June 14, 2024

Non Executive Director under the ITF Act, 2011

by Francis Ogunbowale

The Industrial Training Fund (ITF) was established by Decree 47 of 1979 and amended by the ITF Act 2011. Its purpose is to stimulate training consciousness, generate skilled manpower, enhance human performance and improve productivity. ITF is expected to survive, among others, through subvention and contributions. 

Under Section 6 (1) of the ITF Act, every employer with at least 5 employees or having less than 5 employees, but with a turn-over of N50 Million shall contribute to the Fund, 1% of the annual pay roll of companies with at least 5 employees in respect of each calendar year.

To ensure that companies pay their contribution, Section 9 (1) of the ITF Act prescribes a penalty of a sum equal to 5% of the unpaid amount to be added to each month or part of the month, after the date on which payment should have been made. Unfortunately, this has not ensured adequate compliance to Section 6 above.

Some of the employers have argued that Non-Executive Directors cannot be construed as ‘employees’ under the ITF Act and therefore cannot be compelled to include them in the calculation of 1% annual pay roll, expected to be contributed to the Fund.

Section 6(1) of the ITF Act provides that, ‘Every employer having either five or more employees in his establishment, or having less than five employees but with a turn-over of N50 million and above per annum, shall, in respect of each calendar year and or the prescribed date, contribute to the Fund on per cent of his total annual pay roll’.

Under the ITF Act ‘employees are persons whether or not they are Nigerians employed in any establishment in return for salary, wages or other consideration and whether employed full time or part time, and includes temporary employees who work for periods of not less than thirty days’. (See Section 16 of the ITF Act).

The argument of some of these employers is that a Non-Executive Director is a member of a company’s Board of Directors, on a no full-time basis, who only acts as an independent advisor, helps to look at the strategic plan of the company, provide an un-biased view on the direction of the company and take only remuneration or allowance.

But a cursory look at the above will reveal that the definition of a Non-Executive Director fits into the definition of employees under the ITF Act. Whether what is given to the Non-Executive Director, is called ‘remuneration or allowance or salary or wages’, once payment is made from the company’s account as compensation to anyone, who is believed to have contributed knowledge, advice or service, whether on a part time or full time basis, then 1% of such payment should be remitted as contribution to the Fund. 

Under Section 2 of the ITF Act 2011, the ITF has enormous roles to ‘provide, promote and encourage the acquisition of skills in industry and commerce with a view to generating a pool of indigenous trained manpower sufficient to meet the needs of the private and public sectors of the economy; provide training for skills in management for technical and entrepreneurial development in the public and private sectors of the economy, set training standards in all sectors of the economy and monitor adherence ; and evaluate and certify vocational skills acquired by apprentices, craftsmen and technicians in collaboration with relevant organisations’.

The concern of every citizen is how the economy can be improved and provision made for employment opportunities through the provision of skilled intervention programs. Because of this, the employers need to co-operate maximally and make adequate and the required contribution as prescribed by law, to the Industrial Training Fund.

ITF on its part needs to live up to expectation and strive to meet the specific needs of the employers. The complaint right now across quarters is that some of the courses which the ITF sometimes approve do not meet the specific needs of the companies. ITF needs to play key roles in alleviating poverty and widen its horizon and enhance its relationship with collaborating agencies of government and the International/Multi-Lateral Foreign Agencies and organizations with similar objectives.

For ITF to properly assume a proper role as a catalyst of human capital development, there is urgent need for legislative reform and intervention. It is suggested that the Definition of an ‘employee’ under Section 16 of the ITF Act should be expanded to expressly include ‘Non-Executive Directors of Companies’. This will settle all forms of controversies that have been generated over the years.

Ogunbowale is a lawyer in Lagos.

One thought on “Non Executive Director under the ITF Act, 2011

  1. I am vehemently opposed to the writer’s position. His proposition for a reform of the ITF Act to include NEDs as employees is radically against the intents and purposes of NEDs under the Codes of Corporate Governance.
    Under elementary Corporate Law Principles, the basic distinction between an Executive Director and a NED is ‘involvement in the day-to-day running of the affairs of a company’.
    A NED under the principles of Corporate Governance and for all intents and purposes is never to be involved in the day to day running of the affairs of the company. He is only to bring independence and unbiased contribution to the board.
    He can never pass as an employee of the company. Bringing him under the categorization of an employee negates the very intent and purpose of a NED. We cannot through away this principle in a bid to generate revenues. The effect of robing a NED of the non-employee status far outweighs the benefit of the revenue generation regardless of whatever definition is given to an employee under the ITF Act.
    My humble opinion.

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