Being the director of a company, you might already have an understanding of redundancy payments and how they apply to your employees. However, you might not know that you might also be entitled to claim redundancy pay.
How will I be entitled to directors’ redundancy pay?
If your insolvent company has been trading for more than two years and you choose to liquidate it, you could be entitled to redundancy pay.
Perhaps the company has been suffering with cash flow problems for a while, and now a Creditors Voluntary Liquidation (CVL) is the best solution for you. If so, you will need to prove your status as an employee of the company in order to be able to claim for redundancy and a number of other statutory payments, including unpaid wages, holiday pay and notice pay.
Qualifying for these payments can provide a beneficial financial buffer following the closure of your company. It could also be used to pay for the liquidation itself.
Proving your status and making a claim
When it comes to proving that you’ve been operating as an employee of the company, you’ll be asked to complete a form provided by the Insolvency Service.
This form will ask you to provide certain details to make sure you can qualify for redundancy pay, including:
- Whether a written, oral or implied contract of employment was in place.
- If your working hours came to at least 16 hours per week.
- Details of your day-to-day responsibilities.
- If any money being claimed is owed by the insolvent company.
Any claims will usually need to be made within 6 months of the company’s liquidation, although certain circumstances can see this extended up to 12 months. Claims are made through the Redundancy Payments Service, part of the Insolvency Service.
The amount that can be claimed for director redundancy will vary depending on the particulars of the situation.
What exactly can I claim for?
Along with director redundancy pay, you can also claim for a number of other statutory payments, if you qualify.
Having proven that you were an employee of the company, the amount you’re entitled to will depend on how long you’ve worked for the company, your age and your rate of pay. For example:
- Under 22 years old – you’re entitled to a week’s pay for every year of service.
- Between 22 & 40 years old – you’re entitled to one week’s pay for every year of service.
- Over 41 years old – you’re entitled to one and a half week’s pay for every year of service.
If you’re a director who has been made redundant, you can receive up to a maximum of £489 per week, capped at £14,670 (for 20 years of service). Remember, to be eligible, you must have completed a minimum of two years’ service.
You’ll also be able to claim for up to eight weeks of unpaid wages, and up to six weeks of holiday pay, for any holiday days that haven’t been used.
Want to know more about redundancy pay for directors?
Are you a director wanting to know if you’re eligible for statutory redundancy pay? Are you considering a Creditors’ Voluntary Liquidation for your struggling limited company?
If so, our experts at Clarke Bell are here to help you – with our free, no-obligation advice.
We can help you to determine whether you can make a redundancy claim, as well as helping you with the Creditors’ Voluntary Liquidation process itself – with our affordable CVL service.
Contact us today on 0161 907 4044 or [email protected]