Directors Redundancy Pay Guide

In a time where we have been dealing with the unexpected, the UK has faced its biggest crisis in history never has it been more important to understand more about Directors Redundancy Entitlements but also the fundamental importance of having Contracts in place.

 

If you are a Director you may not be aware that you are entitled to claim for Statutory Redundancy Payments, Directors who can prove their status as an Employee of the business may qualify for a number of statutory payments.

 

Proving your Status

 

You need to prove your status as an Employee to enable any Statutory Payments following the Liquidation, this must prove that you held more that just an ‘advisory or non-executive’ role in the running of the business.

 

You do this by completing a form which is obtained by the Insolvency Service, you will need to complete the relevant details as below:

 

  • You had a Contract of Employment
  • Did you as a Director work at least 16 hours a week
  • The Company has been incorporated for more than two years
  • You will need to add details of your day-to-day responsibilities in the running of the business

 

How is the status decided?

At this stage the 4 points above need to be satisfied by the Liquidator, for example that you took an active day-day role in the business, had a relationship that was on a par to other Employees in the business and took a PAYE salary, then the Statutory Payments may be eligible.

 

What about the need for a Contract?

A key part of the status test is the Contract of Employment, the Liquidator will question what existed between both parties, this can then impact how your status is viewed by the Liquidator.

It is normally one of the first questions the Liquidator will ask, it is worth noting there are many types, but crucially the question to be answered will be:

 

What type of contract of employment existed?

 

It is always advisable as with Employees to ensure Contracts are in writing, this is the easiest way to prove the status, to be legal it necessarily not be though, if the Liquidator can establish the other points above for example that the Director is on the PAYE scheme, with similar hours and had a relationship that was on a par to other Employees in the business, this would then suffice as an oral or implied Contract and would satisfy the Liquidator.

 

Oral or implied terms would mean the Liquidator look at other areas of the relationship and this can take longer. It is always the best option to ensure that you can easily prove your employment by having a Contract of Employment in force.

 

How to claim for redundancy pay

Prior to making a claim you will need to discuss your individual circumstances with the Liquidator and complete the Insolvency Service form.

There are varying statutory payments available to Directors if their status as an Employee is proven, it is interesting that they do not differ from that of what an Employee is entitled to.

 

You can expect to receive – Redundancy pay

Where you are made redundant on or after 6 April 2017, you would be able to claim redundancy payments of £538.00 per week (£560.00 in Northern Ireland), up to a maximum of £16,140.00 (16,800.00 in Northern Ireland). Redundancy payments up to £30,000.00 are tax free.

You will receive, according to your age:

  • Under 22                        0.5 weeks’ pay for every year of service
  • Between 22 and 40        1 weeks’ pay for every year of service
  • 41 years old or older      1.5 weeks’ pay for every year of service

This is capped at 20 years of service.

What about Salary and holiday pay

 

You will also be entitled to claim for unpaid wages up to a max of 8 weeks, and up to 6 weeks of holiday pay for holiday accrued but not taken.

 

Notice Pay and Payment

Payment instead of notice will apply in redundancy cases, this means your employment can be ended without notice being given. You will be paid 1 weeks’ pay for each year of full employment (up to a maximum of 12 weeks), instead of receiving notice.  Your Contract of Employment (where you have one) may offer enhanced notice periods.

 

 

Are there any timeframes

Claims for redundancy payments should usually be made within 6 months of the date of liquidation, although this can be extended to 12 months, in certain cases.

 

Who deals with Redundancy and how do you proceed?

All claims, if accepted, are paid by the National Insurance Fund.

Insolvency and Redundancy as we can see is not just for the purpose of Employees, the process is the same and any Employees that are entitled to do so can use the Redundancy Payments Service, part of the government’s Insolvency Service, to claim statutory redundancy pay.

 

We offer a full end-end redundancy service and can provide you with not just correspondence, we also deal directly with your Employees to in an empathetic and supportive manner.

 

 

Get in touch we can help:

We advise that you always contact us for assistance prior to commencing any proceedings, we can help you get it right.

01254 467156 [email protected]