The Labour Act, of 2004 regulates employment relationships between employers and employees as it defines the rights, duties, and obligations of the employers and employees and provides a clear procedure on how an employment contract may be terminated. Termination of employment is the cessation of the services of an employee by an employer.   

Section 92 of the Labour Act, 2004 defines an employer as a person who has entered into a contract of employment to employ any other person as a worker either for himself or for the service of any other person and includes the agent, manager, or factory of the first mentioned person and the personnel representative of a deceased employer.[i]

Black’s Law Dictionary defines an employer as one who employs the services of others, one for whom employees work and pays their wages and salaries.[ii]

Black’s Law Dictionary defines an employee to be any person in service of another under any contract of hire, express or implied, oral or written, where the employer has the power or right to control and direct the employee in the material details of how the work is to be performed.[iii]

In simple terms, an employee is a person employed by another to do specific work in exchange for remuneration or salary.

The terms and conditions of a contract of employment are the standards upon which the employment is built. They are the foundation upon which a case will be initiated par adventure the court may be approached to determine the propriety or otherwise of an action bothering on termination of employment. The principles guiding the termination of employment naturally depend on the nature of employment.

Ways of terminating a contract

A contract can be terminated in the following ways:

  • Upon expiry of the period for which it was made or
  • By the death of the worker before the expiry of that period or
  • By notice in accordance with section 11 of the Labour Act, 2004 or in any other way as contained or provided for in the contract of employment.

Termination by Expiration of Period

Contracts of employment usually have a duration, and upon the effluxion of time, if the contract is not renewed, the contract automatically comes to end. The most common mode of terminating a contract of employment by either of the parties is by giving notice of termination of the employment contract to the other party. The contract automatically ends at the expiration of the notice given.

Alternatively, either of the parties may elect to pay compensation or a stated amount in lieu of the notice, or the employee may continue to work for the employer during the pendency of the notice of termination. Once, the period stated in the contract of employment has expired, the employer need not give reasons for terminating the employee’s employment. It is crystal clear in the contract of employment that the period of employment has expired.

Termination by Death

On the part of the employer, once he dies, the contract of employment is automatically brought to an end. This is based on the fact that it is only contracting parties to a contract that are bound by the terms of the Agreement.

Termination by Giving Required Notice

Most contract of employment usually provides for the duration of notice to be given by the terminating parties. The duration of notice usually varies, but it is stated in the contract of employment. In some cases, the contract of employment provides for 3 months’ salary in lieu of notice or the 3 months’ notice by either party. This position is not a size fits. It varies according to what is stated in the contract of employment.

Termination on Ground of Misconduct or Criminal Offences

Gross misconduct can be defined as unlawful, or weighty actions that undermine the confidence that exists between the employee and employer or which are against the overall interest of the employer or as stipulated by the contract of employment. When an employee is guilty of gross misconduct, he could be dismissed summarily without notice or wages.

Where there are allegations of the commission of a criminal offense against a person, which has also been denied by the accused person, the person or authority making the accusation must satisfy the constitutional requirement by establishing the guilt of the accused person according to the provisions of the law.

The employee must be given an opportunity to hear the allegations against him, and explain or defend himself before the employer takes any decision that will affect the employee.

Is an Employer liable to pay full salary when a contract is terminated within a new month?

An employer is entitled to terminate the appointment of an employee in accordance with the terms of the relevant contract of employment. In Duru v. Skye Bank Plc,[iv] the court held that an employer should not terminate the appointment of an employee unless a valid reason exists for such termination connected with the employee’s capacity or conduct or based on the operational requirements of the employer.

A periodic employee is one who receives a salary per calendar month, that is, whose salary is not calculated by the number of days. The common practice is that a periodic employee whose appointment is terminated in the course of a particular month receives a fractional payment for the number of days he has worked in that exit month. In Abe Adewunmi Babalola v. Equinox International Resources Limited (Unreported Suit No: NICN/LA/166/2015), the National Industrial Court had cause to consider the question of the quantum of salary due to a periodic employee whose employment is terminated after working for a number of days in (that is, not the entire duration of) the exit month.

The Court held that an employer is liable to pay the full salary to the employee for that exit month and not a fraction.


Flowing the above, it can be concluded that an employer is liable to pay his employee full salary when a contract is terminated within a new month. The only exception where the employer might not pay is if the termination of the contract/employment was based on wrongful misconduct or the commission of a criminal offense. It should also be noted that there must be a fair hearing before the termination of the contract. Another instance when the employer might decide not to pay the employee’s full salary where a contract is terminated within a new month is if the employee breaches the contract of employment.

[i] The Labour Act, 2004

[ii] Black’s Law Dictionary, 9th Edition, Bryan A. Garner

[iii] Black’s Law Dictionary, 9th Edition, Bryan A. Garner

[iv](2015) 59 NNLR (pt 207) at 680 NIC

Written bOlalekan O. Elizabeth for The Trusted Advisors

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