FG’s “Post And Delete”: The Expatriate Employment Levy

 

Ever heard about post and delete? It happens a lot on social media – someone posts something controversial on social media, they receive a lot of negative backlash which then forces them to delete the original post.

Well that’s what happened recently…but for government policy.

Recently, the Federal Government (FG) announced a new policy to regulate the employment of foreigners – the expatriate employment levy, an annual fee of between €9170.03 to €13755.05 payable by companies that hired foreigners.

As you can imagine, a lot of businesses were not happy about it, most calling it anti-business, anti-investments, and other every other ‘anti’ you can imagine.

The FG listened to the criticism and ‘deleted’ the policy. It announced that the policy been suspended, no word on whether it will be reintroduced – so let’s watch this space.

Before we saw the news that it had been paused we had seen the initial ‘post’ about the policy and we decided to review it in light of the current regulations in Nigeria for the employment of foreigners, to determine if the policy is indeed something that is required.

This newsletter therefore would shed light on the policy, its implications and what we think about it.

What is this expatriate levy policy all about?

The Expatriate Employment Levy (EEL) is a levy imposed by the government on companies hiring foreigners a.k.a expatriates to work in Nigeria. Every company in Nigeria that has foreign directors will be charged the sum of €13755.05 annually per director and €9170.03 for other foreign staff of the company, per staff.

Not all foreign employees would be affected, staff of diplomatic missions and government officials in Nigeria are exempted from this requirement.

This policy was due to take effect from 15th of March 2024 with a compliance deadline of 15th of April 2024. Failure to comply with the policy attracts a fine of N3, 000,000 (Three million naira only).

Why was the EEL policy created?

Generally, expatriate policies in Nigeria likewise in other countries in the world, are designed to foster the exchange of skills and knowledge from expatriates to local employees and to protect the local labour market.

For instance in Nigeria, if a company wanted to hire a foreigner, they would have to show evidence that the foreigner possesses a skill or expertise that our local labour market averagely does not. The foreigner then comes in to equip our local workforce and not necessarily take up job functions perpetually. This in itself appears a brilliant idea.

However, there have been policies over the years aimed at achieving this very goal without unnecessarily belaboring the expatriates or the companies hiring them.

What Is The Current Procedure For Employing Foreigners In Nigeria?

Any company in Nigeria seeking to employ a foreigner must get the consent and approval of the Comptroller General of the Nigeria Immigration Service (NIS). It’s a three-step process.

STEP ONE: Expatriate Quota (EQ) – The first step is for the company to obtain an expatriate quota from the Ministry of Interior. Expatriate quota is the number of expatriates that the ministry allots to each company that wishes to employ expatriates as staff.

STEP TWO: Subject to Regularization Visa (STR Visa) – With the expatriate quota granted to the company, the Nigerian company can apply to the Nigerian embassy situated in the resident country of the expatriate for a “Subject to Regularisation Visa (STR ).” The STR Visa is valid for 90 days only and it is granted temporarily pending the regularization of the expatriate’s status.

STEP THREE: Combined Expatriate Residence Permit and Alien Card (CERPAC) Or Temporary Work Permit (TWP) – A CERPAC must be obtained by an expatriate who plans to live and work in Nigeria for a period of time longer than 56 days. It’s like a work or resident permit needed for any foreigner to lawfully reside or work in Nigeria, except citizens of ECOWAS member states. Where an expatriate has no intention of working in Nigeria on a long term basis, the company may apply for a Temporary Work Visa instead which is usually granted for 3 months and can be extended for an additional 6 months.

Was the EEL Policy Necessary?

Once a foreigner is employed, the company is expected to hire two Nigerian understudies for each position that an EQ was approved for, and to submit monthly immigration returns to the NIS and the ministry of Interior.

Considering the detailed process in place that a company must go through before hiring a foreigner, the question to be asked then is ‘was the EEL necessary’? If the current policy is followed then there seems to be a process that ensures local jobs are protected somewhat – with time bound permits, and mandatory training for Nigerians.

Some may argue that the new levy appears to tilt more towards the direction of revenue generation than protection of local jobs. They would argue further that the new expatriate levy adds to the already burdensome process of employing expatriates in Nigeria.

There is already enough bureaucracy and heavy financial demand in the current process. Adding more to it, would potentially discourage foreign investors and generally, foreign participation in business in Nigeria.

While it is ideal to regulate and monitor the influx of foreign employees into the country, there should be a fair and balanced approach to it.

To be clear, this sort of levy is not unique to Nigeria, in fact, in many other countries, there are annual levies charged on companies for their expatriate employees. In the UK, it is called the Immigration Skills charge, payable annually by employers hiring senior level foreign staff to work in the UK. A similar charge exists in other countries like Singapore and Malaysia.

In the UK, the charge costs €1146.78 per year per migrant worker sponsored under the skilled visa and a reduced rate of €417.43 per annum which applies to small businesses and charities. The Nigerian levy is by far more expensive in comparison. This brings us back to the emphasis we made earlier on fairness and balance.

It remains to be seen if the policy will be re-introduced. It wouldn’t surprise to us if the policy is brought back with a lower annual fee, maybe €4.59k a year…the cynics among us would say that would have been their original fee but the FG introduced a high fee knowing it would cause uproar and knowing they would have to reduce the amount.

 

 

Culled from LawPadi