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Company Director Redundancy

Imagine this: Imagine this: You’ve been a dedicated company director for years, investing your time and energy into building a successful business.

But despite your best efforts, the company begins to struggle financially, and eventually, liquidation becomes the only option.

You might feel lost and overwhelmed, wondering how much redundancy and what happens next. This is where understanding company director redundancy is crucial.

By delving into the world of director redundancy, you’ll discover that, as a company director, you may be eligible for redundancy payments, providing you with a financial safety net during these challenging times.

In this blog post, we’ll explore eligibility criteria, the role of liquidation, the claiming process, and more. So buckle up and let’s dive into the world of director redundancy!

Short Summary

  • Company directors may be eligible for redundancy payments when their limited company is insolvent and has been operating for two years.
  • Eligibility criteria include meeting age and service requirements, as well as going through liquidation.
  • Claims must include proof of employment status, with claims needing to be made within the specified time frames in order to receive full entitlements.

Understanding Company Director Redundancy

Director redundancy is a financial lifeline for many company directors when their limited company faces insolvency and enters liquidation.

It’s essential to understand that even though you’re a director of a limited one, you may still be eligible for redundancy payments if your company has been in operation for at least two years and the company is struggling financially liquidated.

However, to receive statutory redundancy payments, you must prove that you had a practical role within the company and were paid through the PAYE system.

The claiming process involves submitting a claim to the Redundancy Payments Service, calculating the amount claim statutory redundancy payments and payment due amount, and claiming any additional statutory redundancy payments office due.

Eligibility Criteria for Director Redundancy

To be eligible for director redundancy, you must be an employee of the company and meet certain criteria, such as the age and service requirements for statutory redundancy pay.

Additionally, the company must be going through insolvent liquidation for you to claim redundancy pay.

It’s important to note that not all company directors will qualify for redundancy. If you’re merely a director of a limited by shareholder without a hands-on role in the company, you may not be eligible to claim for redundancy and payments. Ensuring you meet the eligibility criteria is vital to successfully claim director redundancy.

The Role of Liquidation in Director Redundancy

The process of liquidation is essential for company directors to submit a claim for redundancy pay. In other words, without formal liquidation process, there’s no opportunity to make a claim for redundancy payments.

Therefore, it’s crucial to understand the significance of liquidation when it comes to director redundancy.

Claiming Redundancy Payments as a Company Director

As a company director who meets the eligibility criteria, you can claim statutory redundancy pay through the Redundancy Payments Service (RPS), which is part of the government’s Insolvency Service.

The RPS administers redundancy payment claims and allows you up to six weeks to claim tax-free redundancy payments from the National Insurance Fund.

To initiate the claiming process, discuss your circumstances with the liquidator and complete the Insolvency Service form provided.

Ensure that all required information is included on the form and submit it to the liquidator or the Insolvency Service for further processing.

Redundancy Payments Service

The Redundancy Payments Service (RPS) is a crucial player in the director redundancy claiming process.

It handles redundancy payment claims, allowing you to submit a claim to the National Insurance Fund. This national insurance fund ensures that you receive your tax-free redundancy payments.

Submitting a Claim

To submit a claim for director redundancy, you must first obtain the claim form either online or from the liquidator.

Fill out the form, which contains queries regarding your employment, and submit it to the liquidator or the Insolvency Service for further processing.

It’s worth noting that the typical director redundancy pay claim is estimated to be approximately £12,000 and is exempt from taxation.

Calculating Your Redundancy Payment

When it comes to calculating your redundancy payment, factors such as your length of service, age, and weekly wage rate (up to a maximum of £535/week) come into play. It’s essential to understand how these factors impact the amount you’ll receive as redundancy pay.

As of April 6, 2023, the maximum statutory redundancy pay for employees in the UK is £19,290.

This means that once you’ve determined your eligibility and submitted your claim, you could potentially receive a significant sum to help you navigate the financial challenges that may arise due to the liquidation of your company.

Maximum Entitlements

For company directors made redundant after 6 April 2017, the maximum entitlement is £489 per full week’s pay, with a maximum of £14,670.

This figure provides an idea of how much redundancy is the financial safety net available for eligible company directors facing the challenges of insolvency and liquidation.

Factors Affecting Redundancy Payment Amounts

Several factors influence the amount of redundancy pay you’ll receive. For instance, your age plays a role, with redundancy payments typically increasing as you get older.

