Claimant v Secretary of State for Business and Trade
Outcome
Individual claims
The tribunal found the claimant was an employee within s.230 ERA 1996 and entitled to statutory redundancy payment. The company entered compulsory liquidation on 16 November 2023 having ceased trading on 31 October 2023 when it was insolvent. The claimant had 14 complete years of continuous service.
The tribunal found the claimant entitled to 12 weeks' notice pay based on his contractual notice entitlement. Claim was added by amendment at the hearing with no objection from the first respondent. Calculated based on net weekly basic pay of £241.73.
The tribunal accepted the claimant had taken 8 days of his annual entitlement of 30 days in 2023, leaving a balance of 16 days accrued but untaken paid annual leave as at the effective date of termination. He was entitled to compensation for this at his weekly basic pay rate.
The tribunal found the claimant received no pay from the company for October 2023, his last payment having been received on 2 October 2023 for the previous month. He was entitled to arrears of pay for days worked in October 2023 at his monthly basic rate of £1,047.50.
Facts
The claimant was Managing Director and majority shareholder of Airco Developments Ltd, a sheet metal business, from January 2009. The company entered compulsory liquidation on 16 November 2023 having ceased trading on 31 October 2023. The claimant worked full-time (Monday-Friday, 8am-5.30pm), headed the sales division, attended regular management meetings, took annual leave, was paid partly through PAYE (£1,047.50 monthly) and partly by dividends (£4,000 monthly). He had a written contract, received P45/P60, contributed to pension scheme, and received sick pay and holiday pay like other employees. He was not paid for October 2023 and had 16 days accrued untaken holiday.
Decision
The tribunal found the claimant was an employee within s.230 ERA 1996 despite being director and majority shareholder. Mutuality of obligation, control and personal service requirements were met. However, dividend payments were excluded from week's pay calculation as they related to shareholding not employment. The Secretary of State was ordered to pay redundancy (£5,076.33 gross), 12 weeks' notice pay (£2,900.76 net), holiday pay for 16 days (£773.60 net), and October 2023 arrears (£1,047.50 net), all calculated on basic PAYE salary only.
Practical note
Director-shareholders can be employees, but dividend payments taken as part of optimum director's salary tax planning are excluded from statutory week's pay calculations as they arise from shareholding not employment, even where combined payments reflect market rate for role.
Award breakdown
Award equivalent: 40.5 weeks' gross pay
Legal authorities cited
Statutes
Case details
- Case number
- 4102773/2024
- Decision date
- 31 July 2024
- Hearing type
- full merits
- Hearing days
- 1
- Classification
- contested
Respondent
- Sector
- central government
- Represented
- Yes
- Rep type
- solicitor
Employment details
- Role
- Managing Director
- Salary band
- Under £15,000
- Service
- 15 years
Claimant representation
- Represented
- Yes
- Rep type
- solicitor