Yes — many directors can claim redundancy pay, but only if they were genuinely working as an employee of their own company, not simply holding office as a director. If your company has gone into liquidation and you had a proper employment relationship with it, you may be able to claim redundancy pay, unpaid wages, holiday pay and notice pay from the government's Redundancy Payments Service (RPS).
This surprises a lot of directors. It feels odd to claim redundancy from a company you ran. But company law and employment law treat these as separate questions: you can be both an office-holder (director) and an employee, provided you meet certain tests. This article explains those tests, what you can claim, and how a claim is typically made.
Can a director claim redundancy? The short answer
A director can claim redundancy pay if two things are true: the company has entered a qualifying insolvency process, usually liquidation, and the director can show they worked under a contract of employment, not just as an appointed officer. Directors who took a salary through PAYE, worked set hours, and were under the company's control often meet this bar.
Directors who took no salary, worked purely on a self-employed or dividend-only basis, or had no real employment relationship, typically cannot claim. The distinction is about substance, not job title.
The employee test: are you actually an employee of your company?
The RPS looks past the "director" label and asks whether you were, in reality, an employee. This is sometimes called the employee test. Relevant factors include:
- Whether you were paid a regular salary through PAYE, with tax and National Insurance deducted
- Whether you had a written contract of employment or equivalent terms
- Whether you worked fixed or regular hours, similar to other staff
- Whether the company (through its board) could direct and control your day-to-day work
- Whether you held a minority shareholding rather than sole or majority control
No single factor is decisive. A director with a small shareholding, a proper payroll record and defined duties has a much stronger claim than a sole shareholder who only ever drew dividends.
The key eligibility criteria the RPS looks at
Beyond the employee test, the RPS applies the same general redundancy eligibility rules that apply to any employee:
- You must have at least two years' continuous service with the company
- Your role must have genuinely ended because the company closed or reduced its workforce
- The company must be insolvent — usually confirmed by entering liquidation, with a liquidator appointed
- You must not have already been paid redundancy money by the company itself
These are the same core rules set out in UK employment legislation, and it is worth reading the government's official guidance on redundancy pay entitlement alongside this article, since general eligibility principles apply to directors too.
What you can claim: redundancy, unpaid wages, holiday, notice pay
If you're eligible, a director-employee can typically claim several separate elements through the RPS, each subject to its own limits:
- Statutory redundancy pay — based on age, length of service and weekly pay, up to the statutory cap
- Unpaid wages — up to eight weeks' arrears if the company stopped paying you before it closed
- Unpaid holiday pay — accrued but untaken holiday, up to a set number of weeks
- Notice pay — a payment in lieu of statutory notice you should have received
Each of these is capped and calculated using a statutory weekly pay figure, which is reviewed periodically. Our companion guide sets out what employees are owed when a company closes, which applies equally to director-employees who meet the eligibility tests.
How much a director can typically claim
The redundancy pay calculation uses three figures: your age, your complete years of service (capped at 20 years), and your weekly pay, subject to the statutory maximum. Older directors with longer service and higher qualifying pay receive more, up to the overall cap.
Because the sums vary so much by individual circumstances, we've set out a fuller worked explanation in how much redundancy can a director claim, including how the weekly pay cap interacts with unpaid wages, holiday and notice pay claimed at the same time.
How to make the claim and the evidence you'll need
Once a liquidator has been appointed, they will normally give you a reference number and RP1 claim form details for the RPS. In practice, you'll need to gather:
- Payslips or PAYE records showing a regular salary
- A written contract of employment, offer letter, or board minutes confirming your employment terms
- Evidence of your working hours and duties
- Details of your shareholding, since minority shareholders are more easily accepted as employees
- Your P45 or P60 and National Insurance number
Claims are usually submitted online once the liquidator has confirmed insolvency. The liquidator's office can normally point you to the correct process for your case.
Common reasons director claims get rejected
The RPS refuses a meaningful proportion of director claims. The most frequent reasons include:
- No PAYE record, or salary paid irregularly and informally
- No evidence of a genuine contract of employment
- Sole or majority control with no real oversight from a separate board
- Duties indistinguishable from those of an ordinary company owner rather than an employee
- The company entering an insolvency process that doesn't qualify, or closing without formal liquidation
A rejected claim can sometimes be appealed with stronger documentary evidence, which is one reason it helps to speak to a regulated specialist early, rather than after a first refusal.
Frequently asked questions
Do I need a written contract of employment to claim?
A written contract strengthens a claim considerably, but its absence isn't automatically fatal. The RPS will look at the wider picture — payslips, PAYE records, board minutes and working patterns — to decide whether an employment relationship existed in practice.
Does taking dividends instead of salary affect my claim?
Yes, it can. Redundancy pay is calculated using PAYE salary, not dividends. A director who took most of their income as dividends, with little or no salary, will usually have a much smaller — or no — claim, since dividends are not treated as employment income for this purpose.
Can a sole director and shareholder claim redundancy?
It's harder, but not automatically impossible. The RPS looks for evidence of genuine control by someone other than you, such as a separate board or majority shareholders. A sole director with total control over the company is unlikely to be accepted as an employee.
What if the company closes without going into liquidation?
Redundancy claims through the RPS generally require a formal insolvency process, usually liquidation, with a licensed insolvency practitioner appointed. If a company simply stops trading without this, directors and employees may not be able to claim in the same way.
How long does an RPS claim take to pay out?
Timescales vary depending on the complexity of the case and how quickly evidence is provided, but claims are generally processed once the liquidator has submitted the necessary information to the RPS. Delays are more common where employment status is disputed.
This article is general information, not legal, financial or insolvency advice, and every company's circumstances are different.
If you're unsure whether you qualify as an employee of your own company, Harbourfirst can introduce you to a regulated insolvency specialist who can look at your circumstances properly — start an enquiry.