Additionally, the length of your service with the company also impacts the amount of redundancy pay you’re entitled to, with longer-serving employees generally receiving higher payments.

Another important aspect to consider is the existence and terms of your written employment contract.

Such contracts may provide additional statutory entitlements to redundancy pay, or other statutory entitlements including enhanced redundancy payments or supplementary payments for the notice pay periods.

Additional Statutory Payments for Directors

As a company director, you may also be eligible for additional statutory payments, such as Statutory Maternity Pay (SMP), Statutory Sick Pay (SSP), or Maternity Allowance (MA) claimed from the Department of Work and Pensions. Furthermore, many company directors and you can be entitled to claim holiday pay, backdated salaries, and loans owed by insolvent companies.

These additional payments can provide further financial support during the challenging period following the liquidation of your company.

To make a claim for these payments, you must meet the specific criteria for each type of payment and submit a claim to the Redundancy Payments Service.

Claiming Unpaid Wages

In the event of a liquidation, you may be eligible to claim unpaid wages up to 8 weeks prior to the liquidation date.

This allows you to recover a portion of the income you’ve lost due to the company’s financial struggles, providing a financial buffer as you navigate the challenges that follow formal insolvency process.

It is important to understand the implications of insolvent company, liquidation and the potential for recovering unpaid wages. Knowing your rights and the steps you can take to protect yourself can help you manage the financial impact of the company’s insolvency.

Notice Pay and Holiday Pay

Notice pay and holiday pay can also be claimed up to one week’s pay for 6 weeks prior to liquidation. This ensures that you receive compensation for any unused statutory notice pay and accrued holiday pay entitlement you’ve accrued, as well as any monetary compensation due to termination of employment without appropriate notification.

Common Challenges in Claiming Director Redundancy

Claiming director redundancy might seem like a straightforward process, but there are common challenges that directors often face.

One such challenge is proving your employment status as a company director rather than just a shareholder. Without this proof, you may not be eligible to receive statutory redundancy payments.

Another challenge is the timing of your claims. Depending on the insolvency status of your company and the specific circumstances, the timeframe for submitting your claim may vary. Ensuring that you submit your claim within the appropriate time frame is crucial to secure your financial entitlements.

Proving Employment Status

Proving your status as an employee is essential for receiving statutory redundancy payments. The liquidator will primarily inquire about the type of contract of employment that existed between you and the company.

Providing a contract of employment and evidence of payment through the payroll will help establish your eligibility for redundancy payments.

It is important to note that the liquidator will also consider other factors such as the length of service and the type of work performed. This means that even if they can’t, even if they don’t, it will happen.

Timing of Claims

To receive maximum statutory entitlements due, claims must be made within 12 months of liquidation. Different time limits apply to other statutory entitlements: redundancy payments (6 months from the date of termination of employment), contractual redundancy payments (6 years from the date of termination written oral or implied, of employment), and unfair dismissal claims (3 months from the date of termination of oral or implied contract of employment).

Being aware of these deadlines is crucial to ensure you receive the financial support you’re entitled to.

Frequently Asked Questions

How much is redundancy pay as a director?

As a director, the amount of redundancy pay you receive depends on your age. For those under 22, it is half a week’s pay for every year of service. Between 22 and 40, one and half to one week’s pay each, or half week’s pay for every year of service. And 41 years old or older, one and a half weeks’ pay for every year of service.

Can I claim redundancy from my own company?

Unfortunately, you cannot claim redundancy from your employment contract or own company due to the restrictions set out in UK law.

However, you may be able to receive some form of compensation if you meet the specified criteria.

Who pays redundancy when a business closes?

Employers are generally responsible for paying employee redundancy and holiday pay when a business closes. In most cases, this amount holiday pay is a form of statutory redundancy pay from the government rather than contractual redundancy pay out directly from the employer.

Employees can make a claim for this from their former employer’s Insolvency Practitioner or directly from the government.


Navigating the world of director redundancy can be overwhelming, but having a solid understanding of eligibility criteria, claiming process, and potential challenges can make a significant difference in securing financial support during challenging times.

By understanding the role of creditors voluntary liquidation, calculating your redundancy payment, and being aware of additional other statutory payments due, you’ll be better equipped to face the financial struggles that often accompany company insolvency.

In conclusion, remember that as a company director, you’re not alone in facing the uncertainties that come with liquidation.

By arming yourself with knowledge and understanding your rights, you can successfully claim your redundancy payments and weather the storm of insolvency, emerging stronger and ready for new opportunities.

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