One of Labour’s election promises was to introduce a new public holiday, from 2022, to recognise Matariki.
This year the 4 public holidays over the Christmas/New Year’s period fall on Fridays and Saturdays.
Each year businesses may like to close over some or all of this period and that might mean that some or all employees could be required to take leave during this time.
Two types of Closedown – Customary and Non-Customary
A customary closedown may occur at any time during the year (such as over the Christmas and New Year’s period) but is regular. It might apply to the whole business, or just a team or specific roles. During a customary closedown, an employer can require their employees to take the time off as annual leave (both accrued leave and entitlement), and if they have no leave owing the period is on unpaid leave as detailed in the Holidays Act 2003.
A non-customary closedown, or shutdown, can also occur at any time during the year and may impact the whole business, just a team or specific roles. However, as this type of closedown is not regular, or ‘customary’, it is not known as a closedown period when considering the Holidays Act 2003, and the employer cannot require employees to take accrued leave or leave without pay during that time. With 14 days’ notice (and after consultation) the employer can require an employee to take leave entitlement.
An employer may also have different closedown periods for separate parts of the business.
For the purpose of this article, we will now focus on customary closedowns for the upcoming Christmas and New Year’s period. Prior to applying any process for a closedown, check what is in your employment agreements and/or policy documents, and ensure those requirements are complied with. Our advice below is based on the legislative minimum requirements but employment agreements may provide for more generous terms and conditions.
Employees Entitled to Annual Leave
Employees with entitlement to annual leave may be directed to take the time off as annual leave if their employer gives them at least 14 days’ notice of this requirement.
Where an employee doesn’t have enough annual holidays entitlement to cover the whole closedown period, the employer may agree to let them take some annual holidays in advance, some leave without pay, and/or use another form of leave that may be available e.g. alternative holidays.
Employees Not Yet Entitled to Annual Leave
An employee who is not yet entitled to annual holidays at the commencement of a closedown period must, if required to do so by his or her employer, discontinue his or her work during the closedown period. In this situation, the employee’s 12 months of continuous employment must then be treated as commencing on the date on which the closedown began. Employees who have not yet been working for 12 months (and therefore do not have any annual leave entitlement) must be paid 8% of their gross earnings since they started working for the employer (minus any annual leave taken in advance or holiday pay paid with their ordinary pay). Such an employee is not otherwise entitled to annual leave for the period up to the date of closedown or to any other payment or remuneration for the period of the closedown.
Effect of Closedown on Anniversary Date
The payment of 8% at the commencement of a closedown effectively cancels previous service for the purpose of calculating entitlements to annual leave. The next year of the employee’s employment is deemed to commence on the date on which the premises are closed or the work is discontinued (see section 35(1) of the Holidays Act 2003).
For all employees whose work is subject to a regular annual closedown, the employer may nominate a date, which will be treated as the date on which the closedown begins, and on which the employees become entitled to annual leave. This avoids having a different date each year on which the employee becomes entitled to annual leave (where the start date for the closedown varies from year to year).
The date nominated must be reasonably proximate to the actual beginning of the closedown period. For example, where there is a Christmas/New Year closedown, the date could be 20 December to ensure that it is always before the annual closedown.
Public Holidays and Other Types of Leave
If a public holiday falls during a closedown, the employer will need to decide if the day would have otherwise been a working day for the employee. If so, then the employee is entitled to take the day as a public holiday. The same applies if the employee wants to take sick leave, bereavement leave or an alternative holiday during this period.
Duration of closedowns
The Holidays Act 2003 does not specify a maximum or minimum period of closedown but does provide that the employer customarily closes their operations or discontinues the work of one or more employees.
If you have any questions about your obligations as an employer, do not hesitate to contact us to discuss this with one of our Consultants.