New National Minimum Wages Crackdown on the card: – the government intended to get tough with companies and businesses that take on young employees but do not pay them the NMW. Now Vince Cable says that a general NMW crackdown is on the cards, sooner rather than later.
Higher Penalties: – The penalty for not paying National Minimum Wages previously was £5000, now it has been increased to £20,000. The government has pushed through legislation so that the new penalty applies from 1 February14.
Directors: also might fall within the National Minimum Wages regime, it depends upon their contract. This might pose a problem where, for example, you take a small salary and the rest of your income comes from dividend.
The usual advice is that the National Minimum Wage rules don’t apply to directors where they don’t have a contract with their company. That is only broadly correct. If a contract only relates to your role as a director that is fine, but one that requires you to do a job might be troublesome.
Tip. Beware not to fall into the trap and look closely at director’s contract and reduce the risk.