When a business enters insolvency and has to be liquidated, the company’s employees are automatically made redundant. They become eligible for statutory redundancy and other payments provided they meet certain conditions. The qualifying criteria for employee redundancy also apply to you as a director, as long as you can prove your status as an employee of the company.
If you fulfil the same criteria as your employees, and have worked under a similar arrangement – receiving a salary/wages through the PAYE system rather than being paid solely via dividends, for example – it’s likely that you’ll qualify for redundancy and other statutory entitlements such as unpaid wages and outstanding holiday pay.
To be considered an employee of the company, you must have worked:
The calculation for redundancy pay takes into account three factors – your age, length of service, and weekly wage, and is subject to statutory limits.
Making yourself redundant as a director isn’t always as straightforward as when employees make their claim, due to various factors including the dual status they hold within the company. Some claims are rejected because they haven’t been presented correctly, or directors fail to provide sufficient proof that they are, in fact, an employee.
An unambiguous written contract setting out your hours of employment, holiday entitlement, salary, and duties as an employee, plus proof that PAYE is deducted from your salary all help to reinforce your eligibility for redundancy pay.
Obtaining professional advice and assistance offers you the best chance of making a successful claim, and ensures you provide the evidence required by the Redundancy Payments Service (RPS).
Our experts at Redundancy Claims will review your position within the company, advise on whether you can make yourself redundant, and if so, help with your claim. Contact one of the team to learn more. RCUK are Authorised and Regulated by the Financial Conduct Authority. Authorisation No 830522. You can check our registration here.
The fact that limited company directors can claim redundancy when their company is liquidated is not widely known in the UK. If successful, however, this payment can cover the professional fees needed to undergo insolvent voluntary liquidation, rather than having to wait for a creditor to enforce liquidation.
Whether you’ve decided to liquidate your company voluntarily, or have been forced into liquidation by a creditor, closing down a business in this way is challenging both practically and emotionally.
Director redundancy is still relatively unknown and there is much misunderstanding about who may be eligible for it. There are certain caveats when it comes to making a claim for director redundancy. In order to be eligible you must be registered as an employee of the company, have at least two years’ continuous service, and you must have worked a minimum of 16 hours a week during this time.
May I take this opportunity to thank you and your team for all your professional help in securing for myself and my wife, redundancy pay. I would have no hesitation in recommending RCUK to assist them.Tom Harrison Managing Director of a construction company