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Where does director redundancy pay come from?

Whether you’ve decided to liquidate your company voluntarily, or have been forced into liquidation by a creditor, closing down a business can be a stressful time both emotionally and financially.

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As well as losing your business, you may also be losing your only source of income. Despite this, however, there may be a small ray of light in the form of redundancy pay. Not only could this help reduce the financial strain you’re experiencing, but it could also pay for the costs of liquidating your insolvent company.

Government redundancy payments for company directors

If you’re an employee of the company in insolvency, as well as being a director, you may be able to make a claim for redundancy and other statutory entitlements if it’s going to be liquidated.

Statutory redundancy rules specify that you must have worked under a contract of employment for at least two years continuously, in a practical role that is more than advisory. You also need to have worked a minimum of 16 hours per week.

But where does the money for government redundancy come from, and how much redundancy pay will you get?

How to claim redundancy as a director

You can ask the liquidator for a claim form (RP1), or make a claim online for government redundancy pay. If your business is insolvent the money could either come from the sale of company assets, or if insufficient funds are realised, it’s likely to be made from the National Insurance Fund (NIF).

Claims can be made before or after the liquidation takes place, but the deadline is 6-12 months from the date of liquidation. Redundancy payments are generally made 3-6 weeks after a claim has been received, and are administered by the Redundancy Payments Service (RPS).

In addition to statutory redundancy pay, RPS deals with arrears of wages, outstanding holiday pay, and statutory notice pay.

The claims process can be complicated, and one omission on your application could see your claim rejected. At Redundancy Claims UK we have years of experience helping company director receive the redundancy they are entitled to. With unrivalled knowledge of the claims process we can help maximise your chance of success.

How much is redundancy pay? 

If you start by considering the length of time you’ve worked as an employee for your company, you can calculate your redundancy pay using your age and weekly wage, subject to certain limits:

  • Aged under 22: half a week’s pay for each full year of service
  • Aged 22-40: one week’s pay for each full year of service
  • Aged 41 and over: one and a half week’s pay for each full year of service
  • As of April 2018, the weekly cap on wages is £508
  • The maximum amount of statutory redundancy pay is capped at £15,240
  • Length of service is capped at 20 years

If you would like to learn more about director redundancy, and discover if you qualify, our expert advisors at Redundancy Claims UK can help. Call our team today to start your claim.

Many directors don't consider themselves to meet the criteria and don't claim when they have a legitimate right to.

Start Your Claim
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