Pro-rated Payment: How Nigerian Law Calculates Salary upon Termination of Employment

The termination of employment can lead to various disputes and disagreements between employers and employees, especially regarding the payment of outstanding salaries and entitlements. These salary disputes often find their way into the Nigerian courts, where the law is applied to determine the rights and obligations of the parties involved. This article examines a specific case in Nigeria — Mr. Abe Adewunmi Babalola v. Equinox International Resources Ltd. — decided recently by the National Industrial Court of Nigeria, where the issue of pro-rated or full monthly payment upon termination of employment was contested. The court’s decision sheds light on the legal principles governing such disputes and provides valuable insights into the Nigerian law on this matter.

Case Background

This case revolves around the termination of employment of the Claimant, who held the position of Head of Human Resources and Administration in the Defendant Company. The Claimant sought recovery of unpaid outstanding salaries and general damages due to the delayed payment. The court’s decision in this case sheds light on the legal position regarding pro-rated or full monthly payment upon termination of employment in Nigeria. The case was brought before the court with the support of the Lagos State Office of the Public Defender.

Summary of Court’s Decision: 

Upon reviewing the filed processes, submissions of both counsel, and the evidence presented, the court addressed the main issue of whether the Claimant is entitled to the reliefs sought. The Defendant acknowledged the unpaid balance of the Claimant’s May 2012 salary and was ordered to pay the remaining amount. However, the Defendant disputed the Claimant’s claims for unpaid salaries from June to August 2012 and for a partial payment for September 2012.

Key Findings of the Court:

1. Constructive Resignation: The Defendant alleged that the Claimant had abandoned work, amounting to constructive resignation. However, the court found no evidence to support this claim. The Defendant did not exercise any disciplinary measures or present attendance records justifying the allegation of abandonment.
   
2. Incompetence and Gross Misconduct: The Defendant also alleged that the Claimant was not competent to handle the requirements of the position and was dismissed for gross misconduct. The court found no substantiated evidence for these claims. The Defendant did not comply with the rules of natural justice, as the Claimant was not given the opportunity to defend himself against the allegations.
   
3. Termination vs. Dismissal: The court highlighted the confusion caused by the Defendant’s counsel regarding the concepts of termination and dismissal. Termination is a contractual exit available to both employer and employee, while dismissal is a disciplinary measure imposed by the employer. Dismissal carries the consequence of denying the employee’s terminal benefits. The court emphasized that dismissal requires justifiable reasons and adherence to due process and fair hearing.
   
4. Pro-rated Payment: The Claimant sought a fraction of the monthly salary for September 2012. However, the court held that pro-rated or fractional payment of salary is not applicable to workers in periodic employment, as their salaries are calculated on a per calendar month basis. Pro-rated payment is only applicable to daily paid workers. Therefore, the court rejected the Claimant’s request for a fraction of the monthly salary for September, as it would undermine the principle of equal monthly payments.
   

Conclusion: 

Based on the court’s decision, the Claimant was entitled to the unpaid balance of the May 2012 salary. However, the court dismissed the Claimant’s claims for unpaid salaries from June to August 2012 and partial payment for September 2012. The court clarified that pro-rated payment is not applicable to monthly salaries in periodic employment. This case provides insights into the Nigerian law regarding pro-rated or full monthly payment in the event of termination of employment.

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