Closing Down at Christmas?
As Auckland prepares to come out of lockdown and we are starting to hear Christmas carols in the supermarket, it is time to think about annual closedowns and holiday leave.
A closedown is a period where businesses close for a set period, during which time staff are required to take leave. This may consume only part of their annual leave entitlement, all of it, or more than their accrued annual leave.
Employers are entitled to implement one such closure a year, and it may include the entire business or just part of it. Most often the closedown period includes the Christmas and New Year period.
Why Take Leave
2021 has been another challenging year. Some businesses have had a forced long break, and others may have worked harder than ever. Lockdown has been tough, and many employers and employees are tired and in need of a summer break.
Taking leave helps the balance sheet as it reduces outstanding annual leave liabilities. Whilst it may be tempting to allow employees to cash out leave, remember this is only allowed in some very specific situations because the law wants people to take a break. Rested people are safer, happier and more productive.
Can I make employees take leave? What about declining leave requests?
At FixHR we sometimes meet business owners who keep their businesses open over the holiday period solely because employees refuse to take leave. We understand that some employees won’t be happy at being forced to take annual leave, especially if they don’t have enough paid leave to cover the whole period. However, if it is provided for in their employment agreement, or is custom and practice, you have the legal right to require employees take leave. Please note you must give at least 14 days’ notice, and we strongly advise putting that notice in writing.
Conversely, if you don’t close down, or if you keep a skeleton workforce over the holidays, you are not required to grant time off to every employee who requests it. Refusing a leave application is not an easy conversation, but you are entitled to resource and operate your business as you see fit.
Paying employees during closedowns
During a closedown, if an employee is entitled to annual leave, they must stop work and take as much of their annual holidays balance as is needed to cover the period. If they don’t have a high enough annual holiday entitlement balance to cover the whole closedown period, unpaid leave holds the lowest risk for employers.
Employees who are not yet entitled to annual holidays at the time of closedown must be paid 8% of their gross earnings up to the closedown date (less any amount already paid or taken as annual holidays in advance).
You can discuss and negotiate whether you will allow any annual leave to be taken in advance. Good faith applies but there is no obligation on you to do this. If employees do not come back to work after the break, you are most unlikely to recover any overpayment.
If an employee wants to take sick leave, bereavement leave or an alternative holiday during a closedown period, they are entitled to do so if it is an ‘otherwise working day’ for them. Public holidays that fall during this time (eg Christmas day) are paid as statutory holidays rather than annual leave if it is an ‘otherwise working day’.
As the dates fall this year, entitled employees can get an 11-day break from December 25th to January 4th by taking just 3 days off. Whatever your holiday plans, feeling connected and doing some fun things that recharge the batteries is important at this time of year, especially after the year that it has been.