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. Depending on your individual circumstances you may also be entitled to holiday pay, notice pay, and unpaid wages on top of your redundancy payment.
If you do qualify for director redundancy your payment will be based on the salary you have been earning in the months leading up to your company’s liquidation, up to a maximum weekly pre-tax amount of £508. However, where do you stand if you have been paying yourself substantially less than this, maybe even less than the minimum wage?
Put simply, for the purposes of claiming director redundancy, this does not matter. It is understood that when a company is struggling under the weight of increasing financial pressures, directors often put money-saving measures in place to try and improve the company’s financials; in a lot of cases the first thing to be cut is the salary the director pays him or herself. Unfortunately this can mean the director is receiving a salary at a lower level than the national minimum wage.
The important thing to remember, however, is that the Redundancy Payments Service (RPS) cannot base a redundancy claim on any amount which is lower than the national minimum wage and therefore this is the figure which will be used in any calculations even if your actual salary falls short of this level.
With this in mind, however, you must have been paying yourself something in order to qualify for director redundancy, and this must have been done through the PAYE system. If you are unsure whether you have been paying yourself through PAYE it is advisable to speak to your accountant who will easily be able to confirm this for you.
The responsibility for making redundancy payments to its employees lies with the company making the redundancies. However, if the business is insolvent it is unlikely that there will be enough money in the company to make these payments in full. In this instance redundancy payments are made from the National Insurance Fund (NIF) which is the place where all national insurance contributions are held.
At Redundancy Claims UK, our experienced advisers can assess your claim over the phone and tell you how much you may be entitled to, as well as guiding you through the entire process from start to finish. If your company is heading towards insolvency we can help determine how a redundancy claim could help you financially following your company’s closure, and also provide guidance on where to turn for professional insolvency advice to ensure you are fully meeting your responsibilities and obligations as a director.