How much redundancy can a director claim depends on your age, your length of service and your weekly pay, up to a statutory cap set by the government each year. Most eligible directors can claim four separate amounts: statutory redundancy pay, notice pay, unpaid wages and holiday pay. Together these are worked out using fixed formulas, not a personal negotiation.
This article sets out exactly how each figure is calculated, what the current caps are, and what might reduce your final total. It follows on from the eligibility question — if you're not yet sure whether you qualify, Can Directors Claim Redundancy Pay? covers that first step.
How much redundancy can a director claim? The four elements
When a company goes into liquidation, an eligible director employee can usually claim up to four separate amounts from the Insolvency Service's Redundancy Payments Service:
- Statutory redundancy pay — based on age, service and weekly pay.
- Notice pay — for the statutory notice period you weren't given or worked.
- Unpaid wages — for work already done but not paid, up to a set limit.
- Holiday pay — for accrued but untaken annual leave.
Each element has its own formula and, in most cases, its own cap. Understanding how each one is built up is the best way to get a realistic sense of your total director redundancy calculation before you make a claim.
How statutory redundancy pay is calculated
Statutory redundancy pay is worked out using three things: your age for each full year of service, your length of service (capped at 20 years), and your weekly pay (capped at the statutory limit). For each full year worked, you get:
- 0.5 week's pay for each full year you were under 22.
- 1 week's pay for each full year you were 22 to 40.
- 1.5 weeks' pay for each full year you were 41 or older.
Only your most recent 20 years of service count, even if you worked longer. Length of service is measured continuously up to the date the company stopped trading or entered insolvency, and you need at least two full years' service to qualify at all.
The weekly pay cap and maximum entitlement
Your weekly pay for this calculation isn't unlimited — it's capped at a statutory maximum figure that is reviewed and usually increases each April. If your actual weekly pay is higher than the cap, the cap is what's used, not your real salary.
Because both the weekly pay and the number of qualifying years are capped, there's an overall maximum statutory redundancy payment that applies to everyone, regardless of how senior or highly paid they were. This statutory redundancy pay cap changes annually, so it's worth checking the current figure using the government's own calculator rather than relying on a number you saw last year.
You can work out your own estimate using the official redundancy pay calculator on GOV.UK, which applies the current weekly cap automatically.
Notice pay and how it's worked out
Separately from redundancy pay, you may also be able to claim for statutory notice — the minimum notice period the law says you should have been given before your employment ended. Under statutory minimum notice rules, this is usually:
- One week's notice if you'd worked between one month and two years.
- One additional week for each full year of service after that, up to a maximum of 12 weeks.
Director notice pay in a liquidation is claimed in the same way as redundancy pay, through the Redundancy Payments Service, and is also subject to the same weekly pay cap. If your contract entitled you to longer notice than the statutory minimum, only the statutory element is guaranteed through this route — anything beyond that ranks as an unsecured claim in the liquidation instead.
Unpaid wages and holiday pay
On top of redundancy and notice pay, you can usually also claim:
- Unpaid wages — up to eight weeks' pay for work already done, again subject to the weekly pay cap.
- Holiday pay — for statutory annual leave you'd built up but hadn't taken, typically covering up to six weeks, also capped at the same weekly figure.
These amounts are added to your redundancy and notice figures to give your overall claim. Each has its own cap and its own eligibility rules, so it's worth listing service dates, pay slips and any unpaid invoices or holiday records before you claim, so the liquidator or the Redundancy Payments Service has what they need.
What can reduce your final payout
A few things commonly bring the redundancy payment amount a director actually receives below the theoretical maximum:
- Weekly pay below the cap. If your real weekly pay was lower than the statutory cap, your calculation uses your real figure, not the maximum.
- Service under two years. Statutory redundancy pay isn't payable at all below this threshold.
- Being paid through dividends, not salary. Only PAYE salary counts towards weekly pay for these calculations — dividend income doesn't.
- Missing or incomplete records. Claims are assessed against payroll and company records, so gaps can delay or reduce what's accepted.
- Tax. Redundancy pay is generally tax-free up to a set threshold, but notice pay, unpaid wages and holiday pay are usually taxed as normal income.
Your appointed insolvency practitioner or the Redundancy Payments Service will confirm your specific figures once your claim is assessed against the company's records under the Employment Rights Act 1996, Part XI, which sets out the statutory redundancy scheme.
Frequently asked questions
Is director redundancy pay taxed?
Statutory redundancy pay is usually tax-free up to a set threshold. Notice pay, unpaid wages and holiday pay are generally treated as normal taxable income, with tax and National Insurance deducted in the usual way.
What's the current statutory redundancy pay cap?
The weekly pay cap used in the statutory redundancy formula is reviewed and typically changes every April. Check the current figure on the official GOV.UK redundancy pay calculator rather than relying on a previous year's figure.
How long until I'm paid?
Timescales vary by case, but claims are usually processed within a number of weeks once the Redundancy Payments Service has the information it needs from the liquidator. Complete, well-organised records generally help things move faster.
Do I claim from the company or from the government?
Once a company is insolvent, eligible claims are usually paid from the National Insurance Fund rather than the company itself, because the company won't have the funds to pay. You can find out more about this route on the GOV.UK guidance for employees of an insolvent employer.
Does my full salary count, or just my PAYE pay?
Only pay you received through PAYE as an employee counts towards the weekly pay figure. Dividends and other non-PAYE income aren't included, which is why directors paid mainly through dividends often see a smaller calculated amount than their overall income might suggest.
This article is general information, not legal, financial or insolvency advice, and every company's circumstances are different. For guidance on your own situation, it's worth speaking to a regulated specialist who can look at your specific records and service history.
If you'd like help understanding what you might be owed, Harbourfirst can introduce you to a regulated insolvency practitioner or solicitor to talk it through — start an enquiry.