Annual closedowns in New Zealand

Contents

Overview

How long can a closedown be?

What do I do if it's my company's first closedown? 

What do I have to do as an Employer?

My entire business is operational, but with reduced staff, can I enforce a closedown?

I close my entire business, but have at least one employee on call - what do I do in this situation?

What happens if I hire new employees after I've advised by existing team of the closedown?

What happens if I need to undertake more than one closedown in a 12 month period?

What happens if I don’t want to pay employees with less than 12 months tenure 8% of their gross earnings?

How do I pay employees for public holidays over the closedown period?

I have casual employees, what do I pay them over this period?

I have fixed term employees, employed on an agreement less than 12 months who have a pay-as-you-go arrangement for annual leave.

Support options

Overview

NZ employment law allows employers to implement one closedown each 12 month period 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.

How long can a closedown be?

There’s no minimum of maximum duration. It could be 2 days to 4 weeks. Just whatever is customary for your business.

What do I do if I want to implement the company's first ever closedown?

If you have never closed your business before, but want to implement a regular closedown each year, we’d recommend to consult with your staff and propose the shut down and impact to their pay / annual leave, before confirming.

Reach out to the Advisory team to discuss your requirements further.

What do I have to do as an employer?

To lawfully implement an annual closedown:

1. If it’s the first time your implementing, you’ll need to consult with your team. Contact MyHR to assist you.
2. If you’ve already established a customised closure in your business, then determine the requirements for the year ahead, is the entire business closing, or just select departments.
3. What dates will you be closing.
4. Give at least 14 days' notice to affected employees of the closedown and that they are required to take annual holidays or cease work. This doesn’t have to be in writing, but we’d recommend it to avoid any confusion. Also note that if there will be any change to pay dates over this period.
5. Notice requirements will look different depending on the tenure of your employees:
   • If the employee has been with your business 12 months or longer at the time of the closedown:
     • They must take annual holidays for the closedown period, even if they don’t agree.
     • If they don't have enough entitlement to cover the full duration, you may agree to:
       1. Let them take annual holidays in advance (accrued annual leave)
       2. Or they may take unpaid leave or alternative leave.
   • If the employees has been employed less than 12 months at the time of closedown:
     • They must discontinue work during closedown, and you must pay them 8% of their gross earnings since employment began less any amount of annual leave already taken.
     • Their annual leave anniversary then shifts to the day the annual closedown starts or another nominated date close by.

My entire business will be operational, but with reduced staff, can I enforce a closedown?

As no units of your business are completely closing, we’d recommend an alternative approach to a closedown.

Specifically, you can ask your employees register their interest for taking leave over the timeframe or to work it.

If you don’t get the required level of employees to work, then you can approve / decline leave plans. This could be based on who has worked the Christmas / New Year period previously or who’s new to the organisation etc.

I close my entire business, but do have at least one employee on call – what do I do in this situation?

There are a couple of ways to manage that employee on call.

1. Pay the employee as usual over the on call period. They’re not required to take annual leave. This is in recognition that if they’re using their annual leave, they will be restricted in how they spend their time due to needing to be available to work.
2. Pay an on-call allowance in recognition of the restriction, while the employee is on annual leave. If they are required to undertake work, then they are paid for hours actually worked. If you already pay an allowance, it could be higher over this period.

In either situation, if the employee is on call over a public holiday and they are reasonably restricted in their abilities – i.e. have to stay in a certain location, then employee’s should gain a day of alternative leave to be taken at another point in time.

What happens if I hire new employees, after I’ve advised my existing team of the closedown?

We’d recommend informing them as soon as possible. This could include giving them the heads during recruitment, so that they are aware of this taking place, and including in their offer letter. To note, it is still required to provide a minimum of 14 days’ notice.

What happens if I need to undertake more than one closedown in a 12 month period?

You’d need to seek agreement from your staff for any secondary closure.

What happens if I don’t want to pay employees with less than 12 months tenure 8% of their gross earnings?

There’s a couple of ways to manage:

1. Apply the same rules as your employees who have been with the business 12 months or longer.
2. Invite your employees to apply for leave over this time as opposed to enforcing any kind of closedown.

The risk to the business is if it is audited, or if the practice is scrutinised as a result of a grievance process, the business may be found to be non-compliant. If reviewed by a Labour Inspector they’d require you to correct the issue by reviewing historic records and applying the 8% payment of gross earnings rule.

How do I pay employees for public holidays over the closedown period?

Employees impacted by the closedown period are still entitled to be paid for public holidays if they would have ordinarily worked that day, had the business not closed.

I have casual employees, what do I pay them over this period?

If you have casual employees who are working set days and hours over a specific period of time, that covers the closedown, then they will be entitled to payment for public holidays only.

If you have casual employees who have no set engagement, and have no pattern to when they work, then you are not required to offer them work over this time or pay them anything.

I have fixed term employees, employed on an agreement less than 12 months who have a pay-as-you-go arrangement for annual leave.

Regardless of whether you have a fixed term employee where you pay - 8% of their gross earnings to each pay period, or whether you will pay them 8% of their total gross earnings at the end of the fixed term period these employees will be entitled to payment for public holidays only over this time.

Support Options

If you need more help, our HR teams are always here for you!

If you have questions, message the MyHR team via the Ask Us chat feature or call us on:
NZ - 0800 69 47 69 (0800 MY HR NZ) or +64 9 887 3345