Am I entitled to Director Redundancy pay?
As a company director, it is likely you are also classed as an employee of the business. If so, you may be able to claim redundancy from the company should it become insolvent and consequently enter a formal liquidation process. The rules for redundancy for directors are much the same as for employees and there are a number of criteria to qualify including:
- You must have worked for the company for at least two years
- You must have worked at least 16 hours a week for the company
- You have been paid a regular salary from the company through PAYE
If you can meet these requirements then it is highly likely you will be able to claim for redundancy and other statutory entitlements including notice pay, holiday pay, and arrears of wages, should the company be liquidated due to insolvency.
How much could I claim?
The amount you may be entitled to will depend on a range of factors including you age at the time of redundancy, the amount of time you worked for the company, as well as the salary you took during this time. If you qualify for redundancy, the amount you are eligible for will be calculated as follows:
- 18-21 years of age: half a week’s gross pay for every year of service
- 22-40 years of age: one week’s pay for every year of service
- 41 years of age and over: one and a half week’s pay for every year of service
In addition to this, you may also be entitled to up to eight weeks of unpaid wages and six weeks of holiday pay should you have annual leave remaining. Notice pay, equivalent to one week’s notice for each full year of employment, may also be due depending on your individual circumstances.
What can I spend the redundancy pay on?
There are no rules on what director redundancy can be spent on; the money is yours to do what you wish. As redundancy is only payable after a company has entered into a formal liquidation procedure, some individuals use a portion of their redundancy pay-out to fund this process. Redundancy funds can also be used for general living costs, be put into savings, or even used to start up a brand-new business venture.
Can my co-director also claim redundancy?
All qualifying directors can submit their own claim for redundancy upon the company going into liquidation. Each director’s claim will be calculated individually and the amount each may be entitled to may differ depending on their age, length of service, and salary taken, however, all named directors who can prove they worked for the company in some form will have a right to claim. In some instances, this may mean that a married couple could each receive a redundancy pay-out if both are listed as directors of the company.