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I want to liquidate my company – are my staff eligible for redundancy?

Posted on: Wednesday 18th October, 2017

I want to liquidate my company – are my staff eligible for redundancy?

If your company is going to be liquidated, members of staff may be eligible for statutory redundancy pay. Claims can be paid from the company’s assets if sufficient funds are realised, otherwise the payments are made from the National Insurance Fund (NIF) following submission of form RP1.

What are the criteria for claiming redundancy?

The criteria for receiving redundancy pay are as follows - they apply to part-time employees as well as those working on a full-time basis:

  • Being employed by the company for a minimum of two consecutive years
  • Working under an employment contract

Those who worked on a fixed term contract that lasted for more than two years may be eligible if the contract isn’t renewed due to liquidation. It’s also worth remembering that, as a director, you may be eligible to claim redundancy yourself if you meet the following criteria in addition to those conditions mentioned above:

  • Working a minimum of 16 hours per week
  • Taking on a role that is more than advisory
  • Being owed money by the company, your initial investment, for example

It isn’t commonly known that directors can claim statutory redundancy pay when their company is liquidated, but with the average claim being around £12,000, it’s worthwhile considering your eligibility.

How to calculate redundancy pay

The calculation for redundancy pay contains three elements – an employee’s age, length of service, and weekly wage.

  • Aged 18-22: half a week’s wage for every full year of service
  • Aged 22-40: one week’s wage for each full year’s service
  • Aged 41 and over: one and a half week’s wage for each full year of service

The appropriate amount of pay is multiplied by the employee’s length of service to arrive at a figure for their redundancy pay, but there are caps in place.

  • Length of service is capped at 20 years
  • Weekly pay at £489
  • Maximum amount of redundancy payable is £14,670

National Insurance isn’t payable on redundancy, and tax is payable only on redundancy pay over £30,000.

If you need more information on employee redundancy pay, our experts at Redundancy Claim can explain their rights and entitlements following the liquidation of your business. We will also advise you on your own eligibility as a director/employee.

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