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My Employee Doesn’t Have Enough Leave Accrued for Christmas Closedown | What Do I Do?

Published November 18, 2021 - [email protected]

The Christmas Holiday season is upon us New Zealand! Whilst many people are planning family gatherings, manically gift buying, and looking up ways of defrosting a turkey that doesn’t resemble a friends episode… You as an employer may well be pulling your hair out trying to calculate employee annual leave.

In New Zealand an employee must work continuously for 12 months to be entitled to annual leave. This of course raises many headaches for employers, as staff don’t often all punctually start their roles on December the 1st every year. What are the implications? Let’s look at your commonly asked questions. 

Do I Have To Closedown During The Christmas Period?

In general businesses are allowed to have one customary close-down a year. Customary closedowns must be 12 months apart, however with an employee’s agreement a business can agree to additional times the operations are closed.

Can I Make Employees Take Paid Annual Leave During The Closedown?

Yes, provided that employees are given at least 14 days’ notice outlining the specific dates of the closedown. This applies even if the closedown happens every year at a similar time.

So What Happens If My Employee Doesn’t Have Enough Annual Leave To Cover The Closedown Period?

In this case an employee gets paid out as much as they have built up and, with the employer’s permission, that employee can take annual leave in advance.

Another option is for the employee to take leave without pay. But there are also rules for employees who aren’t entitled to annual holidays.

Can My Employee Not Be Entitled To Annual Holidays?

An employee may not be entitled to annual holidays for one or more of the following reasons:

  • They have not worked continuously for their employer for 12 months at the time of the closedown
  • They have worked for their employer for 12 months, but haven’t reached entitlement for annual holidays because they have taken unpaid leave of more than one week and this has moved out their anniversary date for annual holidays entitlement
  • They have had a period of receiving pay for annual holidays on a pay-as-you-go basis.

So What Happens To These Employees During A Closedown? Does This Mean I Can’t Closedown?

You may still close down your business. If the employee is paid leave on a pay-as-you-go-basis, the employer has already paid out the leave and as such, any closedown period will be unpaid. With regards to employees who are accruing leave but are not entitled to annual holidays, they must be paid 8% of their gross earnings, from:

  • The start of their employment (if they haven’t worked continuously for 12 months for your business)
  • Or their last anniversary date for annual holidays (if they have already worked for your business for at least 12 months). In this case you should deduct any leave already taken as annual holidays in advance

Employers may also choose to let the employee take annual leave in advance to top up their pay for the closedown period. Paying out annual leave to employees who are not entitled to annual holidays for the closedown does, however, affect the employee’s anniversary date.

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If you have any more questions, our team are here for you.

About Employsure

Employsure is one of New Zealand’s largest workplace relations advisers to small- and medium-businesses, with over 30,000 clients in ANZ. We take the complexity out of workplace legislation to help small business employers protect their business and their people.

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