An HR technology startup based in Nigeria, established in 2019, is currently under investigation for alleged failure to remit tax and pension payments on behalf of its clients. The Lagos Inland Revenue Service (LIRS) and the Economic and Financial Crimes Commission (EFCC) are looking into the matter following reports of financial discrepancies. This situation has led to the departure of notable clients like Moniepoint, Paystack, Kobo360, and Bamboo from the startup in 2024.
Former clients have disclosed that the startup is being probed for suspected forgery of tax receipts, delayed pension contributions, and other financial irregularities. There are claims of significant unpaid taxes and pension contributions, with one company alleging ₦50 million ($108,000) in outstanding payments from 2023 to 2024. The company’s CEO has acknowledged the complaints and assured that efforts are being made to address the outstanding tax obligations for affected clients.
Despite the startup’s CEO attributing the discrepancies to challenges within Nigeria’s tax and pension systems, concerns remain about the company’s handling of client funds. The lack of regulation in Nigeria’s HR technology sector has allowed for such issues to persist, with some viewing them as systemic inefficiencies rather than intentional wrongdoing.
The startup’s CEO has faced skepticism due to past allegations of creating a toxic work environment and public incidents. The ongoing investigations and legal issues have resulted in the loss of business from key clients in 2024. However, the CEO remains optimistic about the company’s profitability and strategic shift towards serving traditional businesses over venture-backed startups.
Challenges in Detecting Late Payments
Cultural and systemic factors contribute to delays in detecting payment discrepancies. Payroll application designs often create the impression that taxes and pensions are remitted digitally, yet manual processes can lead to significant delays. Employees and employers may not notice these discrepancies as long as salary payments continue as expected. Additionally, a lack of interest in monitoring pensions and a general distrust in tax processes contribute to the issue.
Efforts to reconcile records and address discrepancies are hindered by the manual nature of the process and the startup’s limited capacity. These challenges have been highlighted by former clients, with one company lodging a complaint with the EFCC over missing pension payment receipts and facing obstruction from the startup in providing necessary records.
Founded in 2019, the startup has raised funding and expanded operations to multiple countries. However, it is currently navigating legal challenges and working to restore its reputation in the face of ongoing investigations. The situation serves as a cautionary tale for employees and HR managers about the importance of scrutinizing HR technology providers and ensuring compliance with tax and pension regulations.