Managing Leave During Christmas Shutdowns

Managing leave during Christmas shutdowns

As the festive season approaches, many Australian businesses begin preparing for their annual shutdowns over the Christmas and New Year period. This traditionally aligns with a seasonal dip in customer demand and a natural desire among employees to spend time with loved ones.

While closing the doors for a few weeks may seem straightforward, there are some key legal requirements employers need to be aware of when it comes to managing employees’ leave during the Christmas period.

What is an annual shutdown?

An annual shutdown is a temporary closure of all or part of a business during which employees may be directed to take annual leave.

When deciding whether to shut their business down during the Christmas period, employers need to consider the following, which regulate how and when employees can be directed to take annual leave:

• the National Employment Standards (NES) in the Fair Work Act 2009,
• modern awards, and
• enterprise agreements.

The NES applies to employees not covered by an award or enterprise agreement

Employees who are not covered by a modern award or enterprise agreement are covered by the NES rules on directing annual leave.

Under the NES, employers can direct employees to take annual leave during a shutdown, but only if the direction is ‘reasonable’. What will be considered reasonable depends on the employee, but a note in the NES suggests that a direction to take annual leave could be reasonable if the business is being shut down for a period, such as Christmas and New Year period.

Modern awards

Most modern awards include a standard annual shutdown clause. The standard clause allows employers to direct employees to take annual leave during a shutdown if:

• the employer gives at least 28 days’ written notice (or less if agreed by a majority of employees),
• the employee has enough accrued leave, and
• the direction to take leave is reasonable.

Important: Some awards have different notice periods, so it is important to always check the specific award that applies.

Enterprise agreements

Enterprise agreements may include clauses about annual shutdowns which can vary significantly from the standard clause in awards. If an enterprise agreement applies, it is important that the employer carefully reviews it to check the requirements for annual shutdowns.

What makes a direction to take annual leave ‘reasonable’?

Factors that to be consider in determining whether a direction to take annual leave during a Christmas shutdown include:

• the needs of both the employee and employer,
• any agreed arrangements with the employee,
• custom and practice in the business,
• the timing of the direction to take leave,
• the amount of notice of the direction.

What if an employee doesn’t have enough annual leave?

If an employee doesn’t have enough annual leave accrued to cover the Christmas shutdown period, some options for employers are to:

• reach agreement with employees to take unpaid leave,
• allow employees to work during the shutdown period,
• reach agreement with employees to take annual leave in advance,
• allow employees to use their rostered days off (if the relevant award permits the accrual of rostered days off), or
• reach agreement with employees to take time off in lieu of overtime worked (if permitted by the applicable award)

Any agreement reached between the employer and employee should be documented in writing.

Key takeaways

• Annual shutdowns can be a great way to give your team a well-earned break at a time that coincides with a dip in business activity.
• However, to avoid pitfalls, it is essential to plan ahead, communicate clearly, and understand the business’s obligations under the NES, modern awards and enterprise agreements.
• The Fair Work Ombudsman’s website contains information about annual shutdowns and directions to take annual leave.