Founder pay optimisation for PR agency directors

Key takeaways

• Pay yourself a market-rate salary first. This covers your living costs, builds your pension, and is a deductible business expense, reducing your corporation tax bill.
• Use dividends as a top-up for profit. Dividends are taxed at a lower rate than additional salary, making them efficient for taking profit out of the company after all business needs are met.
• Benchmark against real market data. Your director salary should reflect your role and the agency's size, not just what's left over. Underpaying yourself distorts your true profitability.
• Reinvest before you take more. A clear PR agency leadership pay structure ensures you fund growth, team development, and cash reserves before increasing your own drawings.

What is the best PR agency leadership pay structure?

The best PR agency leadership pay structure is a mix of a sensible salary and dividends. You pay yourself a regular salary that matches your role in the market. This salary is a cost to the business, which reduces your corporation tax.

Then, you take additional money as dividends from the company's profits. Dividends have their own tax rates, which are often lower than taking the same amount as extra salary. This mix is tax-efficient for most agency directors.

Getting this balance right is a core part of financial strategy. It affects your personal income, your tax bill, and how much money stays in the business to fund its growth. A specialist accountant for PR agencies can model different scenarios for you.

Why do many PR agency founders get their own pay wrong?

Many PR agency founders treat their own pay as whatever is left in the bank at the end of the month. This "what's left over" approach creates huge problems. It makes your agency's finances unpredictable and hides your true cost of leadership.

When you don't pay yourself a proper salary, your agency's profit looks artificially high. You might think you're doing brilliantly, but you're actually working for free. This makes it impossible to know if you can afford to hire someone else or invest in new tools.

It also leads to feast-or-famine personal finances. You take huge sums in good months and nothing in quiet months. This stress makes it hard to focus on long-term strategy. A structured PR agency leadership pay structure fixes this by making your pay a planned, predictable cost.

How do you set the right director salary for a PR agency?

Set your director salary by benchmarking against the market rate for your role. Research what a managing director or senior account director would earn at an agency of your size and location. This salary should be a fixed monthly cost in your agency's budget.

For a small PR agency founder, a typical starting salary might be between £40,000 and £60,000 per year. As the agency grows and becomes more profitable, this should increase. The goal is to pay yourself a fair wage for the job you do, separate from the profits you own as a shareholder.

This salary is a business expense. It reduces your taxable profit, meaning you pay less corporation tax. It also builds your National Insurance record for your state pension. Paying a sensible director salary is the first, most important step in a smart pay structure.

When should a PR agency director take dividends instead of salary?

A PR agency director should take dividends after paying a market-rate salary and covering all business needs. Dividends are a share of the company's post-tax profits. They are an efficient way to take additional money out of the business.

The tax treatment is different. You pay corporation tax on profits first (currently 25% for most companies). Then, dividends are paid from what's left. You then pay personal dividend tax on what you receive.

Dividend tax rates are lower than income tax rates on additional salary. For the 2024/25 tax year, the dividend allowance is £500. After that, basic-rate taxpayers pay 8.75%, higher-rate payers pay 33.75%, and additional-rate payers pay 39.35%. This makes dividends attractive for profit extraction.

However, dividends are not a business expense. They do not reduce your corporation tax. That's why you always set a salary first to get that tax deduction, then use dividends for the rest.

What are the market benchmarks for PR agency director salaries?

Market benchmarks for PR agency director salaries vary by agency size, location, and specialism. Your pay should reflect the job you're doing, not just the title you hold. Use industry surveys and recruitment data to guide you, not guesswork.

For a solo founder or very small boutique, a salary of £40,000 to £60,000 is common. For a managing director leading a team of 5-10 people, salaries often range from £70,000 to £90,000. At a larger, established agency, director salaries can exceed £100,000.

These figures are for the salary element only. Total compensation, including dividends, can be significantly higher. The key is that the salary is justifiable as a commercial cost. If you brought in a hired MD to do your job, what would you have to pay them? That's your benchmark.

