Tis the season for ….. Christmas Closedown and Holiday Pay Queries – What you need to know

General / 20 November 2019
Tis the season for ….. Christmas Closedown and Holiday Pay Queries – What you need to know


Employers have an entitlement to have a Christmas closedown, as long there is customarily a closedown.

What is meant by “customarily” is not 100% clear but it is generally interpreted to mean a practice that has occurred in the past. What does this mean for a new business? An agreement will need to be reached about the arrangements that will apply during any proposed first closedown.

Where employers have a customary close down, they can have a closedown this year provided that:

  • There has been no other closedown in the last 12 months period; and
  • Employees are given 14 days notice of the requirement to take annual leave or discontinue work.

Employees who are entitled to annual holidays, can be required to take their holidays. If an employee has enough annual holidays to cover some, but not all, of the closedown, an agreement can be reached to pay annual holidays in advance.

For those who are not entitled to annual holidays, the employer must pay the employee 8% of the employee’s gross earnings since the commencement of the employee’s employment or since the employee last became entitled to annual holidays. If this occurs, the employee’s anniversary date is either treated as the first day of the closedown, or to day the employer nominates that is reasonably proximate to the beginning of the closedown.

Paying for public holidays

Public holidays are in addition to annual holidays and there is no minimum period of time an employee has to be employed to get public holidays benefits.  The Christmas period can be a challenging time of year for employers trying to manage the minefield that is the Holidays Act 2003 (Act), but it pays to get it right. Where an employer gets it wrong, there is risk of a penalty award and backpay for up to six years.

Who is entitled to payment for public holidays?

An employee is entitled to be paid for a public holiday even if they don’t work that day, if the day on which the public holidays falls would “otherwise be a working day” for them.

If employees work on a public holiday they are entitled to be paid their normal pay (relevant or average daily pay), plus half that amount again for hours actually worked.  If the public holiday falls on a day an employee would otherwise have worked, they will also be entitled to an alternative holiday.

In summary, alternative holidays can either be used, by agreement or at the employer’s direction, or may be cashed out by agreement, when 12 months has passed since accrual.

Transfer of public holidays

Some public holidays that fall at the weekend (Christmas day, Boxing day, New Year’s day, 2 January) are automatically transferred to the Monday (if the day falls on Saturday) or Tuesday (if the day falls on Sunday) immediately following the weekend, where the weekend day is not one that an employee would otherwise have worked.

Public holidays can also be transferred to another day by agreement in writing.  In that case, the agreement must specify which public holiday is being transferred and the date it is being transferred to.  The new date can’t be another public holiday and must be a day the employee would otherwise have worked.

Determining whether a day would “otherwise be working day”

Not sure if your employee would have otherwise been working?  The Act lists factors to consider including, what the employment agreement states, what the work patterns are, any rosters or systems in place, whether the employee works only when work is available, and the reasonable expectations of the parties.

If you would like advice regarding closedowns or public holidays, please contact our team.

Disclaimer: We remind you that while this article provides commentary on employment law and health and safety topics, it should not be used as a substitute for legal or professional advice for specific situations. Please seek legal advice from your lawyer for any questions specific to your workplace.

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