A director of a company is categorised officially as an officeholder and does not automatically qualify as an employee. If an individual is the only director of a limited company and manages the business himself, they may not qualify as an employee. 
 
As per the Employment Rights Act 1996, Section 230 an employee is an individual that works under or has entered an employment contract. As a norm, directors do not sign any employment contract although they may have a service contract. This is practically the same and offers an individual employment status. 
 
Those serving as company directors that do not sign a service contract do not fall under the purview of employees as per employment law regulations. The situation where directors can be considered as employees is when and if they qualify for the majority of employment status standard that determines if one works for a company as an employee. 
 
A director that does not draw a salary (instead takes dividends as a shareholder) are unlikely to be classed as employees vis-à-vis directors on the company payroll. Despite that, if they do not sign a service contract and are just being paid a salary this will not give them employee status as per employment law rules. 
 
Directors to reduce their tax payments choose to take a salary along with dividends. As per law, a director that draws nothing extra over an annual salary of £8,788 does not have to contribute towards National Insurance or Income Tax on their salary. Consequently, for tax reasons, several sole directors opt for a salary within the minimum limit in addition to drawing dividends to prop up their income. 
 
For more information please contact us at info@ccsnationwide.co.uk 
 
Share this post:

Leave a comment: 

UK Contact 
FAX: +44 (0) 121 442 5340 
 
Head Office 
Fairgate House 
205 Kings Road 
Tyseley 
Birmingham 
B11 2AA 
 
CCS Nationwide Ltd. 
Registered in England No: 09636607 VAT Reg No: GB 215 4549 16 Copyright© 2018 All rights reserved 
Our site uses cookies. For more information, see our cookie policy. Accept cookies and close
Reject cookies Manage settings