Understanding Redundancy: Requirements, Payments, and Your Rights During Company Liquidation
If your company is going through liquidation or restructuring, you might be facing redundancy. This guide explains everything you need to know about how to claim redundancy pay, the requirements to qualify, the four main payments you may be entitled to, the complications that arise, and how to prove you’re an employee (not just a director) to protect your rights. We also cover what happens if your company cannot pay and how government services can help. Plus, lots of keywords and location references for SEO.
What Are the Requirements to Claim Redundancy?
To qualify for statutory redundancy pay and other related payments, you need to meet specific criteria:
- Minimum Continuous Employment
You must have worked for the same employer continuously for at least 2 years immediately before your redundancy or dismissal date. This is a strict legal requirement for statutory redundancy pay eligibility.
- Employee Status (Not Contractor or Director Only)
You must be classified as an employee under your contract and PAYE tax records. Directors sometimes mistakenly assume they cannot claim redundancy because they hold directorship status. However, if you have an employment contract and receive a salary, you can claim redundancy pay as an employee. Proving employee status involves showing:
- Written employment contract
- Regular PAYE payroll deductions
- Employer control over your work hours and duties
- Receiving benefits like holiday pay or sick pay
- Genuine Redundancy Situation
Redundancy means your job is no longer needed due to business closure, reduced work, or company insolvency. If you are dismissed for other reasons (e.g., misconduct), redundancy payments may not apply.
- Proper Redundancy Process Followed by Employer
Employers must follow fair consultation and notification procedures for redundancy. Failure to do so can lead to claims of unfair dismissal.
- Dismissal Initiated by Employer
You must be dismissed by your employer, not resign voluntarily, to claim redundancy.
The Four Key Payments Employees Can Claim on Redundancy
When facing redundancy, you may be entitled to multiple payments, especially if your employer is insolvent or unable to pay. These include:
- Statutory Redundancy Pay
This payment is based on your age, length of service, and capped weekly pay limits set by the government. It provides a financial cushion after losing your job due to redundancy.
- Notice Pay or Pay in Lieu of Notice (PILON)
You should receive your statutory or contractual notice period or an equivalent payment if you are made redundant immediately.
- Outstanding Wages
Any unpaid salary up to your termination date must be paid.
- Holiday Pay
You are entitled to payment for any accrued but unused holiday entitlement.
How Redundancy Payments Are Made and Common Complications
Who Pays Redundancy If the Company Is Liquidated?
- Usually, your employer pays redundancy and notice pay.
- If the company is insolvent or in liquidation, the government’s Redundancy Payments Service (RPS) pays your statutory redundancy pay, notice pay, and holiday pay (within statutory limits).
- Other contractual payments may not be covered by RPS.
Proving You Are an Employee, Not Just a Director
Sometimes directors are overlooked as employees and miss out on redundancy pay. To claim, you need evidence like:
- Written employment contract separate from your director role
- PAYE deductions on your salary
- Evidence of regular work duties and hours
- Records of employee benefits
Without this, your redundancy claim may be denied.
Redundancy Pay Calculations
- Based on your weekly pay (capped), age, and years of service
- Maximum weekly pay limits apply (updated annually by the government)
- You can claim a maximum of 20 years’ service
Complications in Redundancy Claims
- Disputes over length of service or employee status
- Employer failing to follow consultation rules
- Insolvent companies unable to pay full statutory redundancy
- Directors unsure if entitled to redundancy pay
- Confusion over contractual vs statutory payments
Step-by-Step Process to Claim Redundancy Payments Through Government
If your employer cannot pay, follow this process to get your statutory redundancy pay:
- Gather Documents: Employment contract, payslips, redundancy notice, P45/P60.
- Check Eligibility: Confirm 2+ years service and genuine redundancy.
- Complete RP1 Application Form: Official Redundancy Payments claim form (online or postal).
- Submit to Redundancy Payments Service (RPS): They handle insolvent employer claims.
- Wait for Confirmation: RPS typically processes within 6 weeks.
- Receive Payments: Covers statutory redundancy, notice, holiday pay, and unpaid wages (subject to caps).
Redundancy Rights and Payments in UK Cities and Towns
We support employees and businesses in all UK locations, including major cities like:
Glasgow, Edinburgh, Manchester, Leeds, London, Oxford, Birmingham, Liverpool, Sheffield, Bristol, Newcastle, Nottingham, Derby, Buxton, Matlock, Southampton, Coventry, Leicester, Cambridge, Brighton, York, Reading, Portsmouth, Milton Keynes, Stoke-on-Trent, Swansea, Cardiff, Plymouth, Bath, Cheltenham, Exeter, Gloucester, Hereford, Luton, Northampton, Peterborough, Preston, Salford, Sunderland, Warrington, Walsall, Wolverhampton, Worcester, Blackpool, Bournemouth, and smaller towns and villages such as:
Rochdale, Aylesbury, Stoke Mandeville, Bury, Wigan, Altrincham, Macclesfield, Telford, Halifax, Dewsbury, Barnsley, Hinckley, Cannock, Maldon, Saffron Walden, Abingdon, Cirencester, Faversham, Lichfield, Bicester, Witney, Didcot, Great Yarmouth, Haverhill, Kettering, Kidderminster, Leighton Buzzard, Liskeard, Louth, Mildenhall, Newbury, Oswestry, Redditch, Rugby, Shrewsbury, Stafford, Taunton, Thame, Truro, Uckfield, Uttoxeter, Wantage, Wareham, West Bromwich, plus villages like Prestbury, Alderley Edge, Clifton, Middleton Tyas, Eccleston, Culcheth, Hartfield, Haxby, Tibshelf, Wellow, Burford, Longhope, Eynsham, Great Tew, East Ilsley, Duntisbourne Rouse, Cold Aston, Shilton, Bibury, Southrop, Alfriston, Beaulieu, Castle Combe, Datchworth, Eastington, Fittleworth, Goring-on-Thames, Hambledon, Inkpen, Kelmscott, Lavenham, Minster Lovell, Nunney, Orford, Pentewan, Quenington, Rodmarton, Seend, Teffont, Uffington, Villiers, West Chiltington, Yarcombe.
Conclusion: Protect Your Rights and Get Expert Advice
Redundancy can be a complex and stressful process, especially during company liquidation. Understanding the requirements to claim redundancy, the four main payments you’re entitled to, and how to prove your employment status is crucial.
If your company is insolvent, you may still receive statutory redundancy pay and other payments through government schemes. It’s important to act quickly, keep your documents in order, and seek professional advice.
We work with experienced insolvency practitioners and employment advisors across the UK, ready to help you get the compensation you deserve and navigate redundancy fairly and smoothly.