Leading into the holiday season: What do Employers and Employees need to know…?

Part 1: Annual leave and close down periods.

We get a lot of questions from employees and employers over the holiday season.  We recommend that you check out part 1 of our FAQs below, before you head into the holiday season. View Part 2.

Can an employee be required to take annual leave at any particular time?

Yes, an employer can require their employee to take annual leave at a particular time, by giving the employee 14 days’ written notice. However it is recommended that employers and employees first try to reach an agreement on when annual leave will be taken.

Employers can also require their employees to take their annual leave at a particular time each year (for instance over Christmas or over an otherwise quiet time).  This is known as a “close down period”. 

Can an employer require employees to take time off work over a close down period when they have no annual leave entitlements? 

If an employer has a close down period, then employees can be required to take leave, regardless of whether they have any annual leave accrued.  Situations where this applies can include a new employee who has not yet accrued their annual leave, or an employee who took annual leave during the year who may not have any annual leave left to cover the close down period.  An employee who has been on parental leave may have annual leave owing, but they may not get paid their usual wage. 

In these situations, the employee can be required to take unpaid leave (provided that the employer has given them at least 14 days’ written notice).  

The employer may instead agree to let the employee take annual leave in advance, or to allow some staff to come back to work earlier (i.e. during the close down period).  This solution is likely to be practical only in some businesses (for instance where there is actual work for the employee to do).

If an employee only has enough leave accrued to cover part of the close down period, then they may be required to use their annual leave and then to take the rest of the time as unpaid leave. 

Can employees choose to take unpaid leave rather than using up their annual leave?

Yes, if the employer agrees.  An employee can, however, be required to use up their annual leave over a close down period or any other leave period.  An employer does not have to agree to an employee taking unpaid leave.  

Do you have any general advice for employers over this time of the year?

Employee’s wellbeing is an important factor in keeping a business running efficiently.  That means ensuring that you and your staff take breaks to spend time with friends and whānau over the holiday season.  For this reason, it makes sense to encourage, or require, your employee to take their leave regularly, rather than to let it build up. 

It is also good business practice to ensure employees do not let their leave build up.  This is because when such an employee finally takes leave or are paid out their leave upon resignation, an employer will be required to pay them at their current rate.  In other words, leave that accrued 10 years ago (when an employee was on a starting wage), will paid out 10 years later at their current more senior rate. 

If an employee does not have enough annual leave to cover their wages over a close down period, it is a good idea for the employer and employee to discuss this openly.  Options like taking leave in advance, early return to work, or taking on temporary secondary employment are ways to work around an employee suffering financial hardship, or the employer dealing with an unexpected resignation.

What if I have any other questions?

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.

We are experienced employment lawyers who can answer your questions, or help you to navigate any other issues you are having at work.