PENSION AND THE CONTRACT OF EMPLOYMENT VITAL ISSUES FOR CONSIDERATION

ABSTRACT
Pension and contract of employment are issues on the lips of pensioners and employees and their employers. They are issues because the processes involved in pension management and contractual procedures in the employment sector have come under serious review due to obvious irregularities. This has caused dissatisfaction, disaffection and mistrust in the manner and methods of the disbursement of pension funds and the apparent violation of the contract of employment procedure. The pension fund in Nigeria is bedevilled by a handicap popularly known as corruption. Government and private employers of labour in Nigeria have continued to violate the contractual rights of their employees especially as they know that employees are hamstrung and will do nothing but recite rhetorics of discontent. This down-turn cannot be allowed to continue to subsist. In the course of this research, effort will be made by the researcher to unveil the root causes of the inconsistencies and irregularities inherent in pension management and contract of employment in Nigeria. This the researcher will do by a critical analysis of the different statutes and laws regulating pension in Nigeria. Relevant statutes, case laws, journals, internet materials and textbooks will be used to give an indepth analysis of the topic.













TABLE OF CONTENTS
Title Page………………………………………………………………………………………i
Certification…………………………………………………………………………………...ii
Approval Page…………………………………………………………………...……………iii
Dedication…………………………………………………………………………………….iv
Acknowledgement……………………………………………………………………………v
Abstract……………………………………………………………………………………….vi
Table of Contents…………………………………………………………………………….vii
Table of Cases…………………………………………………………………………………x
Table of Statutes……………………………………………………………………………xiv
List of Abbreviations…………………………………………………………………………xv
CHAPTER ONE: INTRODUCTION
1.1 Definition of Terms………………………………………………………………………..1
1.1.1 The Contract of Employment…………………………………………………………..1
1.1.2 Meaning of Pension……………………………………………………………………...3
1.2 Pension as Distinct from other Interrelated Terms………………………………………...4
CHAPTER TWO: THE CONTRACT OF EMPLOYMENT AND ITS ELEMENTS
2.1 Formation of the Contract of Employment………………………………………………..7
2.2 Terms Contained in a Contract of Employment…………………………………………...8
2.3 Employee in the Private Sector…………………………………………………………..13
2.4 Employee in the Public Sector…………………………………………………………...14
2.5 Duties of the Employer…………………………………………………………………..15
2.6 Duties of the Employee…………………………………………………………………..17
CHAPTER THREE: THE CONCEPT OF PENSION
3.1 Pension Scheme Administration in Nigeria……………………………………………...23
3.2 Role and Purpose of Pension………………............................................................26
3.3 Employees Right to Pension……………………………………………………………26
3.4 Pension in the Public Sector…………………………………………………………..28
3.5 Pension in the Private Sector…………………………………………………………..30
CHAPTER FOUR: AN EVALUATION OF THE NIGERIAN PENSION REFORM
4.1 Brief Analysis of the Pensions Act of 1999……………………………………………...33
4.2 Pension Reform and the Employee………………………………………………………34
4.3 Pension Reform Act, 2004……………………………………………………………….35
4.4 National Pension Commission (PENCOM)……………………………………………...40
4.5 Contributory Pension Scheme in Nigeria………………………………………………...46
4.6 Remittance of Pension in Nigeria………………………………………………………...51
4.7 Pension Reform Act 2014; Key Highlights and Salient Points…………………………52
CHAPTER FIVE: CONCLUSION AND RECOMMENDATIONS
5.1 Conclusion………………………………………………………………………………..55
5.2 Recommendations………………………………………………………………………..55
Bibliography…………………………………………………………………………………58











