Obviously, no-one is going to complain when you pay your employees at a rate that is above that in the National Minimum Wage legislation or National Living Wage legislation – whichever applies.

But if you are discovered to be paying employees below the appropriate minimum wage, then it’s a different matter.

The minimum wage legislation applies to workers or employees. If you are self-employed or are an office-holder, you won’t be required to comply.

An office holder is defined as someone who is paid for the duties they perform, with the most common example being a company director.

The distinction between an office–holder and an employee is important, as office-holders are not subject to the minimum wage legislation whereas employees are. Unfortunately, Directors will sometimes choose to negotiate a “Contract of Employment” between themselves and their companies and if that is the case then any salary paid in respect of that contract will be subject to the minimum wage legislation.

In other words, it is fine to pay yourself as a Director (if you have no contract with your company) at a rate that is below the minimum wage. This may be the case, for example, if you have adopted the strategy of paying yourself a low salary from the company and taking any balance of your remuneration in the form of dividends.

It is the responsibility of HMRC to oversee the monitoring of the minimum wage legislation.

Accordingly, it is worth reviewing the wages and salaries being paid by your business from time to time to ensure you are paying all your employees a rate that is above the National Minimum Wage.

If, as an employer, it is discovered that you are getting this wrong, then not only will you have to reimburse any affected employees with any shortfall in their wage payments but you may also be fined by HMRC.

We can help.

If you would like to ensure you are covered (compliant), we can check your payroll and advise you if any remedial action needs to be taken.

Readers are reminded that from 1 April 2022, the National Living Wage (NLW) and National Minimum Wage (NMW) hourly rates increase to:

  • 23 and over – £9.50 (2021 £8.91)
  • 21 to 22 – £9.18 (2021 £8.36)
  • 18-20 – £6.83 (2021 £6.56)
  • Under 18 – £ 4.81 (2021 £4.62)
  • Apprentices – £4.81 (2021 £4.30)

Apprentices are entitled to the apprentice rate if they are either:-

  1. Aged under 19, or
  2. Aged 19 or over and in the first year of their apprenticeship.

Need further advice on any of the topics being discussed? Get in touch and see how we can help.

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About Samantha Rowe

Sam’s title is Operations Manager, but the title itself doesn’t truly convey the variety of what she does for THP.  From administrative tasks to payroll, strategic business planning, and office systems and procedures, Sam’s primary skill lies in multitasking.

Sam’s journey began as an office junior with George Nottage (now merged with THP), and she soon learned skills in payroll and bookkeeping, and then gained experience as a PA to the Directors, and as Administration Manager.

At the moment, Auto Enrolment is an area that has a key focus for Sam, and for THP as a whole.  “The question I’m asked the most by clients just now is, ‘How will auto enrolment affect me?’ And the answer is, no matter how big or small you are, you will absolutely be affected by the Auto Enrolment regulations. I’d encourage you to start thinking about it now, and to look at your payroll software to make sure you’re ready.”

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