Director Redundancy Pay: What You Need to Know

Company Director researching eligibility for Director Redundancy Pay

Directors facing the unfortunate circumstances of their company entering liquidation may be eligible to claim director redundancy pay. Understanding the eligibility criteria and navigating the process of claiming redundancy for directors is crucial for company directors in this situation. This comprehensive guide provides detailed information on the eligibility criteria, step-by-step instructions for making a claim, and an overview of the various types of payments available.

Eligibility Criteria for Director Redundancy Pay

Directors seeking redundancy payment must meet specific eligibility criteria. It is essential for company directors to familiarize themselves with these requirements to determine their entitlement to statutory redundancy payment. The eligibility criteria include:

  1. Employment Status: To claim director redundancy, directors must have a contract of employment with their company and be considered an employee rather than just a shareholder or self-employed.
  2. Insolvency: The company must be insolvent, which means it is unable to pay its debts as they become due. Insolvency can be established through a formal insolvency process such as voluntary liquidation or administration.
  3. Redundancy Situation: Directors must demonstrate that their position became redundant due to the company’s insolvency. This can occur when the business ceases trading or undergoes significant restructuring.

Claims Process for Director Redundancy Pay

Company Director completing the online form for Director Redundancy Pay

Making a claim for director redundancy involves several steps. By following this process diligently, directors can ensure they have the necessary documentation and fulfil the requirements to receive statutory redundancy payments. The steps in the claims process include:

  1. Seek Professional Advice: It is highly advisable for company directors to consult an insolvency practitioner or employment law specialist who can provide personalised guidance throughout the claims process.
  2. Gather Documentation: Directors should gather relevant documents such as the contract of employment, payslips, and records of unpaid wages and holiday pay. These documents will support the redundancy claim.
  3. Complete Redundancy Claim Forms: Directors need to complete the appropriate forms to claim statutory redundancy payments. These forms can be obtained from the Insolvency Service website or through an insolvency practitioner.
  4. Provide Supporting Evidence: Directors must provide evidence to support their claim, including proof of employment, insolvency of the company, and the director’s role becoming redundant. This evidence strengthens the validity of the claim.
  5. Submit the Claim: Once all the necessary documentation and evidence are gathered, company directors should submit their redundancy claim to the appropriate authority. This can be done either directly to the Insolvency Service or through an appointed insolvency practitioner.
  6. National Insurance Fund: Redundancy payments for eligible directors are funded by the National Insurance Fund (NIF). Once the claim is approved, directors will receive their statutory redundancy payments from the NIF.

Types of Payments Available for Directors

When claiming director redundancy pay, it is important to understand the various types of payments that can be claimed. These include:

  1. Statutory Redundancy Pay: Directors who meet the eligibility criteria are entitled to claim statutory redundancy payments based on their length of service, age, and weekly pay. The amount of statutory redundancy is subject to a maximum limit defined by legislation.
  2. Notice Pay: Directors may be entitled to claim notice pay if they did not receive proper notice before the company’s insolvency. This includes statutory notice or payment in lieu of notice.
  3. Unpaid Wages and Holiday Pay: Directors can claim any outstanding wages, including salary, bonuses, and accrued but unpaid holiday pay before the company’s insolvency.
  4. Other Statutory Payments: In addition to redundancy pay, directors may be entitled to other statutory payments such as unpaid pension contributions or outstanding statutory sick pay.

How much redundancy pay will you be entitled to?

Once it is established that you are indeed an employee of the company, the amount of redundancy pay you will receive depends on several factors. These include your length of service, age, and rate of pay. The calculation is based on the rate of your gross weekly wages at the time of redundancy, with a maximum cap of £571 per week. Additionally, the length of your service is also taken into account, with a maximum cap of 20 years.

To be eligible for redundancy pay, you must have completed a minimum of two years of service. In the case of an insolvent company, employees who are owed money become preferential creditors. This means that you may have the opportunity to claim not only redundancy pay but also backdated salary and holiday pay that you are owed.


Directors of an insolvent company entering liquidation or facing insolvency should be aware of their eligibility for director redundancy. By understanding the eligibility criteria, following the appropriate claims process, and gathering the necessary documentation, directors can successfully claim statutory redundancy payment, notice pay, and unpaid wages.

Seeking professional advice from an insolvency practitioner or employment law specialist is strongly recommended to ensure a smooth and efficient claims process. Remember, director redundancy pay provides vital financial support during this challenging time, helping directors transition and explore new opportunities confidently.

Further guidance can be viewed on the Redundancy payments service website here


The primary sources for this article are listed below.

Government – Redundancy Payment Service Helpline

Details of our standards for producing accurate, unbiased content can be found in our editorial policy here.

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What employment rights do directors have?

Directors typically have a different employment status compared to regular employees. As they hold a position of control and responsibility within a company, their employment rights differ. Directors are generally considered officeholders rather than employees, and their rights are governed by company law and their service agreements or contracts. It’s essential to review the specific terms outlined in the director’s service agreement or contract to understand their individual rights.

Can a director make himself redundant?

No, a director cannot make himself redundant in the traditional sense. Redundancy typically occurs when an employer determines that a particular role is no longer necessary, resulting in the termination of an employee’s employment contract. Directors, being officeholders rather than employees, usually have decision-making power regarding their own positions.

However, it’s worth noting that in some jurisdictions, directors who also have an employment contract with the company may be eligible for redundancy pay in the event of insolvency. When a company becomes insolvent and enters into a formal insolvency procedure, such as liquidation or administration, there may be provisions for directors to claim redundancy pay alongside other employees. These provisions are typically subject to certain eligibility criteria and limits set by relevant employment laws.

Is directors’ redundancy pay taxable?

Yes, directors’ redundancy pay in England and Wales is generally subject to taxation. When a director receives redundancy pay, it is considered a form of income and is therefore subject to income tax.

In England and Wales, redundancy pay is calculated based on the director’s age, length of service, and weekly pay, following the statutory redundancy payment formula. The amount of redundancy pay that falls within the statutory limits is tax-free, while any amount exceeding those limits is subject to income tax.

It’s important to note that tax regulations and thresholds can change over time. Therefore, it is advisable to consult with a qualified tax professional or HM Revenue and Customs (HMRC) for the most up-to-date and accurate information regarding the taxation of directors’ redundancy pay in England and Wales.

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