Can I pay someone in equity instead of salary?
By SuLe · Updated 15 June 2026
You can give someone equity, but you generally cannot use it to replace salary for an employee or worker — the National Minimum Wage must be paid in money, and shares or options cannot count towards it. Equity is a top-up, not a substitute. Giving shares for work also creates tax consequences that need planning.
Key facts
- The National Minimum Wage must be paid in money — equity and options cannot count towards it.
- The National Living Wage for those 21 and over was £12.21/hour for 2025/26; rates change every April, so check the current rate on gov.uk.
- Whether minimum-wage rules apply depends on status: employees and workers are covered; a genuine founder-director may not be.
- Shares given in connection with employment are usually taxable as employment income on their value.
- EMI options are the most tax-efficient route for eligible employees; advisors and contractors typically use unapproved options or growth shares.
Can equity legally replace a salary?
Not for employees and workers. The National Minimum Wage is a hard legal floor that must be paid in money — shares, options and other benefits in kind do not count towards it.
So the honest answer to "can I pay in equity instead of salary?" is usually no: you must pay at least the minimum wage in cash for the hours worked, and equity can only sit on top. Promising someone "£X of shares instead of pay" for genuine employed work risks a minimum-wage breach with penalties and back pay.
The rates rise each April. For 2025/26 the National Living Wage for those aged 21 and over was £12.21 an hour — check the current rate on gov.uk before relying on any figure.
Does the rule apply to co-founders and advisors?
It depends entirely on status. The minimum wage protects "workers" and employees; it does not automatically apply to a genuine founder-director who is a shareholder working under a founders' or shareholders' agreement rather than a contract of employment.
That distinction is fact-sensitive. Someone you call a co-founder but who works set hours under your direction, with no meaningful equity stake or control, may in reality be a worker entitled to the minimum wage. As with contractor status, the reality of the relationship governs.
Advisors and non-executive contributors are usually engaged under consultancy or advisor agreements, not employment. They can genuinely be paid mostly or wholly in equity — but check they are not really workers in disguise.
How is equity-for-work taxed?
This is where founders get caught. Shares given to someone in connection with their employment are generally taxable as employment income on their market value at the time — potentially creating a "dry" tax charge, where tax is due but no cash changes hands.
For employees, an EMI (Enterprise Management Incentives) option scheme is usually the most tax-efficient answer, deferring and reducing tax if the conditions are met. Advisors and contractors who cannot use EMI often receive unapproved options or growth shares instead.
Where shares (rather than options) are issued, a section 431 election is frequently used to manage the tax, and it carries a strict statutory deadline — miss it and the tax position can worsen. Take specialist tax advice before issuing any shares for work.
| Recipient | Minimum wage applies? | Common equity route |
|---|---|---|
| Employee | Yes — pay NMW in cash | EMI options (if eligible) |
| Worker | Yes — pay NMW in cash | Unapproved options |
| Genuine founder-director | Usually no | Founder shares under a shareholders' agreement |
| Advisor / consultant | No, if genuinely self-employed | Advisor options or growth shares |
Worked example
Leo builds a consumer app and wants a designer, Mia, to join "for equity" while cash is tight. Mia would work four days a week under Leo's direction — which makes her a worker, so the minimum wage applies and cannot be met with shares.
Leo sets Mia's cash salary to at least the minimum wage for her hours, then grants EMI options over 1.5% of the company vesting over four years on top. Because the options are structured properly and any share issue would use a timely section 431 election, Mia gets meaningful upside without a surprise tax bill, and Leo stays the right side of minimum-wage law.
Where founders go wrong
Offering "equity instead of salary" to an employee
— the minimum wage must be paid in money; equity cannot count.Assuming a "co-founder" label removes wage rights
— if they work like a worker, the rules apply regardless of title.Issuing shares without tax advice
— a dry tax charge on the shares' value can hit someone with no cash to pay it.Missing the section 431 election deadline
— the election has a strict statutory time limit that materially affects the tax.
Related questions
Can equity count towards the minimum wage?
No. The National Minimum Wage must be paid in money — shares and options cannot count towards it. So if someone is a worker or employee, you must pay at least the minimum wage in cash, and can add equity on top, not instead.
Does this apply to co-founders?
It depends on their status. A genuine founder-director working under a shareholders' agreement may not be a "worker" entitled to the minimum wage. But someone who looks and works like an employee usually is, whatever you call them — the reality of the relationship decides it. [More: Can a co-founder work for equity only, without a salary?]
What is the tax risk of giving shares for work?
Shares given in connection with employment are usually taxable as employment income on their value, which can create a dry tax charge with no cash to pay it. Structuring through EMI options or growth shares, and a timely section 431 election, is often far more tax-efficient. [More: What is a section 431 election and why does the 14-day deadline matter?]
What is the cleanest way to give someone equity?
For employees, an EMI option scheme is usually the most tax-efficient route. For advisors and contractors who are not eligible for EMI, unapproved options or growth shares are common. Either way, pay any minimum wage due in cash and take tax advice before issuing shares. [More: What is an EMI share option scheme?]
Paying in equity crosses employment law, tax and share-scheme rules at once, and a well-meant "shares instead of salary" offer can breach minimum-wage law or trigger an unexpected tax bill. A SuLe solicitor can structure it properly. Book a free consultation about your contracts before you make the offer.
Keep reading: Can a co-founder work for equity only, without a salary? · What is an EMI share option scheme? · Can contractors or advisors receive share options? · What should an advisor agreement include? · What must a UK employment contract include?
Primary sources: GOV.UK — National Minimum Wage and National Living Wage rates · GOV.UK — Employment contracts
