Can Company Directors Claim Redundancy?

Yes. Many company directors can claim statutory redundancy pay when their company enters insolvent liquidation, provided they were genuinely employed by the company as well as being a director. It’s a right a great many directors don’t realise they have, and the payments can be substantial, often enough to cover the cost of the liquidation itself and, in a good number of cases, a great deal more besides.

If you’ve built a company, paid yourself a salary through it, and now face the prospect of closing it, this is money you may well be owed. It comes not from the failing company, but from a government fund set up for exactly this situation. This guide explains who qualifies, what you can claim beyond redundancy pay, how much you might receive, and how the claim process actually works.

Key takeaways

• Many directors can claim statutory redundancy when their company enters insolvent liquidation, provided they were genuinely employed by it.
• You’ll generally need a contract of employment, two years’ continuous service, at least 16 hours a week, and a salary paid through PAYE.
• The claim isn’t just redundancy pay; you may also be able to claim unpaid wages, holiday pay and statutory notice pay.
• For redundancies on or after 6 April 2026, weekly pay is capped at £751 and the maximum statutory redundancy payment is £22,530.
• Claims are paid from the National Insurance Fund, not the company, so making one doesn’t reduce what’s left for creditors.

Why can directors claim redundancy at all?

Statutory redundancy pay comes from the National Insurance Fund, the same government fund that protects ordinary employees when their employer becomes insolvent. The key point, and the one many directors miss, is that a director can also be an employee of their own company at the same time.

If you have a contract of employment, work in the business day to day, and draw a salary through the payroll, then in substance you’re an employee as well as an office-holder. Where that’s the case, you’re treated much like any other member of staff when the company is liquidated, and you can claim from the fund on the same basis. Being a shareholder, or holding the title of director, doesn’t disqualify you. What matters is whether you were genuinely employed by the company.

The eligibility criteria: a quick checklist

To claim statutory redundancy as a director, you’ll generally need to meet all of the following conditions:

• You were an employee of the company. Ideally under a contract of employment. A written contract is best, but a genuine, demonstrable arrangement can still count.
• You had at least two years’ continuous service as an employee of the company.
• You worked a minimum of 16 hours a week in the business. This means a real, practical, hands-on role, not simply a name on the incorporation paperwork.
• You were paid a salary through PAYE, rather than taking your income solely as dividends. Drawing everything as dividends is one of the most common reasons a claim fails.
• The company is entering, or has entered, a formal insolvent liquidation, such as a Creditors’ Voluntary Liquidation.

If you can tick each of these boxes, there’s a strong chance you have a valid claim. If you’re not certain, for instance if your income was a mix of salary and dividends, it’s still well worth checking, because eligibility is assessed on the overall substance of your role, not on any single factor in isolation.

What can you actually claim?

Redundancy pay is often only one part of what’s available. As an employee of an insolvent company, you may be able to claim several separate statutory entitlements from the National Insurance Fund:

• Statutory redundancy pay, calculated from your age, length of service and weekly pay.
• Unpaid wages that the company owed you, up to a statutory limit.
• Holiday pay that had accrued but wasn’t taken or paid.
• Statutory notice pay, which compensates you for the notice period you would otherwise have been entitled to.

Taken together, these can add up to a meaningful sum. It’s a significant reason so many directors are able to use their claim to fund the liquidation and still have money left in hand afterwards.

How much could you receive?

Statutory redundancy pay is calculated using a set formula based on three things: your age, your length of service (which is capped at 20 years), and your weekly pay (which is subject to a statutory cap). For redundancies on or after 6 April 2026, weekly pay is capped at £751, and the maximum statutory redundancy payment is £22,530. On top of the redundancy element, the further claims for unpaid wages, holiday pay and notice pay can increase the total you receive.

The exact figure will always depend on your personal circumstances, but the headline is a simple one: for many directors this is a five-figure entitlement they had no idea existed until they asked the question.

How to make a claim

The process is more straightforward than most directors expect, and it runs alongside the liquidation rather than complicating it.

First, the company must enter a formal insolvent liquidation, handled by a licensed insolvency practitioner. Once the IP is appointed, they notify the Redundancy Payments Service and provide you with a case reference number. You then submit your claim to the Redundancy Payments Service, usually through an online form, using that reference. The fund assesses your entitlement and pays you directly.

Many directors choose to use a specialist to prepare and maximise the claim, particularly where the employment position needs to be evidenced carefully, or where income was taken as a mix of salary and dividends. Our Director Redundancy Claims service walks you through eligibility and handles the claim alongside the liquidation, so the whole thing is one joined-up process rather than two separate battles. If you’d first like to understand the liquidation itself, our Company Liquidation (CVL) page explains how that works.

A right worth checking

Facing the closure of a company you’ve worked hard to build is difficult enough without leaving money on the table that’s rightfully yours. If you paid yourself properly through the business and played a real part in running it, a redundancy claim may be one of the few genuinely positive elements of the whole process. It costs nothing to find out where you stand, and knowing the answer can make the decisions ahead a good deal easier.

If you’d like us to check whether you’re eligible, we’ll give you a straight answer, confidentially and with no obligation.

Frequently asked questions

Can I claim redundancy if I only paid myself in dividends?

It’s much harder. Statutory redundancy is an employee entitlement, and a salary paid through PAYE is one of the clearest signs of employee status. If you took your income entirely as dividends and drew no salary, a claim is unlikely to succeed. If your pay was a mix of salary and dividends, it’s still worth checking, because eligibility looks at your role as a whole.

How long do I have to make a claim?

Claims to the Redundancy Payments Service are time-limited, so it’s best to start as soon as the company is in liquidation. Your insolvency practitioner will give you the case reference number you need in order to claim without delay.

Will claiming redundancy affect the liquidation or my creditors?

No. Your redundancy and related payments come from the government’s National Insurance Fund, not from the company’s assets, so claiming doesn’t reduce what’s available to creditors. It’s a separate entitlement that you hold personally as an employee.

Can I use my redundancy payment to pay for the liquidation?

Yes, and many directors do exactly that. Because the payment often exceeds the cost of a straightforward liquidation, it can cover the fee and still leave you with money in hand. We can explain how that would work in your particular case.

Do I need two years of service to qualify?

For statutory redundancy pay, yes, you generally need at least two years of continuous employment with the company. Some of the other elements, such as unpaid wages and holiday pay, don’t depend on the two-year threshold, so it can be worth checking your position even if you fall short on service.

What if I was a director of more than one company?

Each company is looked at separately. If you were genuinely employed by more than one company that has become insolvent, you may be able to make a claim in respect of each, subject to meeting the criteria for that company. We can help you work through where claims may exist.

Does taking a redundancy payment count against me as a director?

No. Claiming what you’re lawfully entitled to as an employee is entirely proper and doesn’t reflect on your conduct as a director. It’s a statutory right, the same one available to any employee of an insolvent business.

How soon will I be paid?

Once your claim is submitted with the correct information, the Redundancy Payments Service typically processes payments within a few weeks, though timescales can vary. Submitting an accurate, well-evidenced claim promptly is the best way to avoid delay, which is one of the reasons directors often use a specialist.

 

Written by Michael Chamberlain

Founder, The Insolvency Practitioners, regulated by the ICAEW

This article is for general guidance only and does not constitute legal or financial advice. Redundancy entitlements depend on your individual circumstances. For advice on your own position, speak to a licensed insolvency practitioner.