Yes, Directors Can Claim Redundancy Pay
A director can claim redundancy pay if their company is liquidated, provided they meet specific eligibility criteria proving they were also an employee of the business, not just an office holder.
Understanding your rights as a company director during liquidation is crucial. This comprehensive guide explains eligibility requirements, statutory redundancy calculations, and the claims process.
Also see: Director After Liquidation | Compulsory Liquidation
To qualify for redundancy payments during company liquidation, directors must demonstrate they were genuine employees with specific documentation and working arrangements.
A written employment contract clearly defining your role, duties, salary, and terms of employment separate from your director appointment.
Consistent salary payments through PAYE with proper tax and National Insurance deductions, not just dividends or ad-hoc payments.
Minimum of 2 years continuous employment with the company as an employee, not just as a director or shareholder.
Evidence that you worked under the direction and control of the company or board, performing operational duties beyond directorship.
Performance of day-to-day business operations and duties beyond statutory director obligations (e.g., sales, management, technical work).
Documented evidence including payslips, P60s, employment records, and proof of tax and NI contributions as an employee.
Simply being a director does not automatically entitle you to redundancy pay. You must prove you were a genuine employee with a dual role. Many directors only take dividends and have no employment contract—these individuals cannot claim redundancy.
Key Test: Would an external person performing your duties be classified as an employee? If yes, you likely qualify. Courts examine substance over form. For more information about protecting yourself as a director, visit our comprehensive protection hub.
Statutory redundancy pay is calculated based on your age, length of service, and weekly pay (subject to a maximum cap). Understanding these calculations is crucial before entering company liquidation.
Calculation:
8 years × 1 week × £500 = £4,000
Calculation:
4 years (age 33-36) × 1 week × £643
8 years (age 37-44) × 1.5 weeks × £643
= £2,572 + £7,716 = £10,288
The maximum statutory redundancy payment you can receive is currently £19,290 (as of April 2024). This is calculated as:
20 years × 1.5 weeks × £643 = £19,290
These figures are updated annually. Always check the current rates with Gov.uk or your insolvency practitioner.
Follow these steps to successfully claim your redundancy payment through the Redundancy Payments Service (RPS).
Your company must formally enter liquidation (Creditors' Voluntary Liquidation or Compulsory Liquidation). A licensed insolvency practitioner will be appointed to handle the process.
Key Point: Redundancy claims can only be processed once liquidation has officially commenced and the company has ceased trading. Learn more about Creditors' Voluntary Liquidation or Compulsory Liquidation processes.
Collect all evidence proving your employee status. This documentation is crucial for your claim's success.
Fill out the RP1 form (Claim for Payment from the National Insurance Fund) to formally claim your redundancy payment from the government's Redundancy Payments Service.
Download Form RP1
Available from Gov.uk or your insolvency practitioner
Submit your completed RP1 form and supporting documents to the Redundancy Payments Service. Your insolvency practitioner will typically assist with this process and verify your claim.
Time Limit: Claims must be submitted within 6 months from your employment ending or the liquidation date.
The Redundancy Payments Service will review your claim to verify you were a genuine employee. They may request additional documentation or clarification.
Processing Time
Typically 4-6 weeks
Decision Notification
Written confirmation sent
If your claim is approved, the Redundancy Payments Service will transfer your statutory redundancy payment directly to your bank account.
Direct Bank Transfer
Payment made within 7-14 days of approval
Our experts can assist you with gathering documentation, completing forms, and liaising with insolvency practitioners to ensure your claim is successful. We also provide comprehensive director protection services and guidance on life after liquidation.
Get Free ConsultationCommon questions about director redundancy payments during company liquidation.
Understanding the legal framework surrounding director redundancy claims can help protect your rights and improve claim success rates.
Courts use several tests to determine if a director was a genuine employee:
There's a crucial legal distinction:
Director's Service Contract
Governs your role as a director/office holder - does NOT create employee status
Employment Contract
Separate agreement for your employee role - REQUIRED for redundancy claims
Deadline to submit RP1 claim form
Time limit to appeal to Employment Tribunal if rejected
Missing these deadlines can result in losing your right to claim. Act promptly after liquidation.
