Tax & Accounting News

Directors Can Claim Government Redundancy Cash

26/05/2009

Harris Lipman is advising directors and shareholders of companies that they could qualify for redundancy payments including arrears of pay from the government in the event of their business becoming insolvent.

Anyone who has worked for a company for at least two years is normally entitled to redundancy pay, based on their salary, age and length of employment. If an employer is declared insolvent and cannot afford redundancy pay, employees can apply for a direct payment from the National Insurance Fund.

The Court of Appeal has recently confirmed the right of directors who are employees to claim such payments. A director will normally be considered an employee if they are working under a contract of employment for the company.

However, an lesser-known effect of a director being an employee is that they may then fall within the Transfer of Undertakings (Protection of Employment) Regulations (TUPE), which would mean that in the event of the business being sold, or even a change of supplier on a contract previously performed by the company, the director would automatically become the employee of someone else.

For more information on the practicalities and implications of directors of companies becoming employees, please contact us.