TABLE OF CASES
Atedoghu v Alade [1957] NWLR (pt 184) 185…………………………………………….p.1
Ajayi-Obe v Secretary Family Council of Nigeria [1957] 1 ALL NLR 90………………....p.7
Akpabot v College of Education Uyo [1985] NCVR 45………………………………...…p.10
Ajayi v Texacco Nig Ltd [1987] 3 NWLR (pt 62) 577…………………………………….p.11
Adedeji v Police Service Commission [1968] NMLR 102………………………………..p.15
Asaolu v Olaiya Fagbamigbe LTD& Anor [1982] 1 FNR 88………………………..................................................................................……p.16
Alraine (Nig) LTD v Eshiett (1977) 1 IM SLR 414 418 SC………..........................................................................…………………….…..p.18
Agunanne v Nigerian Tobacco Co. LTD [1979] 2 FNR 144……………………………….............................................................................p.19
Ahmadu Bello University v Molukwu [2003] 9 NWLR (pt 825) 265……………………..p.27
British Transport Commission v Gouley (1969) 1 ALL ER 555…………..……………....p.3
Bell v Lever Brothers LTD (1932) AC 161………………..................................................p.16
Babatunde v Texaco Nigeria LTD(1932) 3 NWLR (pt 62) 577 593………………….…..p.18
Banneke v Union Bank of Nigeria LTD [1982] 3 FNR 151……...................................…..p.19
Bayley v ManchesterSheffield & Lincolnshire Rly Co. (1861-73) ALL ER Rep. 456….........................................................................................................................p.21
Bull v Pitney-Bowes LTD& Ors [1966] 3 ALL ER 384; [1967] 1 WLR .......................…p.27
Beach v Reed Corrugated Cases LTD [1956] 1 WLR 807...........................................……p.27
Coal Board v Galley (1958) 1 ALL ER 91………………………………………………...p.10
Continental Bank Plc v Nbisike [1995] 8 NWLR (pt 416) 725………………………...….p.15
Collier V Sunday Referee Publishing Co. LTD(1940) 2 KB 647; (1940) 4 ALL ER 234........................................................................................................................…p.21
Clayton (herbet) & Jack Waller LTD v oliver (1930) AC 209; (1930) ALL ER Rep 414........................................................................................................................….p.21
Dola v John [1973] 1 NMLR 58……………………….…………………………………..p.1
Daniels v Shell BP [1962] 1 ALL NLR 19………………………………………….……..p.13
Faramus v Film Artist’s Association (1963) 1 ALL ER (pt636) 651...................................p.8
Fisher v Dick (1938) 4 ALL ER 467…………………………………………………...…..p.13
Franklin v Attorney General (1973) 2 WLR 236…………………………...….…………..p.15
George v ECN (1968) LLR 161………………………………………………..…………..p.17
Garabedien v Jamakani [1961] 1 ALL NLR 177 181……………………………….……..p.19
Goff v Great Northern Rly Co. (1861) 121 ALL ER 594……………………….…………p.21
Hindustan Antibiotics LTD v Industrial Tribunal [1967] 1 LLJ 144 129 (ISC)......……….p.3
Houghton v Trafalgar (1954) 1 QB 247………………...………………………...….....…p.12
Hival Ltd v Park Royal Scientific Instruments LTD(1946) Ch 169; (1946) 1 ALL ER 350............................................................................................................................p.12
Ibama v Shell Petroleum Development Co. LTD [1998] 3 NWLR (pt 542) 493............................................................................................................................p.12
Imarsel Chemical Co. v National Bank of Nigeria LTD (1974) 4 ECSLR 355…….......................................................................................................…….....p.22
Katto v Central Bank of Nigeria [1999] 6NWLR (pt 607) 300 ………………………..….p.8
Kodeeswaran v Attoney General of Ceylon (1970) 2 WLR 456…………………………..p.14
Lake v Simmons (1927) AC 487…………………………………………………………...p.12
Lasisi Yussuf v Union Bank of Nigeria LTD [1996] 6 NWLR (pt 457) 632………...................................................................................................………..p.15
Laws v London Chronicle (Indicator Newspaper) LTD (1959) 1 WLR 698; 1959 2 ALL ER 514…………………………………….........................................................………p.18
Lister v Romford Ice & Cold Storage Co. Ltd (1957) AC 555; (1957) 1 ALL ER 125; (1975) 2 WLR 156…………………………………………………………...…………….p.20
Morren v Swinton & Pendlebury Borough Council (1962) 2 ALL ER 395; [1965] 1 WLR 576…..................................................................................................................….p.2
Marshall v English Electric Co. (1945) ALL ER 653…………………………………….p.13
Maja v Stocco (1965) 1 ALL NLR; [1968] NMLR 372 ………………………..………..p.15
Mohammed v Five Stars Industries LTD (1974) CCHCJ 29…………………………….............................................................................…p.18
Nigerian Civil Aviation Training Centre [1991] 5 NWLR (pt 152) 388……………….…p.11
Nwagbara v Nigerian Produce Marketing Co. LTD (1966) NCLR 196………………..…p15
Nwanwko v Ajaegbo (1978) 1 IM SLR 202……………………………………………….p.17
New Nigeria Bank Plc v Imonikhwe [2002] 5 NWLR (pt 760) 294…………………...….p.29
Olatunbosun v NISER Council [1988] 3 NWLR (pt 80) 25 SC…………………………...p.17
O’Brien V Associated Fire Alarms LTD (1968) 1 WLR 1916………………………….…..............................................................................p.17
Olatunji v Ojiakutu [1961] 1 ALL NLR 901……………………………………………....................................................….p.19
Okenwa v Military Governor, Imo State [1996] 6 NWLR (pt 455) 394…………….............................................................................................………p.27
Provincial Insurance Co. v Morgan (1933) AC 240……………………………….………p.12
Pepper v Webb (1969) 2 ALL ER 216; (1969) 2 ALL ER 216; (1969) 1 WLR 514…....................................................................................................................….p.17
Smith v General Motor Cab Co. (1911) AC 188………………………………………..….p.1
Short v Henderson LTD (1964) TLR 426……………………………………...…………...p.2
Stevenson, Jordan & Harrisons LTD v Macdonald & Evans (1952) TLR 101……......................................................................................................………...p.2
Stratford (J. T) & Sons LTD v Lindley 91965) AC 307; (1964) 3 ALL ER 102; [1964] 3 WLR 541…………………………………………………………..............…….....p.3
Smith v Lacas(1881)18 Ch (531)542....................................................................................p.8
Shitta-Bey v Federal Public Service Commission (1981)1 SC 40........................................p.15
Shugaba v The Federal Ministry of Internal Affairs & Ors (1981)2 NCLR 459..................p15
Swain v West (Butchers) LTD (1936) 3 ALL ER 261 .......................................................p.16
Sule v Nigerian Cotton Board [1985] 2 NWLR (PT 5).......................................................p17
Tamlin v Hannarford (1950) 1 KB 18.................................................................................p.15
Tanughe v African Timbers & Plywood LTD [1966] 2 ALL NLR 87;(1966) NMLR 312...........................................................................................................................p.16
Turner v Mason (1845) 14 M &W 112...............................................................................p.17
Union Bank of Nigeria LTD v Ozigi [1994]3 NWLR (pt 333) 385...................................p.8
University College Hospital Ibadan v Sapara [1988] 4 NWLR (pt 86) 58 ........................p.10
UAC LTD v Johnson [12 NLR 38.....................................................................................p.13
Usen v Bank of West of African LTD [1965] 1 ALL NLR 244; (1965) NSCC 196...........................................................................................................................p.20
Vandyke v Fender (1970) 2 ALL ER 335 CA....................................................................p.20






