Directors and National Minimum Wage Exemptions

The National Minimum Wage legislation was introduced with effect from 1st April 1999. Since 1st October 2004 employers have been required to pay workers, aged 22 or over, an hourly rate of at least £4.85. These rules are formulated by the DTI and are policed by the Inland Revenue.

The Inland Revenue published their interpretation of these rules, which recognises that certain directors are exempt:

''If a person is a director, and he/she does not have an explicit employment contract, then he/she is unlikely to be subject to this legislation. He/she is acting for the company in the capacity of office holder, not as a worker''.

This marks a U-turn in previously understood Revenue interpretation, which sought to include directors under these rules, by arguing that an unwritten or implied employment relationship existed, even if not evidenced in writing.