Businesses have been obliged to pay the NMW to their workers since 1 April 1999. Initially, the implications for directors were unclear and so, in September 2000, ICAEW’s Tax Faculty published TAXguide 7/00 to address the confusion. The content of the TAXguide was agreed with HMRC and the government body that was responsible for NMW policy and legislation at that time (the Department of Trade & Industry, now the Department for Business & Trade).
The TAXguide explains that, where an individual has been properly appointed as, and assumes the rights and obligations of a director, they are office holders and not necessarily “workers”. For a director to also be a worker under the NMW rules there has to be an additional legal arrangement between the two parties, which involves obligations on both sides, for example, a contract of employment. Therefore:
- where the director does not have an employment contract, it is highly unlikely that the business will need to pay the director the NMW; and
- where the director is employed by the company under a contract, the director is entitled to the NMW for the work done under that contract.
The TAXguide also considers the position of family members. Although work done by family members may be outside of the NMW where the business is carried on by a sole trader or in partnership, this does not extend to companies. In addition, the absence of a formal written employment contract does not mean that a contract does not exist, as a contact can be implied.
See ICAEW’s article Employers reminded of minimum wage increases for the current rates of the NMW and the national living wage (NLW). The NLW is the minimum wage to be paid to employees aged 21 and over and to apprentices in some circumstances.
On 29 May 2025, HMRC published the names of 518 employers and businesses who were found to have underpaid workers as a result of investigations carried out by HMRC between 2015 and 2022.
See the full list of ICAEW’s TAXguides.
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