A guide, not advice. This explains how things generally work. A licensed insolvency practitioner will tell you what applies to your company or to you.
Director redundancy - can directors claim when a company closes?
Directors who genuinely worked for their company as employees may be able to claim redundancy pay, notice pay, and wage arrears from the government's Redundancy Payments Service when the company enters liquidation - the same scheme that pays staff, subject to the same rules and caps.
In this guide you'll learn who qualifies, what can be claimed, how claims are assessed - and why this area needs approaching carefully, both because eligibility is genuinely case-by-case and because a cottage industry of claim firms has grown up around overpromising it.
If a redundancy claim is part of how you'd fund a liquidation, it's a good idea to have eligibility assessed honestly before the process is priced around it.
Who qualifies - the employee test
The scheme pays employees - so the question is whether you, as well as being a director and shareholder, were genuinely an employee of your company.
Factors that support eligibility: working under a contract of employment (written, or evidenced by conduct), being paid a regular salary through PAYE, working substantial regular hours in the business, and doing a real job beyond statutory directorship - running operations, serving customers, managing staff.
Factors that undermine it: no salary (dividends only), no meaningful hours, a purely supervisory or investment role, or paperwork created after the fact.
There's no single decisive factor - the Redundancy Payments Service and, in disputed cases, employment tribunals look at the whole picture - which is why honest case-by-case assessment beats any generic promise.
What can be claimed?
Eligible director-employees can claim the same categories as staff, each subject to statutory weekly caps and qualifying rules: statutory redundancy pay (based on age, length of service, and capped weekly pay - two years' service minimum), notice pay, arrears of wages, and accrued holiday pay.
Claims are made to the Redundancy Payments Service once the company is in liquidation, with the liquidator confirming the necessary details; payments typically follow within weeks.
For long-serving director-employees the totals can be meaningful - sometimes enough to fund the cost of the liquidation itself, which is a legitimate and common use.
A straight word about redundancy claim firms
Director redundancy has become a marketing hook: firms advertising headline averages, charging substantial percentages of any award, and - at the aggressive end - encouraging claims that don't withstand scrutiny.
The area has attracted regulatory attention for exactly that reason, and a rejected or overturned claim is worse than no claim - so treat any adviser who guarantees a figure before examining your employment reality with the caution that promise deserves.
The honest version costs nothing extra: eligibility assessed on the facts as part of the liquidation conversation, claimed through the government scheme directly, with no percentage skimmed off.
How does this interact with the liquidation?
Practically, in three ways.
Timing - claims can only be made once the company is in liquidation, so the assessment happens during the advice stage and the claim follows appointment.
Funding - where eligibility is solid, anticipated redundancy can shape how liquidation fees are structured; where it's marginal, the liquidation should be affordable without it.
Interaction with other issues - a redundancy claim sits alongside everything else in your personal picture, including any overdrawn loan account, and it's far better to have one adviser seeing the whole board than separate firms optimising separate pieces.
How do I find out if I'd qualify?
Bring the basics to a first conversation: how long the company traded, your salary history and PAYE records, your role day to day, and any contract of employment.
Call our licensed insolvency practitioners in Manchester on 0333 023 5090 - you'll get an honest eligibility view from an ICAEW-licensed IP as part of the wider conversation about your company's options, not a sales pitch built around a number.
InsolvencySupport.co.uk is operated by Xeinadin Corporate Recovery Limited (company no. 11415156), 8th Floor, 100 Barbirolli Square, Manchester M2 3BD. Our insolvency practitioners are licensed and regulated by the ICAEW.
This article is intended for general information purposes only and does not constitute financial, legal, or professional advice. Eligibility for redundancy payments is assessed case by case by the Redundancy Payments Service - always take advice from a licensed insolvency practitioner about your specific position.
Reviewed by Alan Fallows, Licensed Insolvency Practitioner, ICAEW.