Guidance has recently been updated by the Redundancy Payments Service to provide greater clarity to Insolvency Practitioners on their determination of employee status when assessing claims made by company directors.
Only employees who are made redundant are entitled to payments from the National Insurance Fund.
A director who is also an office holder can be eligible for payments and when applying to the Insolvency Service for monies owed, they will need to provide evidence to support their claim that they too were an employee.
What does the Redundancy Payments Service require
On submission of the director’s claim, the Redundancy Payments Service will contact them to request further information which may include:
- Details of the structure of the company in terms of directorships and shareholders;
- P60’s for the last 3 years;
- Wage slips for the last 3 months;
- Employer’s bank statements for last 12 months to review regularity of payments made;
- A comparison of the contracted hours being claimed in relation to the work being undertaken;
- A copy of the contract of employment;
- Dividend payments received in the last 3 years;
- Directors loans;
- Holiday pay arrangements;
- Pension arrangements regarding any workplace pension scheme;
- Sick leave procedures;
- Grievance and disciplinary procedures.
The Redundancy Payments Service will not make any payments to directors if there are outstanding directors loan. Therefore in order to be considered for redundancy our recommendation is to ensure these are settled prior to liquidation.
From the information provided by the directors, the Redundancy Payments Service will determine the probability of the director being an employee.
If the Redundancy Payments Service cannot confirm the director was also an employee of the company, they will reject their claim and make no payments. If the director disagrees with their decision, they can make a claim to an employment tribunal.
If you are concerned about your company or claiming redundancy as a director, please speak with any of the experienced management team at BRI Business Recovery and Insolvency and talk to us in confidence, without obligation and free of charge.