Most directors facing liquidation assume their position puts them outside the employment law safety net. They spend weeks worrying about company debts and personal guarantees while a legitimate financial entitlement sits unclaimed.
The average director redundancy claim is around £9,000. That can cover a meaningful part of your liquidation costs or give you breathing room while you work out what comes next.
Whether you can claim depends on one question: were you genuinely employed by the company, or only ever an officeholder? The distinction matters in law, and the Redundancy Payments Service (RPS) will probe it.
We work with directors through this process regularly. The cases that succeed share the same characteristics: PAYE, continuity of service, and a real employment relationship documented or evidenced even if informally.
Director redundancy pay is statutory redundancy pay accessed through the National Insurance Fund, administered by the Redundancy Payments Service, which is part of the Insolvency Service. When a company cannot pay its employment liabilities on insolvency, the RPS steps in as payer of last resort.
It is not charity and it is not discretionary. It is a legal entitlement under the Employment Rights Act 1996 (ERA 1996) for those who qualify.
The entitlement is not paid by the insolvent company. Your company does not need to have funds available. The RPS pays from the National Insurance Fund and then recovers what it can from the insolvency estate as a preferential creditor.
The key point that trips directors up: holding a director appointment does not automatically make you an employee. Equally, it does not automatically prevent you being one. Your status is determined by the substance of your working relationship with the company, not by your job title.
Director Redundancy Eligibility: The Criteria That Decide Your Claim
To qualify for director redundancy pay, you must satisfy the employment conditions in ERA 1996 ss.135 and 230. We see claims fail most often on the first two points below.
Employee status under ERA 1996 s.230. You must have worked under a contract of employment. A formal written contract is the cleanest evidence, but the RPS also looks at the substance: did you have set duties, regular hours, management accountability, and a genuine employment relationship rather than just a directorship?
In our experience, the substance test is where most claims succeed or fail at the margins.
A company secretary’s role or a non-executive director role typically fails this test. An operational director who ran a department, managed staff, and had day-to-day accountability usually passes it.
Minimum two years’ continuous service. Under ERA 1996 s.155, you need at least two years of qualifying employment. The two-year period is counted continuously, which means gaps in your employment record matter.
If you were a director for four years but only drew a PAYE salary for the last eighteen months, the claim is weaker than it looks on paper.
PAYE salary. Being paid through PAYE is the strongest single piece of evidence the RPS looks for. Directors who paid themselves only through dividends are treated as shareholders, not employees, because dividends are a return on investment rather than wages for work.
If you mixed dividends and PAYE, the PAYE element supports your claim; the dividend element does not count toward weekly pay for redundancy calculation purposes.
Formal insolvency process. The company must be in a formal insolvent process. Creditors’ Voluntary Liquidation (CVL) and compulsory liquidation both qualify. A Members’ Voluntary Liquidation (MVL) is a solvent process and does not. Administration can also trigger RPS claims in certain circumstances. A voluntary strike-off does not qualify.
Consistent substantive work. The old 16-hour weekly threshold was removed, but the RPS still needs to see evidence of a genuine, ongoing working role. Nominal directorships held on paper while you ran another company full-time are examined closely.
What You Can Claim as a Director
Qualifying directors can claim multiple heads of payment, and the total matters. We often see directors who only knew about redundancy pay and missed the others.
Statutory redundancy pay is calculated using your age, your length of qualifying employment, and your weekly gross pay, subject to the statutory weekly cap. From 6 April 2026, that cap is £751 per week.
The multiplier per year of service is half a week’s pay for service before age 22, one week’s pay for service between 22 and 40, and one and a half weeks’ pay for service aged 41 and over, up to a maximum of 20 years.
Statutory notice pay covers the notice period you should have received but didn’t. Under ERA 1996, you are entitled to one week per year of service up to a maximum of 12 weeks. This is claimed as a separate secondary application to the RPS, after your statutory notice period ends.
Holiday pay covers accrued but untaken annual leave at the point your employment ended. If your company was paying you holiday in arrears rather than as you took it, this can add up.
Unpaid wages can be claimed up to eight weeks’ worth. If the company fell behind on payroll in its final months, those arrears are claimable through the RPS.
The combined value of these heads of claim is why professional advice matters here. Directors frequently understate their claims by omitting notice pay or misdating their employment start. A claim that looks like £4,000 often turns out to be closer to £9,000 or more when all entitlements are properly calculated.
How to Claim Director Redundancy from the RPS
The process is administered online through the RPS and requires your company to be in formal insolvency first. Your insolvency practitioner is the gateway.
