Redundancy Pay for Directors: When Can You Claim?

Claiming Redundancy Now

by NickWood
Redundancy Pay for Directors

As a company director, you may be familiar with redundancy pay in relation to your workers. However, did you know that redundancy pay for company directors is claimable?


Directors’ redundancy pay, also known as director redundancy, is a sum of money directors are entitled to in the eventide that their company goes bankrupt or has to close.


If your limited company is struggling and it appears as if liquidation may be the only way out, many people mistakenly think they’re out of options. You might not have enough money to liquidate your company.


In this instance, you may be eligible for several statutory rights that could help immensely right now. The director is compensated through settlements based on eligibility criteria. They can spend the money as they please.


This payment could help ease the financial burden after a company closes, or it may be used to start a new limited company if the director chooses to.


If your small company has been running for more than two years and you’re thinking about shutting it down because of financial issues (like Creditor pressure, HMRC debt, cash flow concerns, or potential liquidation), you might be eligible to receive director redundancy payments based on the UK average claim of £9000.


Furthermore, you may be eligible for benefits such as notice pay, holiday pay, and unpaid wages – but many company directors lack knowledge of these rights.


If you qualify, you can request forms for the National Insurance Fund through the Redundancy Payments Service (RPS), tax-free. You may ask the liquidator for a form or fill one out online.

Do you qualify for Statutory Redundancy Payments?

If you want to qualify for statutory redundancy pay as a director, you must first and foremost be seen as an employee of the company. The following are the requirements that come along with this:


  • Working under a contract of employment for at least two years, rather than having only a controlling interest,
  • You’re owed money by the company – for example, arrears of PAYE or the capital you put in.
  • Working a minimum of 16 hours each week

How much redundancy pay will you receive?

Your redundancy pay is based on how long you’ve been with the company, your age, and your hourly wage. You’re also entitled to a gross weekly wage of £544 per week at the time of redundancy.


Your length of service (capped at 20 years) is used to calculate how much redundancy cash you’ll get. You must also have been an employee of the firm for at least 2 years.


As an employee, you are entitled to back-dated pay and holiday pay if your company becomes insolvent.


If you meet the criteria, it’s likely that you’ll be entitled to claim redundancy pay and other statutory entitlements if your company goes bankrupt. These include holiday pay, back pay, and notice periods.

How to Submit a Claim for Redundancy

Before claiming director redundancy, you must meet specific requirements. The easiest way to determine your eligibility is by consulting with an independent company that specialises in helping directors comply with their statutory obligations.


Up to eight weeks of unpaid wages, as well as six weeks’ holiday pay, may be recovered from the Insolvency Service National Insurance Fund. This is the fund where National Insurance Contributions are kept and used to pay for statutory programs such as redundancy and the state pension.

Is it Possible For My Co-Director to Claim redundancy Pay?

When a company goes bankrupt and is forced to liquidate, its directors can each submit their own individual redundancy claims. How much they receive will be based on varying factors such as age, how long ago they were hired by the company, and salary.


All directors who can demonstrate that they worked for the company in any capacity will have a right to make a claim as long as the above-mentioned criteria is met.


If a married couple is recorded as company directors, this may imply that each would receive a redundancy payment.

How much can I claim?

The amount of money you will be eligible for will be determined by several criteria, including your age at which you were made redundant, the length of time you worked for the firm, and your salary at the time.

If you qualify for redundancy, it will be based on gross weekly pay. Here is how it will be calculated:


  • 18-21 years of age: half a week’s pay for every year of service
  • 22-40 years of age: one week’s pay for every year of service
  • 41 years of age and over: one and a half week’s pay for every year of service


In addition to this, you may be entitled to up to eight weeks of unpaid wages and six weeks of holiday pay if you have any accrued but unused annual leave.


Depending on your specific circumstances, notice pay, which is equivalent to one week’s notice for each full year of employment, might also be owing.

What can I do with my redundancy pay?

What you do with your director redundancy payout is up to you; the money is yours to use as you please. Severance pay is only given after a company has undergone formal liquidation, and some people use part of their payout to finance this procedure. Redundancy payments can be used for everyday living expenses, savings, or starting a new business venture.


Who can I contact for help?

If you are company directors of an insolvent company and are considering a Creditors’ Voluntary Liquidation (CVL) and have questions about director’s redundancy pay claims. Here at Company Doctor, our insolvency practitioner licensed by the Insolvency Practitioners Association with decades of experience can offer you the skills and support needed. Complete the form on through the page dedicated to this topic or give us a call today.

Related Posts

Leave a Comment