Entitlement to National Minimum Wage: Directors and office holders
The national minimum wage does not apply to company directors unless they have contracts that make them workers as defined in section 54(3) of the act.
Usually payments made to a director arise not from a contract but by way of remuneration as the holder of an office, in accordance with a company’s articles of association. It is likely that the articles will be in the form set out in the Companies (Tables A to F) Regulations 1985 (SI 1985/805). In such a case the director is an office holder and is not a worker for the purposes of the national minimum wage.
An office holder’s rights and duties are defined by the office held and exist independently of the person who fills it, whereas a worker’s rights and duties are defined by the contract between him and the employer.
A director can be voted out of office by the shareholders of the company, whereas a worker has a contractual relationship with his employer and can only be dismissed by termination of this contract.
An office may be created by a charter, statute, or other document which is, or forms part of, the constitution of an organisation or which governs its operation. But not everyone who carries out duties specified by the law is an office holder. A local authority has a statutory duty to collect refuse but a dustman does not hold an office. On the other hand a Returning Officer does hold an office because not only the duties but also the ‘post’ is established by law.
Other examples of office holders include, but are not limited to, judges, ministers of parliament, company secretary, coroner, chairperson or member of a Rent Tribunal, VAT Tribunal, Local Veterinary Inspector (LVI), sub-postmaster/sub-postmistress, some ministers of religion and Special Commissioner.
It should be noted that being an office holder and a worker are not mutually exclusive. An individual who holds the office of director of a company may also be employed by the same company under a contract. Such a person will be entitled to the minimum wage, like any other worker, for the work done under the contract.