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A Guide to Collecting Director Redundancy Payments


A Guide to Collecting Director Redundancy Payments

It is common knowledge that workers have the right to redundancy payments, but a lesser-known fact is that the director of a business can also claim.

It is common knowledge that workers have the right to redundancy payments should they meet certain requirements when dismissed from their job, but a lesser-known fact is that the director of a business can also claim redundancy pay in the event of the liquidation or closure of their company.  When a business goes into liquidation, its director will typically look to pay for the procedure through the sale of assets, but said assets may not necessarily be enough to cover the cost of the liquidation process.  In this case, directors may qualify for certain statutory entitlements that they can use however they see fit.  These benefits typically go towards paying off the insolvency practitioner employed to see through the liquidation process, but directors may also choose to put them towards a new business venture if enough is left over.  In any case, the director redundancy payment can provide a much-needed lifeline in times of trouble for your business, so it is essential that you know what benefits are available to you and whether or not you are eligible for them.


What makes a director eligible to make a redundancy claim?


The primary criteria for claiming director redundancy payments include:

  • Being regarded not just as a director, but also an employee of your company. This includes having worked under a contract of employment – written, oral or implied – for at least two years, playing an active role in the daily running of the business rather than solely working an advisory role.
  • Working a minimum of 16 hours per week.
  • Having been on the PAYE scheme.
  • Being owed money by the business, such as in the form of arrears of PAYE or the cost of the initial investment into the company.


How much is the director redundancy payment worth?


Director redundancy payments average around £9,000 – £12,000, but the exact amount you will receive depends on your age, pay rate and length of service to the company (capped at 20 years).  The latter is the foremost factor in calculating how much you can claim, alongside your weekly wage rate at the time of redundancy (capped at £544/week for redundancies made after 6th April 2021).  You may also be able to claim up to eight weeks of unpaid wages and up to six weeks of holiday pay.


How to claim director redundancy


Firstly, if you’re unsure whether or not you’re entitled to request redundancy payment, you can employ the help of an independent firm that specialises in director redundancy claims.  These firms will help you ascertain whether or not you can make a redundancy claim, how much the payment will be worth, and can provide further advice regarding your circumstances.  If you are found to be eligible, you can submit a form to the National Insurance Fund, which can be obtained either online or from the liquidator in charge of the closure of your business.

If you would like to know more about director redundancy payments or the liquidation process in general, contact Voscap at 020 7769 6831 or email help@voscap.co.uk to speak to one of our business recovery specialists.

About Voscap Ltd

Voscap’s primary objective is to save your business! Our team of experts’ knowledge in restructuring and turnaround assignments is invaluable when assessing the best option available to your needs. With experience spanning several decades, we have the skill and resources to provide viable solutions within all industry sectors. All organisations go through difficult times and we are here to help. From small to multi-million turnover businesses, we have dealt with the most complex of cases. We offer an initial free assessment in analysing your financial position and providing clear and precise advice making your experience a simple non-complicated process. Get in touch →

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