Withholding tax on a compensation payout.
Net after WHT
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WHT at 10%
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Gross payout
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When a job ends and a cheque arrives
Losing a job is rarely tidy, and the payment that lands afterwards, redundancy, severance, or a negotiated exit sum, usually arrives with tax already taken off. In Nigeria, compensation for loss of employment is treated as a payment caught by withholding tax rather than ordinary salary, and the payer deducts the tax at source before the money reaches you. This calculator shows the gap between the gross figure in your settlement letter and the net amount you can actually expect to bank, so you are not caught out when the credit is smaller than the number you agreed.
It is aimed at anyone in Nigeria facing redundancy or a mutual separation who wants a quick, honest estimate of the deduction. The tool keeps things simple on purpose, applying a single rate to the whole payout, which makes it a good first sanity check rather than a final tax computation.
The 10 percent the calculator applies
The rate this calculator uses is 10 percent withholding tax on the gross compensation. So it takes your payout, deducts a tenth, and shows the remainder as your net. Withholding tax of this kind is administered through the FIRS (Federal Inland Revenue Service) framework, and the employer or paying entity is the one responsible for deducting it and remitting it on your behalf. The 2025 reform has been reshaping how termination payments are treated, so confirm the current rate and the precise basis with the FIRS or the Nigeria Revenue Service before you rely on a figure, and keep the deduction receipt because it is evidence of tax already paid.
A NGN 5 million payout, after tax
Suppose your exit package is NGN 5,000,000. At the 10 percent rate this calculator applies, the withholding tax is NGN 500,000, leaving a net of NGN 4,500,000. The arithmetic is deliberately plain, but the figure to internalise is the net: that is what clears into your account, and it is what you should plan your next few months around rather than the headline gross.
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The exemption this tool does not model
Here is the part that catches people out, and it works in your favour. Nigerian tax law has long allowed a portion of a genuine redundancy or loss-of-employment payment to be exempt, so the taxable amount can be smaller than the full sum you receive. This calculator applies the 10 percent rate to the entire gross, which is the cautious, worst-case view. If part of your payout qualifies for the statutory exemption, your actual withholding could be less than the figure shown. The common mistake is to assume either that the whole sum is taxed (and underclaim) or that the whole sum is tax-free (and get a shock). Neither is safe to assume blind.
A practical step: ask your employer in writing how they calculated the deduction and which part, if any, they treated as exempt. If too much was withheld, the excess is creditable, and you may be able to recover it when you file. Because the reform is changing the detail of how termination payments are taxed, take the breakdown to a tax adviser or your state internal revenue service and confirm the exempt portion for your circumstances. Separately, this withholding is distinct from the personal income tax on any salary you earned earlier in the year, which is handled through PAYE.
Is the withholding tax the final tax on my severance?
Often it is treated as a final deduction on the compensation, but if part of your payment qualifies for the statutory exemption, too much may have been withheld. In that case the excess can be reclaimed or credited when you file your return, so keep the deduction certificate and confirm the position with the FIRS or your state revenue service.
Do my unpaid salary and leave pay get taxed the same way?
No. Outstanding salary, accrued leave, and bonuses owed to you are ordinary employment income and are taxed through PAYE on the personal bands, not as compensation for loss of employment. Only the true severance or redundancy element falls under the withholding treatment this calculator models, so a settlement that mixes both will have two different tax effects.