Vince Cable has suggested a clampdown on National Minimum Wage (NWM) to begin in the near future. Planned changes include quadrupling the maximum fine for not paying the NWM to employees be increased from £5,000 to £20,000 which the government has pushed through to apply from 1 February.

Company directors may also need to be aware of these new changes as their own contractual agreements may mean they may fall foul to these new planned changes. NWM rules may apply to them if they’ve opted for a small salary which may be below the NMW and take the remaining amount of their income through dividend payments.

The current advice for directors is the NMW rules do not apply to directors who don’t have a contract with their company however this situation may even arise even if the director has no contractual agreement. If a director has a contract to only act as a director of their company then the NMW rules may not apply but if in the course of their directorship they are required to work on site even if not stipulated within their existing contact then this may be subject to NMW rules.

If you believe this situation may arise with your own situation please call for more info.

Source: Tax and Advice: Company Director, Indicator FL Memo, 15th Year, Issue 14, April 16, 2014