TABLE OF STATUTES
Constitution of the Federal Republic of Nigeria 1999 (as amended)
Evidence Act 2011
National Provident Fund Cap 273 Laws of the Federation 1990
Pensions Act Cap 346 Laws of the federation 1990
Pension Reform Act No2 2004













LIST OF ABBREVIATION
AC Appeal Cases
ALL ER All England Report
ALL NLR All Nigerian Law Report
CA Court of Appeal
CCHCJ Selected Judgement of the High Court of Lagos
Ch Law Report Chancery
ECSLR East Central State Law Report
FNLR Federal Nigerian Law Report
JTB Joint Tax Board
KB Kings Bench
LLJ Lagos Law Journal
LLR Lagos Law Report
M and W Meeson and Welby’s Reports
NAICOM National Insurance Commission
NCLR Nigerian Constitutional Law Report
NLR Nigerian Law Report
NMLR Nigerian Monthly Law Reports
NPF Nigerian Provisional Fund
NSITF Nigerian Social Insurance Trust Fund
NWLR Nigerian Weekly Law Report
PENCON Pension Commission
PFA Pension Fund Administration
PFC Pension Fund Custodian
PRA Pension Reform Act
QB Queen’s Bench
RSA Retirement Savings Account
SC Judgement of the Supreme Court
SEC Securities and Exchange Commission
TLR Times Law Report
WLR Weekly Law Report
WNLR Weekly Nigerian Law Report




