Annual shut down rules for payroll

Christmas is less than 6 weeks away (sorry) and it is important to prepare and understand the rules for an annual shut down period or if your company requires skeleton staff over this period.

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 be directed to take annual leave during an annual shut down 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 close down period.

An example of an employer giving affected employees at least four weeks’ notice, is contained in the CLERKS—PRIVATE SECTOR AWARD 2020 [MA000002].

32.5 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.  For example, within the MEAT INDUSTRY AWARD 2020 [MA000059] an employer would have given no less than 3 month’s notice to employees that they will need to take annual leave.

25.8 Annual close-down (a) Where an employer closes down a plant or a section of a plant for the purpose of allowing annual leave to all or the bulk of the employees in the plant or sections concerned, the employer should, where possible, give affected employees not less than 3 months’ notice of the employer’s intention to stand down all employees in the plant or sections concerned.

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. Certain agreements may have different rules.

If an employer agrees, employees can also take unpaid leave. However, if an employee does not have enough annual leave you cannot force them to take unpaid leave.

JobKeeper payments on public holidays during a JobKeeper enabling stand down?

Employers who have employees on a JobKeeper enabling stand down during the Christmas and New Year Period, still need to include public holiday pay when calculating an employee’s usual pay. This is only if the employee:

* would normally have worked on the public holiday as if the JobKeeper enabling stand down direction hadn’t been given, or
* would have been entitled to time off without loss of pay.

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.

Skeleton staff during annual shut down:

If there are employees who continue to work during the annual shut down, 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. In conclusion, public holidays can be different depending on the state or territory employees work in. It’s important to know when public holidays are because employees can get different entitlements on these days. 

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