, methods of remuneration, statutory deductions, PAYE and payroll

WAECNECO

What the syllabus asks

WAEC: differences between wages and salaries; roles of the wages and salaries office (calculating, recording, making appropriate deductions); methods of paying wages (time rate, piece rate, profit sharing, commission, premium system bonus). Uses Nigeria Tax Act 2025 (from 2026) and Pension Reform Act 2014.

NECO: differences between wages and salaries; roles of the wages and salaries office (calculating, recording, making appropriate deductions); methods of paying wages (time rate, piece rate, profit sharing, commission, premium system bonus). Uses Nigeria Tax Act 2025 (from 2026) and Pension Reform Act 2014.

What you will learn

Distinguish between wages and salaries.
State the roles of the wages and salaries office.
Describe time and output records and pay documents.
Calculate pay by time rate, overtime, piece rate and premium bonus.
Calculate commission and profit-sharing payments.
Explain statutory and voluntary deductions and calculate net pay.
Prepare a simple payroll and describe controls against payroll fraud.

Key points

Wages vary with time or output; salaries are fixed and monthly.
Wages office calculates, records, deducts, pays and remits.
Clock cards, time sheets, job cards feed the payroll.
Time rate: simple, stable, no incentive; overtime at higher rates.
Piece rate: incentive, known unit cost, quality risk.
Halsey: time pay + 50% of time saved; Rowan: proportion of time pay.
Commission rewards sales; profit sharing builds loyalty.
Statutory deductions: PAYE, pension 8%, NHF 2.5% of basic (compulsory in the public sector; opt-in in the private sector from 2026).
2026 PAYE: progressive bands; rent relief 20% up to ₦500,000.
Controls: separation of duties, biometrics, audits, reconciliations.

Start here: Wages and salaries: meaning and differences

Both wages and salaries are payments made by an employer to employees in return for their labour. In everyday speech the words are often used loosely, but in Office Practice they are distinguished.

Wages

Wages are payments to workers calculated on the basis of time worked (hours or days) or output produced, and usually paid daily, weekly or fortnightly. They are typical for manual, casual, factory, construction and farm workers. Because the hours or output vary, the amount of wages can change from week to week.

Salaries

Salaries are fixed periodic payments, usually expressed as an annual sum and paid monthly, to clerical, administrative, professional and managerial staff. A salaried teacher receives the same basic monthly pay whether the month has 20 or 23 working days.

Point	Wages	Salaries
Basis	Hours worked or output	Fixed annual amount
Frequency	Daily or weekly (sometimes fortnightly)	Monthly
Amount	Varies with time or output	Fixed (plus allowances)
Workers	Manual, casual, factory	Clerical, professional, managerial
Overtime	Commonly paid	Often not paid to senior staff
Records	Clock cards, time sheets, job cards	Payroll on salary scales
Method of payment	Often cash or transfer weekly	Bank transfer monthly

Salary structure in Nigeria

In the public service, salaries are fixed by grade level and step on approved salary structures (for example, CONPSS for the core civil service). A salary is often made up of basic salary plus allowances such as housing, transport, meal, utility and leave allowance. The National Minimum Wage (₦70,000 a month under the 2024 amendment) is the lowest monthly pay an employer covered by the law may pay.

An employee’s gross monthly pay is basic plus allowances. Pension contributions in Nigeria are calculated on “monthly emoluments”, which under the Pension Reform Act 2014 must not be less than basic salary plus housing and transport allowances.

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Practice questions

1. Wages are usually

paid weekly or by hours or output
fixed annual sums paid monthly
paid only to managers
paid in shares

Show answer

A: paid weekly or by hours or output
Wages vs salaries.

2. Salaries are usually

paid by the piece
paid hourly in cash
paid daily
fixed annual sums paid monthly

Show answer

D: fixed annual sums paid monthly
Salary.

3. 40 hours at ₦1,000 + 8 hours at time-and-a-half + 4 Sunday hours at double time =

₦56,000
₦48,000
₦60,000
₦52,000

Show answer

C: ₦60,000
40,000 + 12,000 + 8,000.

4. A tailor paid ₦1,500 per shirt makes 46 shirts. Her pay is

₦60,000
₦69,000
₦78,000
₦46,000

Show answer

B: ₦69,000
46 × 1,500.

5. Under the Nigeria Tax Act 2025, the first slice of income taxed at 0% is

₦800,000
₦300,000
₦1,000,000
₦2,200,000

Show answer

A: ₦800,000
Nil band.

Key words

Wages: Pay based on time or output, paid daily or weekly.
Salary: Fixed annual pay, paid monthly.
Gross pay: Total earnings before deductions.
Net pay: Take-home pay after deductions.
Overtime: Hours beyond the normal week, paid at a higher rate.
Piece rate: Pay per unit produced.
Premium bonus: Time pay plus share of time saved.
Commission: Pay as a percentage of sales.
Profit sharing: Employees’ share of company profit.
PAYE: Pay As You Earn income tax deducted by employer.
RSA: Retirement Savings Account with a PFA.
Ghost worker: Fictitious name on a payroll.

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