Once your licensed insolvency practitioner is appointed, they will register your company with the Insolvency Service and issue you a case reference number (CN number). Without this, the RPS portal will not accept your application.
You then complete your primary application online via the RPS portal at gov.uk/your-rights-if-your-employer-is-insolvent. The primary claim covers redundancy pay, unpaid wages, and holiday pay.
You’ll need your National Insurance number, bank details, employment history with the company, payslip evidence if available, and any written contract or correspondence that supports your employment status.
The secondary application, for statutory notice pay, is submitted separately after your notice period has run. Your IP will tell you when this is due, and we flag this deadline in our initial case management to avoid it being missed.
The RPS typically processes complete applications within six weeks. Incomplete applications take longer and are sometimes rejected. Getting the application right first time is the fastest route to payment.
Using Director Redundancy Pay to Cover Liquidation Costs
One of the more useful things a director redundancy claim can do is reduce the out-of-pocket cost of the liquidation itself. A CVL has professional fees attached, and while these are paid from company assets where available, many directors of cash-poor companies worry about how they’ll be met.
If your redundancy entitlement arrives before the liquidation costs are settled, it can be directed toward the IP’s fees. This is not guaranteed: timing depends on how quickly the RPS processes your claim relative to the pace of the liquidation. We raise it as a possibility, not a certainty, because both the claim amount and fee level depend on your specific circumstances.
What to Do if Your Director Redundancy Claim Is Rejected
The most common reasons for RPS rejection are: insufficient evidence of PAYE employment, a gap in continuous service that breaks the two-year threshold, or a finding that you were not genuinely an employee in substance.
If you receive a rejection, you can request a reconsideration and, if that fails, take the matter to an employment tribunal. Tribunal is a live route, but it takes time and works best with professional support.
Speak to an employment solicitor or to the insolvency practitioner who handled the liquidation. They will have the background documentation that strengthens the appeal.
If your claim is weak on the evidence because your records are incomplete, honest early engagement with a specialist is better than submitting a thin application and hoping. The RPS probes the employment relationship methodically.
Your Next Step
If your company is entering or considering liquidation and you believe you were a genuine salaried employee, check your eligibility before the liquidation process starts. The two things that kill director redundancy claims before they begin are incorrect assumptions (“I’m a director, so I can’t claim”) and poor recordkeeping.
Start gathering evidence now: employment start date, payslips or PAYE records, any employment contract, and details of your role and duties. If you’re unsure whether you qualify, our team can assess your position in a free initial call.
Directors who claimed promptly and with proper documentation received their payments within six weeks of the IP appointment in most of the cases we handle. Those who submitted incomplete applications waited significantly longer or were turned down.
FAQs on Director Redundancy Pay
Can I claim director redundancy pay if I was only paid in dividends?
No. Dividends are a return on shareholding, not wages for employment. The Redundancy Payments Service requires evidence of a PAYE salary as proof of employee status. Directors paid entirely by dividends are treated as shareholders rather than employees and are not eligible for statutory redundancy pay from the National Insurance Fund.
What is the maximum director redundancy pay I can receive?
Statutory redundancy pay is capped at the weekly pay limit (£751 from 6 April 2026) and a maximum of 20 years’ qualifying service, giving a top redundancy figure of £22,530 before the age multiplier. Notice pay and unpaid wages are calculated separately and are also capped. Total claims including all heads of payment vary widely but average around £9,000 across the cases we see.
Do I need to formally liquidate before claiming, or can I claim during administration?
You can claim through both CVL and compulsory liquidation. Administration can also trigger RPS claims in certain circumstances. An MVL is a solvent process and does not qualify. The company must be formally insolvent and under an insolvency appointment before the RPS will accept a claim. A voluntary strike-off does not qualify.
I was the only director and sole employee. Can I still claim?
Potentially, yes. Being the only director does not automatically disqualify you. The RPS will examine whether a genuine employment relationship existed: were you genuinely an employee of the company in substance, receiving a PAYE salary, performing employee-level duties? These cases are scrutinised more closely than multi-employee claims, but they do succeed where the evidence is sound.
How long does the Redundancy Payments Service take to pay?
The RPS typically processes complete applications within six weeks. Common delays include missing employment start dates, no payslip evidence, inconsistencies between the claim and payroll records held by the IP, and cases where the employment relationship is in dispute. Getting the application right first time is the fastest route to payment.
Will claiming director redundancy affect my personal liability for company debts?
No. Claiming statutory redundancy pay does not affect your personal liability position. Your liability as a director is assessed under company law and insolvency law separately from your employment entitlements. Personal guarantees are enforced through their own terms. Wrongful trading concerns are assessed by the liquidator. Your redundancy claim is a separate matter entirely.
