Redundancy pay to cover the cost of liquidation
Director redundancy payments can be substantial and may be used to pay for the liquidation process if necessary, and/or repay some of the company’s debts. Being able to use the money to pay for a Creditors’ Voluntary Liquidation (CVL) is important as the alternative is waiting for a creditor to forcibly wind up your insolvent business.
This would lead to scrutiny from the Insolvency Service as to why the company failed, and a greater potential for sanctions being made against you if a breach of director duty is uncovered during the investigation.
What are the eligibility criteria for director redundancy?
The criteria for claiming director redundancy pay is the same as for employees of the business. Indeed, many directors work as employees of their company as well as holding office as directors.
To be eligible to make a claim you’ll need to have:
- Worked under a contract of employment, whether written, oral, or implied, for at least two years
- Worked for a minimum of 16 hours per week in a role that’s not solely advisory
- Taken a salary under PAYE
- Been owed money by the company – this might be the amount you’ve invested in the business, for example
How is director redundancy calculated and paid?
If you’re entitled to claim director redundancy pay your payment will be based on your age, length of service, and gross weekly wage. Length of service is capped at 20 years. There are various online tools to help you calculate statutory redundancy pay; the calculation is as follows:
- Aged under 22: half a week’s pay for each full year worked
- Aged 22-40: one week’s pay for each full year worked
- Aged 41 or older: one and a half week’s pay for each full year worked
Statutory redundancy pay is taken from the National Insurance Fund (NIF) with amounts up to £30,000 being free of tax and National Insurance. If you claim other entitlements, such as holiday pay or arrears of wages, these will be subject to tax and NI.
Don’t Fall Foul of Unqualified AdviceHow to claim your director redundancy pay
You can request a redundancy claim form online or from the liquidator you have appointed and you have 12 months from the date your company enters liquidation to make your claim. Applications are sent to the Redundancy Payments Service (RPS).
Payments are generally made within six weeks of claiming, so you should have the money available to pay for the CVL, repay some of the business’s debts, or support your own personal financial situation if required.
Company Closure can assess your eligibility for redundancy pay and provide professional guidance on entering Creditors’ Voluntary Liquidation. Our team has extensive experience in helping company directors to close down their businesses appropriately and advising on the implications of different closure methods.
Please get in touch to arrange a free, same-day consultation – we operate a broad network of offices around the country.
Need to speak to someone?
With multiple offices across the UK and a vastly experienced team of business closure experts, you are never far away from the advice you need. Our Licensed insolvency practitioners provide free consultations to all directors and shareholders, and can quickly ascertain which closure method is best for your business.
We are licensed by recognised professional bodies and have helped thousands of directors over many years. Contact us today for your free company closure consultation.
Related Posts
25,000+ Company Directors Supported – Partner Led Service
At Company Closure we have a nationwide team of licensed insolvency practitioners and company closure experts here to help you understand your options. Whether your company is solvent or insolvent, there is a closure method out there to suit you.
Call our team of licensed insolvency practitioners today:
