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Annual closedowns

If a business has a closedown period, employees may need to take annual holidays or not be paid.

If a business closes down for a holiday period or seasonal break employees can be required to take annual holidays (or take unpaid time off). This is referred to as a 'closedown' and it can occur:

  • across an entire workplace, or
  • for part of a business (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 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.  

If an employee doesn’t have enough annual holidays to cover the entire closedown, they must still stop work (as long as they get 14 days’ notice) and take all of their available annual holidays and then take annual holidays in advance (if the employer agrees). If the employee doesn’t have enough entitled annual holidays then the anniversary of their 12 months’ continuous employment with that employer is treated as the date the closedown starts (only for the purposes of annual holidays and paying out of annual holidays).

For employees whose work is subject to a regular annual closedown, the employer can nominate a date that will be treated as the date that the closedown begins, and on which the employees become entitled to annual holidays. This date must be reasonably connected to the timing of the regular annual closedown. For example, when there is a Christmas closedown, the date could be set at 15 December to make sure that it always comes before the annual closedown commences. This is the only way that an employer can choose a particular date for annual holidays to become entitled.

Payment of annual holidays during a closedown

Employees who are entitled annual holidays (ie they have been working for 12 months or more) are paid their annual holidays as usual.

Employees who aren’t entitled to any annual holidays at the time of the closedown (eg if they have been employed for less than 12 months):

  • must get paid 8% of their gross earnings as at the closedown date (less any amount paid as 8% already or already taken as annual holidays in advance). In this situation they don’t get any annual holidays for the period up to the closedown or any further pay while the closedown is on, and
  • in addition, the employee can agree with their employer for them to take annual holidays in advance and be paid, even though the employee is not yet entitled to annual holidays.

An employer may choose not to make staff take annual holidays, (eg they could receive their full pay but not have to attend work).

The employer and employee/s can agree to other closedowns on terms that they both agree to but an employer can’t make them to take annual holidays as above.  An employee’s date of entitlement to annual holidays isn’t affected by a second closedown.

Public holidays, sick leave and bereavement leave during a closedown period is the same as during annual holidays.

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