-1

Is it legal not to pay employees a salary (even not a minimum) and only incentivise them with an equity reward?

Do I, as the owner of the company, have to pay a salary for myself?

  • The person who downvoted this - why? – Arturs Vancans Feb 14 at 8:26
2

It's illegal in the UK to pay an employee less than the National Minimum Wage. There's a list of the groups of workers not automatically entitled to the Minimum Wage here.

You've mentioned equity. If people joining the company are immediately given equity, they become owners (and possibly directors) rather than employees. This would mean that you could no longer consider yourself the only owner of the company. It's not a requirement that owners take a salary - though it's a good idea.

If you do not immediately give equity, there would need to be a contract in place showing how much equity your partners would receive, and when. This should consider the possibility of someone leaving the company before the first assignment of equity, and make arrangements for how they would be remunerated for any service to date. Again, they would be considered partners and part-owners and not employees, and the contract would be a partnership agreement and not a contract of employment.

Short answer : startups can't get out of paying the minimum wage to their employees, but don't necessarily have to pay their owners.

  • 2
    However, startups still need to convince employees that this is worth their while. Just because it's legal doesn't mean you will find anyone stupid enough to work for you. – gnasher729 Feb 10 at 13:02
  • @gnasher729 - Completely agree with the second sentence. (Though we'd be talking partners - or possibly self-employed subcontractors, which is the more usual fiddle - rather than employees if we wanted to be exempt from Minimum Wage requirements.) – ItWasLikeThatWhenIGotHere Feb 10 at 13:24

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.