As we head into the Holiday Season, employers and employees will be planning their annual leave and public holiday breaks from work.  It pays to make sure that you are clear about what annual leave employees are entitled to, how annual leave payments are calculated, how closedown periods operate and what the law says about public holidays (statutory or stat days). 

This article sets out a brief summary of the most relevant laws and most frequently asked questions that we see over this time of the year. This article also contains links to further articles with more detailed information. 

What is annual leave?

Annual leave is paid time off work to allow employees time for rest and recreation

How much annual leave are employees entitled to?

Employees are entitled to 4 weeks of annual leave once they have been employed continuously for 12 months. More leave can be given in an employment agreement. 

The day that the employee first started working is known as the anniversary date, and will the date upon which they will receive their 4 week entitlement to annual leave. This date can change for various reasons as detailed below.

How are annual leave payments calculated?

The correct rate is at least the greater amount of:

  • Ordinary weekly pay as at the beginning of the annual leave; or
  • The employee’s average weekly earnings in the 12 months before the end of the last pay period before the annual leave.

Both of these calculations need to be done each time an employee takes annual leave to determine which method produces the higher total.  If an employee takes a period of annual holidays that covers more than one pay period, the calculation for the entire time on annual holidays is still done at the start of the annual holiday.

Are casual and fixed-term employees entitled to annual leave?

If an employee is being paid their annual leave on a pay-as-you-go basis (being 8% of their gross earnings), they will not have any annual leave available for additional paid time off work (as they would already have received their entitlement at each pay period). 

What annual leave entitlements does an employee have if they have not been working for 12 months?

If an employee has not yet had their work anniversary, they will not yet be entitled to their 4 weeks of annual leave.

Where an employee has not yet earned their 4 weeks of annual leave, they will instead be entitled to 8% of their gross earnings from the day they started work, until the day that their leave starts.  The employee’s anniversary date will reset to this date.

Can an employer tell their employee when to take annual leave?

Employers and employees should discuss and agree when leave is to be taken.  If the parties cannot agree, the employer can require an employee to take leave at a particular time, by giving the employee 14 days’ notice.

An employer can also require an employee to take leave over a valid closedown period. 

What is a closedown period, and when can an employer have one?

An employer can have one closedown period per year, where either the entire business or a part of the business stops operating.  If an employer wants to have a closedown period, this must be set out in the employment agreements that they have with their employees. 

Employers must give their employees at least 14 days’ notice of the closedown period dates in each year. 

An employer can have a second closedown period, but only if their employees agree on the terms of the second closedown. 

Do employees get paid over a closedown period?

Employees must stop working at the time of closedown and they will be paid from the annual leave they have accrued over the preceding year.

Employees who have been paid their annual leave on pay-as-you-go basis during the year (i.e. 8% of gross earning), will not have any annual leave accrued and will have to take leave without pay, unless otherwise agreed.

An employee who does not yet have any annual leave accrued (for instance they have not yet been employed for 12 months, or it has not been a full 12 months since their anniversary date has been reset) will be paid 8% of their gross earnings up to the start of the closedown period.  Their anniversary date will also change to the date that the closedown period started (or a date close to it).

If an employee does not have enough annual leave to cover the entire closedown period (or they are not entitled to annual leave), the employee will either have to take unpaid leave, or they can ask their employer if they will pay them leave in advance (to be deducted from their new annual leave entitlement once they receive it).

What happens if other types of leave are taken during the closedown period (for instance sick leave)?

If an employee wishes to take sick leavebereavement leave or any other type of leave during the closedown period, the employer must determine whether those requested dates for leave would be normal working days for the employee if the closedown was not in place.  If a normal working day, the day off will be deducted from the alternative leave entitlement rather than from the annual leave entitlement.   

Public holidays which take place during a closedown period or during annual leave, will also not be treated as annual leave.  Public holiday entitlements are in addition to annual leave.   

What do I need to know about Public Holidays over a closedown period?

The public holidays for the upcoming holiday period (December 2021 – January 2022) are as follows:

Christmas Day

          Saturday 25 December or Monday 27 December

Boxing Day

          Sunday 26 December or Tuesday 28 December

New Year’s Day

          Saturday 1 January or Monday 3 January

Day after New Year’s Day

          Sunday 2 January or Tuesday 4 January

These public holidays have 2 dates listed because all of them happen to fall on a weekend day.  Because some employees do not work on weekends, they would miss out on these public holidays.  For this reason, these public holidays will be Monday-ised or Tuesday-ised for those employees who do not usually work on weekends. 

In summary:

1.    An employee who normally works on the Saturday/Sunday, will have either:

       a.    A paid day off on the original public holiday date; or

       b.    If they are required to work on the original public holiday (according to their employment agreement),                   they will be paid 1.5 times their usual rate and they will receive another paid day off work.

       c.    If they are not required to work public holidays in their agreement, but you ask them to work and they                  agree to work,  they will be paid 1.5 times their usual rate, but they will not receive a day in lieu. 

2.    If an employee does not normally work on Saturdays/Sundays, they will either:

        a.    Have a paid day off on the following Monday/Tuesday; or

        b.    If you ask them to work on the public holiday (and they agree) – they will be paid 1.5 their usual rate,                    but will not receive a day in lieu.

For employees that are only working public holidays or employees that are “on call” there are different rules that apply.

What should I do if I am not sure about the law?

You should get advice from an employment law expert.  Getting things wrong can result in employees missing out on their full entitlements, or can result in costly grievances or even enforcement action being taken by a Labour Inspector against an employer.  

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.