Minimum Wage legislation

No-one is going to complain if you pay more than the National Minimum Wage or National Living Wage rates – which ever applies.

However, there are matters you will need to consider if you pay less than the appropriate minimum wage rates.

The minimum wage legislation applies to workers or employees. It does not apply to the self-employed or office holders: an office holder is paid for the duties they perform and the most common example is a company director. This distinction is important, as office holders are not subject to the minimum wage legislation. Unfortunately, directors sometimes negotiate a contract of employment with their company and therefore any salary paid as part of such contract would 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 less than the minimum wage. This may be the case, for example, if you have adopted the strategy of paying a low salary and any balance of remuneration as dividends.

HMRC oversee the monitoring of the minimum wage legislation. Accordingly, it is worth reviewing your wage and salary rates from time to time to ensure your business is paying at the correct rates.

Not only will you have to reimburse employees with any shortfall in wage payments, you may also be fined by HMRC.

We can help. If you would like to make sure you are compliant, we can check your payroll and advise if any remedial action needs to be taken.

A list of the current minimum wage hourly rates is displayed below:

  • Aged 25 and over £7.50
  • Aged 21 to 24 years £7.05
  • Aged 18 to 20 years £5.60
  • Under 18s – £4.05
  • Apprentice rate – £3.50

Apprentices are entitled to the apprentice rate if they are either: aged under 19, or aged 19 or over and in the first year of their apprenticeship.

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