Directors claiming redundancy should be aware of potential wrongful trading investigations:
If you traded whilst insolvent, seek legal advice before making any claims. Our team can provide guidance on director disqualification protection.
Your redundancy claim is paid from the National Insurance Fund, not company assets:
This protection applies to all qualifying employees, including directors who meet employment criteria.
The Redundancy Payments Service will thoroughly examine:
Tip: Prepare comprehensive documentation before submitting. Incomplete claims face delays or rejection.
Our specialists can review your employment status, assess your documentation, and advise on the strength of your redundancy claim. We also offer support with misfeasance claims, personal guarantees, and comprehensive disqualification protection.
Get Expert Legal AdviceThis Information is For Illustration Purposes Only
General Information Only: The content on this page is provided for general information and educational purposes only. It is not intended as, and should not be relied upon as, legal, financial, or professional advice for your specific situation.
Seek Professional Advice: Every director's situation is unique, and redundancy eligibility depends on your specific circumstances, employment arrangements, and documentation. You must seek professional advice from a licensed insolvency practitioner, employment law solicitor, or qualified advisor before making any decisions or claims.
No Guarantee of Eligibility: The information provided does not guarantee that you will qualify for redundancy payments. The Redundancy Payments Service (RPS) assesses each claim individually based on evidence and legal tests of employment status.
Rates Subject to Change: Statutory redundancy payment rates, weekly pay caps, and eligibility criteria are set by UK law and are subject to change. The figures quoted (£643 weekly cap, £19,290 maximum, etc.) were accurate as of 2024 but may have been updated. Always verify current rates with Gov.uk or the Redundancy Payments Service.
Complex Legal Matters: Director redundancy claims involve complex employment law, insolvency law, and tax considerations. The distinction between office holder and employee status is often contentious and may require legal assessment. Do not rely solely on this guide.
Time-Sensitive: Redundancy claims have strict time limits (6 months from employment ending). Delays in seeking advice could result in loss of rights. Act promptly and consult professionals immediately if your company is entering liquidation.
Professional Guidance Essential: To ensure that the right procedures are followed and your interests are properly protected, it is always best to use a professional adviser. A qualified insolvency practitioner or employment law specialist can guide you through the complexities, help avoid costly mistakes, and maximize your chances of a successful claim.
Our experienced team can assess your specific situation, review your documentation, and advise on your redundancy claim eligibility.
No Liability: Tenable Business Support accepts no liability for any actions taken based solely on the information provided on this page. All decisions should be made after consulting with qualified professionals who understand your specific circumstances.
Everything you need to know about claiming redundancy as a company director during liquidation.
Yes, directors can claim redundancy pay if they prove genuine employee status with proper documentation and PAYE salary.
Written employment contract separate from director's service contract is essential for successful claims.
Continuous employment as an employee for at least 2 years is required to qualify for statutory redundancy pay.
Maximum statutory redundancy payment is £19,290 based on age, service, and weekly pay cap of £643.
Claims must be submitted within 6 months from employment ending or liquidation date via RP1 form.
Must perform day-to-day business operations beyond statutory director responsibilities to qualify as employee.
Review Your Documentation
Gather employment contracts, payslips, P60s, and proof of PAYE salary
Confirm Employee Status
Verify you meet all eligibility criteria with proper employment evidence
Calculate Your Entitlement
Use the statutory redundancy formula based on age and service years
Submit RP1 Form
Complete and submit to RPS within 6 months with supporting documents
Need professional assistance with your redundancy claim?
Speak to Our ExpertsAlso explore: Director Protection | FAQ | Free Consultation
Disclaimer: This content is for information purposes only and does not constitute professional advice. Statutory rates are subject to annual change. Please verify current rates with Gov.uk and seek advice from a licensed professional before taking action. See our full disclaimer above.