Sole director and shareholder fails to prove employee status for National Insurance Fund claim
A design co-ordinator who was the sole director and shareholder of her own company could not claim redundancy or other payments from the National Insurance Fund because she was not an employee. The tribunal dismissed her claims.
1 min read · Last updated 18 May 2026
Case details
- #employee-status
- #sole-director
- #implied-contract
- #mutuality-of-obligation
- #control
- #national-insurance-fund
Key facts
- The claimant was the sole director and shareholder of Design and Manage Limited (D&M).
- There was no written contract of employment between the claimant and D&M.
- The claimant decided her own work, hours, and pay without any agreement with D&M.
- Payments to the claimant varied in amount and frequency, with discrepancies between payslips, bank statements, and P60s.
- The claimant could take unpaid leave whenever she wished and determined her own bonus and pension contributions.
Timeline
-
Incorporation of D&M
Design and Manage Limited was incorporated, with the claimant as sole director and shareholder.
-
Claimant started working
The claimant began working as a design co-ordinator through D&M, without a written employment contract.
-
Last salary payment
The claimant received her last salary payment of £1,500 from D&M.
-
Furlough payment
A furlough payment was made into the claimant's account.
-
D&M entered liquidation
Design and Manage Limited went into Creditors' Voluntary Liquidation.
-
Claim to National Insurance Fund
The claimant applied to the National Insurance Fund for redundancy payment, arrears of pay, notice pay, and holiday pay.
-
Tribunal hearing
The employment tribunal heard the case at East London Hearing Centre.
-
Judgment issued
The tribunal dismissed the claimant's claims, finding she was not an employee of D&M.
The legal issue
The tribunal had to decide whether the claimant was an employee of Design and Manage Limited, and if so, whether she was entitled to redundancy pay, arrears of pay, notice pay, and holiday pay from the National Insurance Fund after the company went into liquidation.
The outcome
The tribunal dismissed all of the claimant's claims.
- The claimant was not an employee of Design and Manage Limited because there was no contract of employment, no mutuality of obligation, and she had complete control over her work, hours, and pay.
- As she was not an employee, she was not entitled to any payments from the National Insurance Fund.
- No compensation was awarded.
Lessons & takeaways
- If you are the sole director and shareholder of your own company, you may not be considered an employee for employment law purposes, even if you do work for the company.
- To be an employee, there must be a contract of employment (written or oral) with mutuality of obligation and sufficient control by the employer over your work.
- Without employee status, you cannot claim statutory redundancy pay or other employment rights from the National Insurance Fund if your company becomes insolvent.
- Keep clear records of any agreements about pay, hours, and duties to help prove employee status if needed.
This case shows the importance of having a clear employment relationship, even when you are the only person running your own company. The claimant, a design co-ordinator, set up her own limited company and worked for large building contractors. When the company went into liquidation, she applied to the National Insurance Fund for redundancy pay, arrears of pay, notice pay, and holiday pay.
Why the claim failed
The tribunal found that the claimant was not an employee of her own company. There was no written or oral contract of employment. She decided her own work, hours, and pay. She could take unpaid leave whenever she wanted, and she determined her own bonuses and pension contributions. The company had no control over her work. This meant there was no 'mutuality of obligation' – a key requirement for an employment relationship.
What could have been done differently
If the claimant had wanted to be treated as an employee, she could have entered into a formal contract of employment with her company, setting out agreed terms about her duties, hours, and pay. She could have ensured that the company had some control over her work, rather than her having complete autonomy. Without such arrangements, the law sees her as a business owner, not an employee.
Why this matters
This decision highlights a common trap for sole directors and shareholders of small companies. While they may think of themselves as employees, the legal test for employee status is strict. Without a contract and with no control by the company, they are not entitled to employment rights such as redundancy pay or protection from unfair dismissal. Anyone in a similar position should seek legal advice about their status and consider putting a formal employment contract in place.
Similar cases
Dog walker with set hours found to be employee: unfair dismissal and age discrimination win
A dog walker who worked set hours for five years was found to be an employee, not a self-employed contractor, and awarded over £11,700 for unfair dismissal and age discrimination.
Site supervisor found to be employee despite signing self-employed contracts with agencies
A tribunal ruled that a site supervisor who signed self-employed contracts with two agencies was in fact an employee of the end-user, Flexwood Windows Ltd, and awarded over £28,800 for unfair dismissal.
Security guard with 28 months' service found to be employee, unfairly dismissed
A security guard who was removed from his assignment and not given any disciplinary process has been found to be an employee and unfairly dismissed. The tribunal also ordered the employer to pay outstanding holiday pay for the full 28 months of service.
Housekeeper in shared home not an employee: claim dismissed with costs order
A woman who lived in a man's home and performed housekeeping tasks was found not to be an employee or worker, leading to dismissal of her unfair dismissal claim and a costs order of £11,130.