THE Minister of Labour and Employment, Chris Ngige, in alleged connivance with the management of the Nigeria Social Insurance Trust Fund (NSITF), has been accused of illegal tax deductions from the salaries of over 5,000 workers.
An aggrieved source said the deductions run into billions because of the organisation’s large staff population.
The controversy is an offshoot of the Federal Government’s approval of a new minimum wage in 2019. The salary review extended across all levels of civil servants in the Ministries, Departments and Agencies (MDAs), including the NSITF employees.
Findings revealed the approval was also validated by the National Salaries, Income and Wages Commission (NSIWC).
In a memo with reference number, NSITF/AC/DIR/ADMIN/5/S.13/26 obtained by The ICIR, the NSITF management, through the executive director in charge of administration, also confirmed the salary upgrade for all the staff from Grade Level 03 to Grade Level 17.
The confirmation was dated April 13, 2022, and the payment was expected to take effect from April 2019.
In other words, there was a percentage increase in the salary of the employees, from the vehicle drivers to supervisors and managers.
A breakdown revealed that grade levels 03 to 07 would get a 23.2 per cent upward review.
From officer II to the senior manager, grade 08 to 14, there was a 14 per cent increase. In contrast, grade level 15 to 17 officers, the principal managers and general managers are expected to benefit from a 10.5 per cent increase.
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With the adjustment, an NSITF staff in level 3, receiving N50,000 as take-home, would have a salary increase of 23.2 per cent.
That is an additional N11,600 to the existing N50, 000 to make N61, 600. In three years, this amounts to hundreds of thousands of naira.
“Payment of the consequential adjustment has been carried out in line with approvals from the (NSIWC) and the supervising ministry, and the ministry of labour and employment,” the memo sighted by The ICIR read.
“Percentage of computation of salary increase/arrears for various ranks/levels are Motor Driver to Supervisor (Grade Level 03 to 07):23.2 per cent; Officer II to Senior Manager (Grade Level 08 to 14): 14 per cent and Principal Manager to General Manager (Grade Level 15 to 17): 10.5 per cent.”
The NSITF ultimately agreed to pay the employees in three tranches since there was an outstanding directive by the Federal Government for agencies yet to implement the new minimum wage policy.
The Fund has mostly been in the news for wrong reasons, either a case of stealing of public funds or abuse of office, especially by its past executives. There were other cases of breach of the Public Procurement Act 2007, where at least nine sacked top officials were directed to return ‘excess remunerations’.
Payment of lump sum commences
On April 1, 2022, the NSITF eventually made its first tranche of payments to the staff.
The second payment was scheduled for June 30, 2022, while September 30, 2022 was set as the payment of the last tranche.
However, the union accused Ngige of conniving with the management of the NSITF to deduct up to N500, 000 from the employees’ salaries, depending on their grade level.
“For instance, someone who received N400, 000 as his first tranche got N250, 000 in the second, and we don’t know how much would get to us in the last tranche,” an official at the Fund said, raising doubt that there were no defined benchmarks as to what type of tax and percentage of deductions adopted.
“There were no defined parameters to which the deductions were made,” the source, who cannot be named for fear of victimisation, said.
“In my case, I ought to receive N1.5m for the three tranches. N500,000 per tranche.”
She acknowledged payment of the first tranche of N500,000. But her second payment, she said, was about N300,000 instead of N500, 000. This, she noted was done without any details or formal documents listing the taxes deducted from the accrued salary increase.
That means from the second tranche, about N200, 000 was deducted by the management of the Fund. But the third deduction is yet to be pulled out due to the growing concerns raised by the aggrieved workers, The ICIR gathered.
“We had no issue during the first payment,” says another source affected by the development.
“It was a week to pay the second tranche that the story of a tax deduction emerged.”
In her case, she was worried about 60 per cent of the N1.5 million would be deducted from the accrued sum.
Another source, who occupies a managerial position in the government, confirmed the deductions. she alleged opacity of the deduction process.
“I should be cruising this year based on my calculation but the management has not been transparent to us,” she said.
She also confirmed, just like other employees, that the arrears were meant to be paid in three tranches.
“We got the first one. To pay the second and third, we were told that there are taxes to be paid.”
Another source, who is a principal officer at the Fund told The ICIR that of the N500,000 for the second tranche, he was paid only N150,000.
This implied that N350,000 was deducted as tax.
“We have been paying our normal taxes for years, but when the government approved the new minimum wage, they came up and said we were not paying the right taxes and they failed to make public the percentage for the deductions.
“They have even told us we should not expect any amount from the third tranche,” he added.
Labour kick, describe deduction as a fraudulent
In a message shared with members, the aggrieved employees, through the umbrella body of the Association of Senior Staff of Bank, Insurance and Financial Institution (Domestic Unit), kicked against the policy, describing it as fraudulent.
In the post, the union leadership also claimed they were “arm twisted” by the Labour Minister and the NSITF management into signing undisclosed agreements on behalf of the employees.
