Are you closing down your office between Christmas and New Year? Perhaps the first week in January when it’s quiet in your business? Perhaps the pre-Christmas rush means your team needs a few extra days off in January?
As much as you might want to just put an ‘out of office’ on and make everyone take leave, if you intend to close your business between Christmas and New Year (or indeed at any other time of the year), there are a few things to consider to comply with the rules around annual closedowns (https://www.employment.govt.nz/leave-and-holidays/annual-holidays/annual-closedowns-and-holidays)
An annual closedown is the regular closure of a business for a holiday period or seasonal break, requiring its employees to take annual holidays or unpaid time off. Annual closedowns often happen over Christmas, but some industries have closedowns at the end of a particular season.
A closedown can occur:
- across an entire workplace
- for part of an organisation – for example, where a factory closes for maintenance while the office stays open
- for different parts of a workplace at different times.
An employer must give their employees 14 days’ notice before an annual closedown.
If an employee is entitled to annual holidays
If an employee has annual holidays they can use at closedown time, they must do so (as long as they get 14 days’ notice). Payment for these annual holidays is calculated as usual.
More details about annual holiday pay can be found here.
If they do not have enough leave to cover the whole closedown period, then:
- You can choose to also let them take annual holidays in advance or
- They may have to take leave without pay (or another form of leave that they agree with their employer).
If an employee is not yet entitled to annual holidays
An employee may not yet be entitled to annual holidays at the start of the closedown if they’ve:
- Not worked for you for 12 months continuously, or
- taken unpaid leave of more than a week, and this has moved forward their anniversary date for annual holiday entitlement or
- at some time, received pay for their annual holidays on a pay-as-you-go basis.
More details about Pay as you go holiday payments
If this is the case, their employer must:
- Pay them 8% of their gross earnings as of the closedown date
Before a closedown starts (or, in their normal pay cycle, if this has been agreed in their employment agreement), they must be paid an additional 8% of their gross earnings up to the closedown date from:- The start of their employment, if they’ve not worked for their employer continuously for 12 months or
- their last anniversary date for annual holidays, if they’ve already worked for their employer for at least 12 months – minus any amount already paid as 8% pay-as-you-go or already taken as annual holidays in advance.
Employees could also agree with their employer to take annual holidays in advance.
- Move the anniversary date for the annual holiday entitlement.
The anniversary date for their annual holiday entitlement will be moved to the date the closedown starts (or another nearby date that their employer chooses) – meaning they’ll receive their next leave entitlement 12 months from this date.
During a closedown, the employer and employee may agree to use other types of holidays or leave, such as alternative holidays or any other form of leave (with or without pay) not provided by law. If you have questions about the appropriate pay arrangements for your staff during a Christmas shutdown, please contact us at DFK OGC.