Automatic fines for breach of minimum wage legislation

My understanding is that the Minimum Wage also applies to directors of One Man (or to be PC, One Person) Companies. So if the director is being paid the minimum up to the NIC Primary Threshold and taking the rest of their income as dividends they could potentially be penalised if they are working a 35 hour week! They would need to be particularly careful if they are declaring a certain number of hours per week for Tax Credit purposes.

I believe that there is an exemption if the earnings are for duties as an 'Officer' of the company, not an employee, but there may be a conflict with the Tax Credits legislation.

Not my area of expertise, so I'm sure somebody will correct me!

Re previous post.

Directors may or may not have a service contract with their company. If they do, then NMW applies. If they don't then it does not.

Merely working 35 hours per week does not necessarily create a contract of employment. Of course contracts do not have to be in writing in order to exist, but HMRC have come out in print (I forget the link) to confirm that they have no intention of pursuing that point (in relation to directors of OMBs) and if the parties insist that there is no service contract then it will be accepted. It may be that Re. Duomatic applies?

So those taking low salary and high dividends and who claim to have no service contract are not at risk of challenge under the NMW legislation. They may be at risk under other legislation of course, such as IR35, settlements legislation and, as you mention the tax credits legislation (which does appear to require a service contract in order qualify for WTC, although it remains unclear whether TCO intend to pursue that point).

Re. Original post

A tantalising glimpse at the problems ahead, but annoyingly short on detail, such as calculating the penalty between the two limits and providing no link to where further information is available.

With kind regards

Clint Westwood