“We were given a timeline for this payment. After paying the first tranche that was carefully calculated from January 2019- March 2022 (36 months), the minister and management started playing games about a non-existing tax regime that will eat up to 40 – 50 per cent of the arrears.
“Both the Minister and management arm twisted the union into signing a bogus and fraudulent tax deduction from our arrears,” the post read.
“The deduction of this seemingly fraudulent tax ranged from N200, 000 to N500, 000 per staff. This amount runs into billions based on a calculation of more than 5000 staff.”
But despite actions from the union, there were allegations of compromise by labour. A faction allegedly received a bribe; another faction just allowed things to be, an insider privy to the development disclosed.
Regardless, on Saturday, August 20, The ICIR contacted one of the in-house labour officials to help book an appointment with the union’s representative. The move was to verify the claims and seek efforts made by the labour group, but he advised this reporter to call back on Monday, August 22, as the labour chairman was out of town.
He promised to speak with the chairman and get back when best The ICIR could meet with him. In a text message, a source subsequently reached out, asking for a brief on the essence of the planned meeting. This reporter sent a brief.
He later cancelled the proposed meeting. The chairman was not ready to speak on the matter, he said, and The ICIR did not have the chairman’s direct contact.
Repeated efforts to persuade him failed.
Meanwhile, based on independent findings, some of the deductible taxes from the salaries of public servants include the Payee, payment to the National Housing Funds (NHF), and Contributory Pension Scheme (CPS). Nonetheless, The ICIR got hold of the pay slip of one of the aggrieved employees.
The deductions were Housing, Transport, PFA (Contributory Pension), NHF, PAYEE, Union, Cooperative, and Union. Others are Car loans, FGN Housing Loans, and Salary advances.
She only had as deductions: PFA: N12, 604.43 NHF: 1,547.70, PAYE:/Tax: N5, 806.35 and Union: N1, 238.16.
Resolution held with the NSITF Labour Union on July 8, 2022. by Olugbenga Adanikin on Scribd
It totalled N21, 196.54. These total deductions, she argued, should not add up to over N500,000 set to be deducted from the consequential adjustment arrears.
NSITF Corporate Affairs fail to react
On August 20, The ICIR visited the NSITF Corporate Headquarters to verify the claims of arbitrary deductions. But, all efforts to meet the management failed. At the Corporate Affairs Department, an official directed this reporter to one Ogechi in Corporate Communications.
Ogechi thereafter advised the reporter to meet with the Assistant Head of Corporate Affairs identified as Queeneth, who was also not available. Efforts to either get their official emails or phone numbers were futile. After an hour, The ICIR left.
Head, Press and Public Relations, Federal Ministry of Labour and Employment, Olajide Oshundun, said as civil servants the aggrieved persons are issued monthly updates on their deductions via pay slips, and as such do not have reasons to complain.
But he was told the monies were deducted in a lump sum of between N200,000 and N500,000. At this point, he said he did not have information on the deductions.
“I don’t know about it,” he said.
He also denied relocation of the procurement department of the NSITF to the labour ministry.
“As an agency of the ministry, when they need to make procurement, they have procedures to follow. After they have completed the procedure in their office, they will submit it to the ministerial tenders board. That is where everything will be ratified before contracts are awarded.”
“They will have done everything. Ratifications is only what they come to do at the ministry.”
NSITF Finance and Admin clarifies alleged deduction in leaked document
In the course of the investigation, The ICIR obtained a copy of an internal memo titled RE: IMPLEMENTATION OF THE NATIONAL MINIMUM WAGE IN THE PUBLIC SERVICE CONSEQUENTIAL ADJUSTMENT IN THE FUND – 2ND TRANCHE.
It was dated August 25 and signed by the Fund’s General Manager, Finance and Admin, Zwalda Ponkap. The document revealed that the first tranche of payment to the staff was done based on estimates put together from January 2022 staff payroll list.
While the payment was to cover three-year arrears (36 months), effective from April 1, 2019, some staff had been promoted from different levels at different dates.
The document further explained the rationale for the variation in payments, stressing that after considering the differences, it was agreed with the union that N3.7 billion was to be disbursed among the staff for the second and third tranches.
Moreover, the sum of N2.1 billion would be deducted as staff PAYE for the period April 2019 and March 2022 while the payment would spread across the month of August to December 2022.
Leaked reaction to the controversial deductions obtained by The ICIR by Olugbenga Adanikin on Scribd
“Therefore, the union executives on their part met with the minister of labour and employment and the management of NSITF and resolved thus:
(a) 25 per cent of the PAYE (N2.1bn) is to be recovered in the second instalment payment.
(b) 25 per cent of the PAYE (N2.1bn) is to be recovered in the third instalment payment.
(c) 50 per cent balance of the PAYE (N2.1bn) to be recovered from August to December 2022.”
Olugbenga heads the Investigations Desk at The ICIR. Do you have a scoop? Shoot him an email at oadanikin@icirnigeria.org. Twitter Handle: @OluAdanikin