Contract Staff as a Means of Reducing Employer’s Staffing Cost – A Misconception or a Reality?

There is a growing usage of the word “Contract Staff” in the Nigerian employment space. This is highly attributed to an understanding that contract staffing is a means of resolving budgetary concerns of employers.

The word has also been used interchangeably with “Casual Staff”. We shall examine the concept of contract staff, the statutory obligations of employers, limitations of contract staffing, and the alternative(s) to contract staffing.

Who is a Contract Staff?

 There are three categorisations of employment relations recognized by various legislation in Nigeria. These categories are express and implied employment; employment under a contract of service and a contract for service; and employment as a permanent staff & a temporary staff.

The first category relates to the mode of engagement. It is express when the terms of the contract are set forth either orally or in writing. It is implied where the terms and conditions are not expressly stated but can be inferred from the conduct of the parties, circumstances surrounding the employment, as well as statutory provisions.[1]

For the second category, an employment under a contract of service is a master-servant relationship, in which the employer exercises control over the way and manner the employee carries out the terms of the employment. Other defining factors include payment of wages and salaries, ownership of equipment, hours of work, place of work, etc. A contract for service on the other hand, is an employment with an independent contractor, who undertakes to produce a given result with little or no control from the employer, and exercises discretion over the mode of executing the work. Another feature of a contract for service is the freedom available to the independent contractor to work for others.[2]

The third category relates to the duration of employment.  A person employed as a permanent staff is a person whose contract of employment is for an indefinite period subject to retirement, termination by either parties, or based on the continuous observance of the terms of employment. Contrarily, an employment for a temporary period is an employment with a fixed term. As such, the employment ordinarily terminates automatically upon effluxion of the period agreed. This temporary arrangement delineates the concept of a contract staff.  Generally, contract staff do not get most of the benefits given to permanent staff. This is because a contract staff is assumed not to be a regular addition to the staff of an employer. Whilst this appears reasonable, the laws that make provisions for most of these traditional employment benefits and obligations of an employer, makes no distinction between a permanent and a contract staff to warrant the exclusion of contract staff from these benefits.

The status of a contract staff is recognized in the jurisprudence of labour relations in Nigeria. The Supreme Court as far back as 1965 in its decision in the case of Thomas V Local Government Service Board[3] justified temporary employment in Nigeria under the umbrella powers of an employer to make an appointment which includes the power to appoint for a fixed period. The apex court gave the example that a schoolteacher might be appointed for one term, or an engineer for the duration of a particular piece of work. This recognition of contract staff in labour law jurisprudence in Nigeria has been reiterated by statute as well as the National Industrial Court in its recent case of Mr. Casmir Onuchukwu V. Petroleum Products Pricing Regulatory Agency (Supra). The said statutory recognition can be found in the Labour Act vide Section 7(1)[4] which provides what a contract of employment should contain, and this includes the contractual period of the employment, whether it is for a fixed period or otherwise.

 What are the Statutory Provisions for Contract Staff?

It may appear that there is no law regulating the relationship between an employer and its contract staff, thus leaving the determination of the entitlements of the contract staff to the whims of the employer. This is however not the case, as there are provisions for contract staff embedded in the different statutes that deal with employment relations in Nigeria. They include, the Labour Act, the Industrial Training Fund Act, the Employees Compensation Act, the Trade Union (Amendment) Act, the Trade Dispute Act, the National Industrial Court Act, the Nigeria Social Insurance Trust Fund Act, the Pension Reform Act of Nigeria, and the National Health Insurance Scheme Act. What is common with these laws is that they define an employee/worker to include a contract staff expressly and impliedly. The implication is that the rights and obligations arising from these statutes equally apply to a contract staff.

The question is, if the employer is statutorily mandated to pay pension for its employees which includes its contract staff, is required to provide health insurance to all employees including its contract staff, is required to include its contract staff in the computation of its contribution to the Industrial Training Fund, and the Nigerian Social Insurance Trust Fund, can it truly be said that contract staffing is a means of reducing the financial obligation of an employer? If the law is strictly adhered to, the answer to this question might to an extent be in the negative.

It follows therefore, that an employer may struggle to reduce staffing cost from statutory obligations. This notwithstanding, employment relations are contractual. Contract staffing may be deployed to reduce staffing through contractual and discretionary benefits such as the provision of car, lunch, accommodation, transportation, bonus, etc.

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[1] Mr. Casmir Onuchukwu V. Petroleum Products Pricing Regulatory Agency Unreported in Suit No: NICN/ABJ/373/2017 delivered on the 2nd of May 2019 by Honourable Justice Sanusi Kado.

[2] Shena Security Company Ltd V. Afropak Nigeria Ltd & Ors (2018) LPELR-3052 (SC).

[3] (1965) LPELR-25204(SC).

[4] Labour Act CAP LI LFN 2004.

[5] Diamond Bank Plc v. National Union of Banks, Insurance and Financial Institutions Employees (NUBIFIE) unreported in Suit No: NICN/ABJ/130/2013, delivered on the 6th of February 2019 by Hon. Justice B. B. Kanyip; PENGASSAN v. Mobil Producing Nigeria Unlimited [2013] 32 NLLR (Pt. 92) 243.