Author: David Jenkins, NZPPA CEO

If a business has an annual closedown, employees may have to take their annual holidays entitlement.

If an employer regularly closes down for a holiday period or seasonal break and requires employees to take annual holidays (or take unpaid time off) this is referred to as an ‘annual closedown’ and it can occur:

• across an entire workplace, or
• for part of an organisation (eg where a factory closes for maintenance while the office, dispatch and sales departments stay open).

This often happens at Christmas time, but some seasonal industries have closedowns at the end of a particular season. An employer can close down different parts of the workplace at different times.

The employer may have a customary closedown once a year and require employees to take annual holidays during the period of the closedown, as long as they give employees 14 days’ notice.

Employees who are entitled to annual holidays at the time of closedown
If an employee is entitled to annual holidays (even if they currently have a zero annual holidays balance), they must stop work (as long as they get 14 days’ notice) and take as much of their annual holidays balance as is needed to cover the closedown period. Payment for these annual holidays is calculated in the usual way that payment for annual holidays is calculated.

If the employee doesn’t have a high enough annual holidays entitlement balance to cover the whole closedown period, then:

• in addition to taking all of the annual holidays entitlement they currently do have, they can also take some annual holidays in advance (if the employer agrees), and/or
• they may have to take some leave without pay (or another form of leave as agreed with their employer).

Employees who are not entitled to annual holidays at the time of closedown
Some employees may not be entitled to annual holidays at the start of the closedown because:

• they haven’t worked continuously for their employer for 12 months yet, or
• 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, or
• they have had a period of receiving pay for annual holidays on a pay-as-you-go basis.

There are special provisions for these employees as follows:

• they must get paid 8% of their gross earnings as at the closedown date from:
  – the start of their employment if they haven’t worked continuously for 12 months for their employer, or
  – their last anniversary date for annual holidays if they have already worked for their employer for at least 12 months, less any amount already paid as 8% pay as you go or already taken as annual holidays in advance,
• in addition:
  – the employee may agree with their employer that they take some annual holidays in advance
  – the employee’s anniversary date for annual holiday entitlement purposes is moved to the date the closedown starts (or in some situations, an alternative date close by as nominated by the employer).