Christopher Andersen
Written By Chris Andersen
Director & Licensed Insolvency Practitioner
November 17th, 2023

Most company directors are well aware of the statutory redundancy payments their employees can claim during insolvency but remain unaware that they may also be entitled to claim.

The average director redundancy pay claim is for around £12,000, which can prove to be a real lifeline when your insolvent company has just been closed down.

If your business is struggling financially and closing the company seems to be the best solution to HMRC debts, creditor pressure and constant cash flow concerns, you may be able to claim director redundancy pay.  

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What is Directors’ Redundancy Pay?

Directors’ Redundancy Pay is a financial compensation for directors who can establish that they were also employees of their company and are facing redundancy due to the company’s liquidation. This payment is determined by factors like how long they worked there, their age, and their salary. It offers financial support to directors during the period after their company has closed.

Can I Claim Redundancy if my Company Goes Bust?

If you are the director of an insolvent company that has been trading for over two years and you choose to liquidate the company, you could be entitled to redundancy payments.

You may also be entitled to other statutory payments such as unpaid wages, holiday pay, and notice pay. To claim these statutory payments, you must be able to prove that you have been operating as an employee of the company.

To determine your employment status, you will be asked by the liquidator to complete an Insolvency Service questionnaire. The questions you need to answer will focus on:

  • Whether you have a written, oral or implied contract of employment;
  • If the money claimed is owed by the insolvent company;
  • If you worked at least 16 hours per week for the insolvent company;
  • Whether your role was more than non-executive or advisory.

As a basic rule of thumb, if you were paid through the PAYE system as an employee, then your claim is likely to succeed. If you were remunerated through dividends, your employment status will be more difficult to prove.

How to Check if you can Apply for Redundancy Payments as a Company Director

Claims for redundancy payments must be made through the Redundancy Payments Service (RPS), part of the Insolvency Service. Your liquidator will provide you with the necessary forms and information to make a claim.

The deadline for making a claim is usually six months from the date of your dismissal, although this can be extended to 12 months in some circumstances.

How Much can you Claim?

Like employees, company directors are entitled to claim for a number of statutory payments. That includes:

  • Redundancy pay – Company directors made redundant on or after 6 April 2017 can receive a maximum of £489 per week, capped at £14,670 (for 20 years of service).  

How Much Redundancy Does the Government Pay?

  • Under 22 years old – Half a week’s pay for every year of service;
  • Between 22 and 40 years old – One week’s pay for every year of service;
  • 41 years old or older – One and a half week’s pay for every year of service.
  • Salary and holiday pay – Company directors can also claim for up to eight weeks of unpaid wages and up to six weeks of holiday pay for holiday days that have been accrued but not taken.
  • Notice pay – Company directors are also entitled to ‘payment in lieu of notice’ if their employment ended without the proper notice being served. In this case, directors can claim for one week’s pay for each year of unemployment (up to a maximum of 12 weeks) instead of receiving notice.   

Eligibility Criteria for Directors Redundancy


To be eligible for Directors’ Redundancy Pay after insolvency, the criteria are:

  1. Employee Status: The director must have been an employee of the company. This employment can be under a written, verbal, or implied contract, demonstrating an employee-director relationship.
  2. Length of Service: The director needs to have been continuously employed by the company for at least two years. This continuous service is key to qualifying for redundancy pay.
  3. Minimum Working Hours: The director should have worked a minimum number of hours per week, typically at least 16 hours, to be eligible.

How Much tax will I pay on my Redundancy?

The first £30k of redundancy is tax free. However, other elements of your redundancy package – for example holiday pay, or pay given in lieu of notice, will be taxed in the same way as normal wages.

Need Advice about Your Situation?

Are you a company director considering a voluntary liquidation? Perhaps you’d like to discuss whether you’re likely to eligible for statutory redundancy pay with one of our experts? For confidential, no-obligation advice, please contact us today on 020 8444 3400.  

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