CHAPTER ONE
INTRODUCTION
1.1 Definition of Terms
1.1.1 The Contract of Employment
A contract is an agreement giving rise to obligations which are enforced or recognised by law. A contract of employment is a category of contract used in labour law to attribute rights and responsibilities between parties to a bargain. On the one end stands an ‘employee’ who is employed by the ‘employer’ and on the other end stands an employer. It has arisen out of the old master-servant law used before the 20th century. However, to come properly within the purview of Labour law it must be first shown that a relationship of master and servant relationship exists between the parties. This is because Labour law applies mainly, though not exclusively, to master and servant relationships.
Therefore, in deciding whether a person is a servant or not the courts have confined themselves to one particular test. They have employed devices such as ‘control, multiple and organization’ tests.
The Control test stresses the employer’s right of control or actual control exercisable by means of dismissal. In Dola v John, the Kaduna High Court of Appeal held that a servant is a person subject to the control of his employer as to the manner in which he shall do his work. Hence, in Atedoghu v Alade, the Judge observed that the absence of control showed that there was no relationship of master and servant. This would suggest that the person who has the power to ‘hire and fire’ is the person in control and the person subject to the exercise of such power is taken to be the servant or employee.
This test is however inadequate for the needs of modern industrial relations. In an age when business management is becoming more of an art to be left in the hands of professional managers and when the employer himself is a spectator further removed from the seat of industrial power, the control test cannot be the sole determinant of the master and servant relationship.
This has led to the development of the Multiple test. This theory was laid down in Short v Henderson Ltd. Under this test, three or more conditions which have to be examined along with control are; the power of selection of the person to do the job, the right to fix wages payable and the employer’s power of discipline. This test was applied in Morren v Swinton & Pendlebury Borough Council where the court held that despite the fact that the plaintiff was not subject to the direct control of the council, he was nevertheless the servant of the council.
The Organization test is the determination of the legal status of a worker in relation to the role he plays in an organization’s set-up. The test emerged from the decision of Denning, L.J. (as he then was) in Stevenson, Jordan & Harrisons Ltd v Macdonald and Evans, when he took the view that whether a person is a servant depends on whether he is part and parcel of the organization. The test thus takes account of the degree of integration and brings workers like hospital staff, consultants and other professionals within the theory.
It seems possible to apply a combination of all the tests to a particular case. Some Learned authors however believe that Lord Denning’s Organization test has greater validity than accorded it. Nevertheless, the whole matter will turn, apart from written contracts, on the facts of the individual cases.
Employment may however give rise to a number of different relationships but the relationship between an employer and an employee is a contract of service. Also, a contract of employment is governed principally by the general law of contact. Finally, contract of employment are regarded as the product of free and personal bargains between the individual worker and his employer. Hence, terms of collective bargaining are not treated as part of such a contract unless by express words or necessary implication. The case of Stratford (J.T) & Sons Ltd v Lindley is illustrative of this proposition.
1.1.2 Meaning of Pension
According to Black’s Law Dictionary, pension is a state allowance out of the public treasury granted by government to an individual or his representatives for his valuable service to the country or in compensation for loss or damage sustained by him in the public service. Pension is also described as an efficient device considered necessary for an orderly and humane elimination from industry of superannuated employees who but for such retiring benefits would have continued in employment even though they function efficiently. Further, it differs from gratuity as it is usually but not necessarily a periodic payment of a certain amount whereas gratuity is a lump sum payment.
The pension scheme is an important feature of the career system support and sustaining performance in the public service. Pensions are universally construed as a reward for long continued service paid upon retirement from service and all pensions of public employees are paid upon their retirement.
1.2 Pension as Distinct from other Interrelated Terms
Pension as a term is interrelated to the following terms. They include ;
(a) Gratuity
Black’s Law Dictionary, defines gratuity as something acquired or otherwise received without bargain or inducement. Something given freely or without recompense, a gift. Something voluntarily given in return for a favour or especially a service, hence a bounty, a tip or a bribe. It is the amount a person may receive in gratitude for his/her services. It is given generally as a reward for the service provided and as supplement to the service provider’s income. Individuals who work for gratuity include those who provide a wide variety of services, including for example; waiters, bartenders, hotel employees and cab drivers. Gratuity is customarily designed to ensure that parsons receive the best services possible. The amount of gratuity depends upon the type of service, though tips are usually determined by the total cost of service provided. Gratuity encourages workers to render better service than they ordinarily would have offered. (b) Annuity
Is a right to receive periodic payments usually fixed in size for life or a term of years that is created by a contact or other legal document. The most common form of annuity is akin to a savings account. The annuitant, the person who creates an annuity for his or her own benefit deposits a sum of money, the principal, with an individual, business or insurance company to be invested so that the principal will earn income at a certain percentage, usually specified by the terms of the annuity. This income issued by the company to pay the annuitant. Each payment received by the annuitant sometimes called the primary beneficiary, represents a partial return from the principal and a portion of the income generated by its investment. Such annuities are employed frequently to provide a source of income to persons upon their retirement.
A retirement annuity is a policy paid to the annuitant after retirement. If the annuitant dies prior to expectation of the annuity or wants to surrender the policy, an amount specified in the terms of the annuity is returned to the annuitant’s estate or designated beneficiary.
(b) Severance Pay
Severance pay is an amount of money paid to employees upon the termination of their employment. It is usually based on the employee’s salary and duration of employment. It is pay and benefits an employee receives when he or she leaves employment of a company. In addition to an employee’s remaining regular pay, it may include some of the following;
 An additional payment based on months of service
 A payment for unused vacation time or sick leave
 Payment in lieu of a required notice period
 Medical, dental or life insurance
 Retirement benefits
 Stock options
 Assistance in searching for new job, such as access to employment services or help in producing a resume.
Severance pay was instituted to help protect the newly unemployed. Sometimes, they may be offered to people who resign regardless of the circumstances or are fired. Severance contracts often stipulate that the employee will not sue the employer for wrongful dismissal or attempt to collect unemployment benefits.

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