What a non-executive director is paid, on AIM, at smaller quoted companies and at SMEs

What a non-executive director is paid, and what sets the fee

There is no fixed rate. The Institute of Directors says NED pay varies with company size, the time commitment the role requires and the value the NED brings in ability and experience, and that it may rise with additional fees for serving on board committees. The fee is written into a letter of appointment, not an employment contract, alongside the term, the time expected and any committee posts.

A listed company follows the FRC’s UK Corporate Governance Code. Provision 34 says NED pay is set in line with the articles of association or by the board, should reflect the time commitment and responsibilities of the role, and should not include share options or other performance-related elements. A fixed fee protects the independence the board is paying for.

The fee buys a director, not an adviser. As the IoD notes, UK law makes no distinction between executive and non-executive directors: a NED carries the same legal duties as the rest of the board, including those GOV.UK lists for company directors, such as following the articles of association. For what the role involves day to day, see what a non-executive director does.

The exception: charity boards

Charity trustees sit on a board too, but are normally unpaid. The Charity Commission’s guidance on paying trustees says being a trustee is generally a voluntary role, and sets out the rules a charity must follow before it pays one. A charity pays its executive team instead; see charity CEO recruitment.

NED fees: a fee, not a salary

NED fees are paid for holding an office, not for employment. BDO puts it plainly: NEDs receive a fee for their services rather than a salary. The fee is usually a fixed annual sum for board membership, with separate additions for extra responsibilities. BDO’s AIM 100 median base fee rose to £58,000, up from £53,000; its first and third quartiles are £47,000 and £75,000.

How fees are set: under Provision 34 of the Corporate Governance Code, a listed company sets them in line with its articles of association or by board decision, to reflect the time commitment and responsibilities of the role. In a private company the board or the shareholders agree the fee, and the letter of appointment records it.

How fees are taxed: a company director holds an office, and HMRC’s Employment Status Manual says earnings from a directorship are employment income, subject to Class 1 National Insurance. HMRC’s PAYE Manual sets out when PAYE must be operated on a director’s pay. So a NED fee normally runs through the company’s payroll under PAYE, not on an invoice.

Where a NED provides services through their own company, the off-payroll working rules (IR35) can apply. Status turns on how the engagement runs, not its label, and a medium or large client makes the determination; for a small client outside the public sector, the worker’s own company decides. Our IR35 guide sets out the tests.