Are the self-employed entitled to the National Minimum Wage?

What is the National Minimum Wage?

First introduced in 1999, the National Minimum Wage (NMW) protects those on lower incomes and ensures that employers don’t underpay their staff.

It’s set at an hourly rate and the amount you’re entitled to depends on your age, as well as whether or not you’re an apprentice.

For example, the current rates (2024) are as follows:

• Those aged 21+ – £11.44
• 18 to 20 – £8.60
• Under 18 – £6.40
• Apprentice – £6.40 (this rate is for an apprentice who is either under 19 years old or someone over the age of 19 but still in the first year of their apprenticeship)

Are the self-employed entitled to the National Minimum Wage?

Some types of workers are not entitled to the NMW.

This includes the self-employed and company directors, as well as:

• Volunteer workers
• Those on a government employment programme
• Members of the armed forces
• Family members of the employer living in the employer’s home
• Higher education students on work experience/placements up to one year
• Prisoners
• Those aged under 16

The full list is available on the government’s website.

For more information on this topic, take a look at our What employment rights are freelancers not entitled to? page.

What about umbrella company contractors?

While an umbrella company contractor counts as a type of self-employment, those who choose this structure are still entitled to employment rights, such as the NMW.

An umbrella company employs a temporary worker on behalf of an employment agency with the agency then providing the services of the worker to their clients

Therefore, an umbrella company contractor is an employee.

Financial benefits of self-employment

While contractors may not be protected by certain employment rights, most find that they have many more financial benefits compared to those in permanent employment.

For example, contractors are often able to command higher rates of pay compared to their permanent counterparts and the more experience and skills you gain along the way, the more you can potentially charge.

It’s also more tax efficient, especially for limited company contractors, and you’re able to claim back on business expenses, which can reduce your tax bill at the end of each year.

Typical sole trader expenses (outside IR35) include:

• Travel costs – such as fuel, parking, hire charges, train/bus/taxi/air fares and accommodation while away for business reasons.
• Office costs – such as stationery, printer ink/cartridges, postage, phone/mobile/internet bills.
• Clothing expenses – if you require specific protective wear, a uniform or a costume.
• Financial costs – such as hiring an accountant.
• Training courses – they must be related to your current line of work to help improve your skills and knowledge.
• If you work from home, you may be able to claim a proportion of costs for your heating, electricity, Council tax, mortgage interest/rent and internet/telephone use.

Read our Benefits of Contracting page for more details about the pros of self-employment.

If you need any further help, or you’d like to sign up you can either contact us via our online chat, call one of our friendly experts on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com.