If you usually close down over Christmas or you’re thinking about it for the first time, doing it properly is important. For most of us Xmas is a hectic time. Work and personal commitments escalate in the mad-rush to Christmas Day. While some industries (such as retail and hospitality) enter their busiest time of year, many industries prepare to wind down for a summer break and (usually) the “regular annual close-down.” Before you shut up shop, there can be a lot to get done: last orders, final repairs, gifts for clients, December billing, Christmas functions, and a busy personal life. Like everything in New Zealand employment law, any close-down requires that your business follows a process and if you don’t get it right, it can cause unnecessary hassle. With a little bit of planning the regular annual close-down can be seamless and not get in the way of everything else that’s happening.
Close-down periods and New Zealand law
NZ employment law allows employers to implement one annual close-down each year in which they close all, or part of, the operation and require employees to take annual leave (even if they don’t have enough leave to cover the break). This usually happens over Christmas and New Year’s, but it doesn’t have to. A close-down might occur during the year if there is a need, such as servicing a manufacturing plant. Employers don’t have to close the entire workplace. For example, engineers, maintenance or manufacturing staff might continue working while the office closes down. Or the office may stay open for customer service queries but wider operations shut down. Employment agreements don’t have to contain a close-down clause, but we recommend you have this clause as it makes the requirement very clear.
Employers must provide at least 14 days’ notice of the close-down. While there is no legal requirement to notify in writing, we recommend writing a simple letter informing staff of the close-down dates. This helps avoid any confusion. We also recommend doing this as early as possible. Leaving it to two or so weeks before Xmas doesn’t give a lot of time for people to plan or for you to deal with any questions or issues that may arise. If you know you’re closing down, deal with it early. And don’t forget a bit of festive cheer. Your letters and communications don’t have to be too dry and legalistic – wish everybody a Merry Christmas and a good holiday.
Use of annual leave
During the close-down, the employer can direct employees to take annual leave (as long as you give them at least 14 days’ notice). This is straightforward when the employee has enough annual leave to cover the whole break. If an employee doesn’t have enough leave to cover the shut-down, time off is unpaid or you can agree to let them take annual leave in advance. This ensures the employee is not out of pocket, but it does come at a cost to the business, and if the employee leaves before accruing the leave back, you may never recover that cost. Employees who aren’t yet entitled to annual holidays, e.g. they have been working for you for less than 12 months, must be paid 8% of their earnings up to the close-down. You also need to move their leave entitlement date to the day the annual close-down starts to ensure they don’t miss out on any annual leave benefits. Alternatively, you can nominate a date close to the close-down start date, as long as it doesn’t disadvantage the employee. As with any annual leave payment, employees can request to have the leave paid out in full, in advance of the close-down. But it is much more common for leave to be paid in the normal pay-cycle. Ideally, you will have a clause in your employment agreements covering this.
Public holidays are paid if the day would be an “otherwise working day”, i.e. a day that the person would’ve normally worked if it wasn’t a public holiday. This applies to the close-down period as if the close-down was not in effect, meaning employers can’t claim that it is not a working day because the business is closed. Learn more about paying public holidays correctly.
5 simple steps for closing down
- Decide if there will be a close-down.
- Set the dates.
- Notify your people with a simple letter as early as you can, at least 14 days out.
- Be prepared to speak to anybody who raises an issue so problems are dealt with effectively and the right outcome is achieved for the business and staff.
- Then enjoy the break! Breathe a sigh of relief, toast the season, and fire-up the BBQ…