Demystifying NED pay

In this Demystifying series, we shed light on what non-executives actually get paid. The role of a non-executive director is far from the boardroom stereotypes of smoking jackets, whiskey and private members clubs with panelled walls. This blog was last updated January 2021.

How do NEDs get paid?

Non-executive directors of companies can typically expect to be paid a director’s fee and often the amount is fixed and clearly explained in the advertised vacancy. This will usually be very structured, you might get £20,000 per year for being a Non-executive Director, an additional £5,000 for sitting on the Risk Committee, and a further £10,000 for a Chair role, and you wouldn’t usually expect to negotiate on this. Sometimes companies won’t state the amount up front and will negotiate on appointment, though this is less common.

The fees will be paid monthly like a salary, but you are not legally an employee, and pay is usually described as ‘directors fees’. NEDs do not typically receive any other employee benefits, pension payments, or bonuses. While the Executive directors are likely to have some of their pay be performance-based, NEDs do not. This income is subject to tax. In some cases, the company will pay your tax for you (like normal P.A.Y.E.) and in others they will pay you gross and you will need to file a self-assessment tax return.

So, how much do NEDs get paid?

The quick answer is that, like any job, it varies a lot. It depends on the size and type of organisation, and if you take on any more responsibility like being on a committee or becoming the chair.

The biggest factor is the type of organisation and board. Charity trustees are usually volunteer roles – they usually pay expenses but there is no annual pay. This used to be the case for Housing Associations but they now typically pay their board members – anything from £3,000 a year up to more than £20,000 for chair roles of large associations.1

Pension Trusts director’s fees were an average of £20,000 per year in 2019.2 Investment Trusts paid their non-executive directors an average of £30,000-50,000 in 2020. 3

NHS Trusts and Foundation Trusts all have boards of non-executive directors. At the moment (in 2021) NHS Trusts have a fixed pay of £6,157, which is set by the Secretary of State. NHS Foundation Trusts set their own pay, meaning a much greater variation – ranging from £7,000 to £21,000 for non-executives. This was reviewed in October 2019 and it will be reformed to make the difference less pronounced, by 2022 all NHS trusts and foundation trust board members will be paid £13,000 a year.4

For company boards, there is almost no limit to how much or how little companies can pay. The average NED pay for AIM-listed companies is £36,000 and it’s £44,000 for small market capitalisation (SmallCap) companies.5 In the FTSE250 it’s £53,000, while a FTSE 100 NED base salary can be anything from £100,000 – £300,000.6 Chairing a committee will come with a higher salary – this is usually a flat rate for each committee and may vary from committee to committee as some have more responsibility and more frequent meetings. The Chair of the board will likely be paid a lot more, but the time requirement also increases.

Getting data on private company boards is more tricky but the pay can be anything upwards from £3,000 up to around £50,000, or more for much larger companies. Private companies are more likely to appoint Board Advisers (rather than appointing them as legal directors) and these too can vary hugely in pay – anything from £2,000 upwards.

Some start-ups might offer a mix of remuneration, such as a low level of directors fees and in addition may offer shares in the company. Early stage businesses, particularly those with external investment, (e.g. angel investment or early-stage VC), may consider seeking a Board Advisor rather than a Non-Executive Director.

Investing ‘Non-Executive Directors’ – in some instances individuals that invest in a business are offered a Director seat on the board, and therefore they are unlikely to also be paid directors fees. At Dynamic Boards we don’t advertise these role that require you to invest in order to be offered a seat on the board.

Is it worth it?

This might seem like a lot of money for a part-time role. It is not without its challenges, and generally, the NED community wouldn’t describe it as a fast way of getting rich. If you’re in it for the money, you’re in the wrong game! Some things to consider when you’re weighing it up…

  • Time commitment: the typical role will be at least 10 days a year (see our blog ‘what is a NED’ to find out more about what directors do) and it can be much more than that – a Chair of a FTSE 100 company might be up to three days a week. The pay stays the same no matter what happens that year, so at times of crisis or change non-execs may need to put in much more time and focus, too.
  • Legal liability: legally, as a director of the company, you are responsible for the business and its future. This is a lot of responsibility for a role where you might only see your fellow board members in person once every one or two months.
  • Reputation: you’re associating yourself – both legally and formally – with a company and what happens to that company. You might not have input on every decision, and if something goes wrong you will be involved throughout and will have the reputational fallout. Of course, if it does well, there are reputational gains to be made, too.

View our Non-Executive Director listings for FREE

Interested in becoming a Non-executive Director? Click here to sign up and view vacancies. We showcase 60-100 paid non-executive director board roles each month. It’s totally free for candidates to view roles, there’s no catch, we launched Dynamic Boards to make it easier and free for you to find roles that suit you. You can read our story here.

Advertise your NED role with us

Are you an organisation looking for Non-executive directors? We’d love to help you get the word out about your role. Click here to find out more.

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References:
1 – Housing Association pay – from Dynamic Boards data on roles between May 2020 and January 2021
2 – Pension pay data
3 – Investment Trusts pay data
4 – NHS Director pay data
5 – Average pay in Small Cap companies
6 – Executive remuneration in listed companies






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