Regular market benchmarking ensures your pay stays competitive and realistic. It stops you from underpaying yourself and distorting your agency's financial health.

How does your pay structure impact agency growth and valuation?

Your pay structure directly impacts growth by determining how much profit is reinvested. If you take all profits as personal income, the agency has no capital to hire, train, or market itself. A structured approach ensures the business is funded first.

It also affects how potential buyers or investors value your agency. They will "add back" your director salary to the profits to see the true earnings of the business. If you pay yourself a below-market salary, the adjusted profit looks healthy.

If you take an excessively high salary, the adjusted profit looks weak. A market-rate, documented salary makes your agency's financial performance clear and credible. This transparency is vital if you ever plan to sell or seek investment.

A smart PR agency leadership pay structure signals that you run a professional, sustainable business. It shows you understand the difference between personal income and corporate wealth.

What are the tax traps in a dividend vs salary strategy?

The main tax trap is taking too much in dividends before paying a reasonable salary. Since dividends aren't a business expense, you miss out on corporation tax relief. You end up paying more overall tax than necessary.

Another trap is not planning for your tax bill. Dividend tax is paid via your annual Self Assessment. You must set aside money for this personal tax bill. Many directors get caught out by spending the dividend cash and having nothing left to pay HMRC.

There are also limits to be aware of. If dividends push your total income over £100,000, you start losing your personal allowance. Over £125,140, you pay the higher 45% income tax rate on other income. Careful planning with an accountant avoids these cliffs.

The optimal split changes each year with tax allowances and rates. What worked last year might not be best this year. An annual review of your dividend vs salary strategy is essential.

How should you adjust your pay as the PR agency scales?

Adjust your pay as the agency scales by linking salary increases to clear business milestones. When you hit a new revenue tier, add a new team member, or achieve a target profit margin, it's time to review your compensation.

The salary component should increase first. As you take on more leadership responsibility and the agency's financial base becomes more secure, your fixed salary should rise to reflect that. This continues to provide a stable personal income and maximise tax-deductible costs.

The dividend component will naturally fluctuate with profitability. In great years, you can take more. In investment years, you might take less to fund growth. The key is to decide on a target "take-home" percentage of post-tax profit and stick to it.

For example, you might decide that after all business reinvestment, you will take 50% of remaining profits as dividends and leave 50% as retained earnings in the company bank account. This creates a rule, not an emotional decision.

What financial metrics should guide your pay decisions?

Three key financial metrics should guide your pay decisions: gross profit margin, operating profit, and cash runway. Your pay comes from profit, so you must understand what drives it.

First, look at your gross profit margin (the money left from fees after paying your team and freelancers). A healthy PR agency typically targets 50-65%. If your margin is below this, increasing your pay may not be sustainable.

Second, look at operating profit (what's left after all overheads, including your salary). This tells you how much true profit the business is making. This is the pool from which dividends are paid.

Third, check your cash runway (how many months the agency could survive with no new income). You should never drain the agency's cash to pay yourself. A buffer of 3-6 months' operating costs is a prudent minimum before considering large dividend payments.

If you'd like a clearer picture of how different pay scenarios affect your agency's financial health, take our free Agency Profit Score — a 5-minute assessment that gives you a personalised report on your profit visibility, revenue pipeline, cash flow, operations, and AI readiness.

When should you get professional advice on your pay structure?

You should get professional advice when setting up your pay structure for the first time, when your profits change significantly, or at least once a year for a review. Tax rules and your personal circumstances change.

A good accountant will do more than just tell you the tax-efficient split. They will help you understand how your pay fits into your overall business plan. They can model scenarios showing how different choices affect your personal income, your tax bill, and the agency's cash flow.

If you're planning to buy property, invest personally, or have other complex finances, integrated advice becomes even more critical. Your personal and business finances are linked.

Seeking advice early prevents expensive corrections later. It turns your PR agency leadership pay structure from a source of stress into a strategic tool. For specialist support, consider working with accountants who understand PR agency economics.