With effect from April 2017, the national minimum wage has increased to £7.50 per hour. This increase applies to employees, including directors. However, if your employee is an apprentice, they are entitled to the apprenticeship rate:
If your employee is aged 25 and over, and works for 40 hours in a week, your annual salary payout for each employee needs to be a minimum of £15,600.
National minimum wage does not include expenses and benefits, it is the basic salary payable. If you give your employees cars, accommodation or any other taxable benefit, the value of the benefit cannot be deducted from the national minimum wage allowance. You will also need to maintain records of hours worked, so these can be audited by HMRC.
Since the introduction of dividend tax, shareholder directors have been paying themselves just enough to stay below the NIC threshold or personal allowance. If this applies to your business, you will be in violation of the national minimum wage regulation, and could be made to pay salary in arrears if an enquiry is opened by HMRC. Alternatively, you could pay yourself entirely in dividends, but pay class 3 voluntary NIC of £733.20 to secure your state pension.
If you would like further clarification on the national minimum wage, and how it applies to your organisation, please contact me on 01256 406 601.