Annual shut down rules for payroll.

Christmas is less than 7 weeks away!

It is important to prepare and understand the rules for an annual shutdown period, and the rules for when you require a skeleton staff to operate during the shutdown period.

What is a shutdown?

A shutdown is when a business temporarily closes during slow periods of the year, such as Christmas and New Year. It is also called a ‘close down’.

How employees are paid over this period depends on the award or agreement they are covered by and whether they are working or on leave.

Around this time each year, we get lots of questions about the Christmas and New Year period, including questions about:

  • employee entitlements when working through the holiday period
  • businesses shutting down between Christmas and New Year.

An employee can only be directed to take annual leave during an annual shutdown if their award or enterprise agreement allows it. 

If an employee isn’t covered by an award or an enterprise agreement, their employer can direct them to take annual leave if the direction is reasonable.

Most awards will contain conditions on notice requirements for employers to follow for a closedown period.

For example, the BANKING, FINANCE AND INSURANCE AWARD 2020 [MA000019] requires the employer to provide employees with at least 4 weeks’ notice:

22.5 Close-down An employer may require an employee to take annual leave as part of a close-down of its operations by giving at least 4 weeks’ notice.

This is not always the case!  An award may require a greater period of notice. 

What if employees don’t have enough annual leave?

Most awards allow an employee without enough annual leave to make an agreement with their employer to take leave before it’s accrued. 

If an employer agrees, employees can also take unpaid leave. 

Check your award or agreement. Certain awards or agreements may have different rules!

Note: If an employee without an annual leave balance does not want to take annual leave in advance or unpaid leave, the employer must either allow the employee to work through the close-down period or pay them at their ordinary pay rate for the shutdown. They can’t be forced to take unpaid leave.

What happens if a public holiday falls during an employee’s annual leave?

If a public holiday falls during an employee’s annual leave, they need to be paid for the public holiday, not as annual leave. This means that an employee should be paid their base pay rate for the day, and it should not be taken off their annual leave balance.

What about skeleton staff during annual shutdown?

If there are employees who continue to work during the annual shutdown, they should be paid as normal. If any of the days are public holidays, these days are treated as public holidays.   This means the employee should be given the day off without loss of pay, or they should be paid public holiday rates as per their award or agreement.

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