Updated: 7 November 2024
If you’re planning to close down your business over summer and the festive season, doing it properly is important.
For most of us Xmas is a hectic time. Work and personal commitments escalate in the mad rush to Christmas Day.
While some industries (such as retail and hospitality) enter their busiest time of year, many industries prepare to wind down for a summer break and (usually) the “regular annual closedown.”
Before you shut up shop, there can be a lot to get done: last orders, final repairs, gifts for clients, December billing, Christmas functions, and a busy personal life.
Like everything in New Zealand employment law, any closedown requires that your business follows a process and if you don't get it right, it can cause unnecessary hassle.
With a little bit of planning your closedown can be seamless and not get in the way of everything else that's happening.
Closedown periods and New Zealand law
NZ employment law allows employers to implement one closedown each year in which they close all, or part of, their operation and require employees to take annual leave (even if they don’t have enough leave to cover the break).
This usually happens over Christmas and New Year’s, but it doesn’t have to. If your manufacturing operation regularly closes down in June for 4 weeks of servicing and maintenance, this can be your annual closedown instead.
Employers don’t have to close the entire workplace. For example, engineers, maintenance or manufacturing staff might continue working while the office closes down. Or the office may stay open for customer service queries but wider operations shut down.
Employment agreements don't have to contain a closedown clause, but we recommend you have this clause as it makes the requirement very clear.
Notifying employees
Employers must provide employees at least 14 calendar days’ notice of the closedown. While there is no legal requirement to notify in writing, we recommend writing a simple letter informing staff of the closedown dates. This helps avoid any confusion.
We also recommend doing this as early as possible. Leaving it to two or so weeks before Xmas doesn’t give a lot of time for people to plan or for you to deal with any questions or issues that may arise.
If you know you’re closing down, deal with it early - and remember to include a bit of festive cheer! Your letters and communications don’t have to be too dry and legalistic – wish everybody a Merry Christmas and a good holiday.
If you need help with letters to employees, the HR advisory team is only too happy to help.
Use of annual leave
During the closedown, the employer can direct employees to take annual leave (as long as you give them at least 14 days' notice).
This is straightforward when the employee has enough annual leave entitlement to cover the whole break.
If an employee doesn’t have enough leave entitlement to cover the shut-down, then the rest of their time off is unpaid, or you can agree to let them take annual leave in advance (i.e. annual leave accrual). This ensures the employee is not out of pocket, but it does come at a cost to the business.
Employees who aren’t yet entitled to annual holidays, e.g. they have been working for you for less than 12 months, must be paid 8% of their total earnings up to the date the closedown starts (less any annual leave they’ve taken in advance of entitlement). You also need to move their leave entitlement date to the day the annual closedown starts to ensure they don't miss out on any annual leave benefits.
Alternatively, you can nominate a date close to the closedown start date, as long as it doesn’t disadvantage the employee.
As with any annual leave payment, employees can request to have the leave paid out in full, in advance of the closedown. But it is much more common for leave to be paid in the normal pay cycle - your employment agreement will specify what happens here.
Public holidays
Public holidays are paid if the day would be an "otherwise working day”, i.e. a day that the person would’ve normally worked if it wasn't a public holiday.
This applies to the closedown period as if the closedown was not in effect, meaning employers can’t claim that it is not a working day because the business is closed.
Learn more about paying public holidays correctly.
5 simple steps for closing down
- Decide if there will be a closedown.
- Set the dates.
- Notify your people with a simple letter as early as you can, at least 14 days out.
- Be prepared to speak to anybody who raises an issue so problems are dealt with effectively and the right outcome is achieved for the business and staff.
- Then enjoy the break! Breathe a sigh of relief, toast the season, and fire up the BBQ…
