Company directors, if they are employees, are entitled to claim redundancy pay from the government if their company goes into liquidation, regardless of whether the liquidation is voluntary or compulsory liquidation.

In terms of how quickly you, as a director, can receive your statutory redundancy, you can start the process as soon as a liquidator is appointed, and typically, it may take 3-4 months to receive your money.

We advise directors on all types of business financial issues and insolvency. If you want to find out about your options, risks and rights, please do call us for initial free advice.


What’s the Eligibility for Directors’ Redundancy Payments?

Directors are eligible for redundancy if their company becomes insolvent, providing they are legally classified as employees.

Statutory redundancy pay is available to directors (with a cap of £14,370) and can be a lifeline during the difficult circumstances of a liquidation.

Proving Employee Status

Any director seeking redundancy pay must be regarded as ‘an employee of the limited company’ in addition to his/her role as director (i.e. his/her role was more than non-executive).

Do You Need to Have an Employment Contract?

The director must have worked under an employment contract for at least the last two years (this may be written, oral or implied).

The director’s work week must be a minimum of 16 hours.

The director must be owed money by the company (whether it be PAYE arrears, for example, or an initial seed capital investment).

What if there’s no Employment Contract for the Director?

Especially in instances where the director has founded the company, there may be no written employment contract.

During a company liquidation, it will be up to the liquidator to assess whether a director without a written employment contract has a legitimate claim on redundancy pay.

Where directors have opted not to receive a wage and only receive dividends as a shareholder, this will automatically exclude them from statutory redundancy pay.

How are Directors’ Redundancy Payments Calculated?

HMRC offer a handy redundancy payment calculator which you can find here. Your redundancy application will be based on:

  •  your current age
  • your length of service to the company (with a 20-year maximum)
  • your gross weekly pay (up to a maximum of £479 per week)

Holiday pay

Also, you may claim a maximum of six weeks accrued holiday pay, and up to 8 weeks of unpaid wages.

Notice pay

For each full year of employment, a director has served, the RPS calculates one week’s notice being applicable. In cases of redundancy, pay instead of notice applies which means that a director may be eligible for up to 12 weeks additional redundancy pay

Is Director’s Redundancy Pay Taxable?

Like other employees, directors who are eligible for redundancy will receive the first £30,000 as a tax-free statutory redundancy payment.

How to Apply for Redundancy

The first thing to do will be to discuss your situation with the insolvency practitioners handling your liquidation. They will advise you on the best course of action, part of which will be filling in the forms available here.

Appling to the Redundancy Payments Service is a straightforward process, as follows:

  1. Confirm Eligibility
  2. Gather Necessary Information:
  3. Submit a Claim
  4. Wait for Processing
  5. Receive Payment

You will need to ask your insolvency practitioners for the case reference number. You will also need your National Insurance number to hand.

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