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Owners of Companies and Redundancy Payments

Owners of Companies and Redundancy Payments

The Employment Appeal Tribunal (EAT) was recently asked to look at the question of whether the owner of a company can be regarded as an employee for the purposes of a claim for a redundancy payment.

The case, Secretary of State for BIS v Knight, concerned a sole shareholder and managing director of a company who had served her company from 1991 until it closed its doors in 2011. During the final 2 years of trading, the Managing Director had forfeited her salary in order to ensure that other employees were paid. When the company finally became insolvent, the Managing Director applied for a redundancy payment from the Redundancy Payments Office. This application was challenged by the Secretary of State for Business Innovation and Skills.

The Employment Tribunal found that the individual was an employee of her company however the Secretary of State for BIS appealed this decision to the EAT. The EAT determined that whether or not an individual is an employee of a company is a question of fact however in these particular circumstances, the Employment Tribunal was correct to find that the Managing Director was an employee of the company. 

If you would like any further information about redundancy payments or indeed your status as an owner or director of your business, please do not hesitate to drop us an email or call us on 0114 255 0825.