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UpdatesOct 19, 2015

Compulsory Christmas close – does everyone get paid?

A few years ago I started a new job in November, just after Melbourne Cup Day. Less than two months later the company closed for two weeks over the Christmas-New Year period. Like many businesses, that time of year was ‘dead’ so the time off was compulsory for all staff – there really was nothing to do as we deliberately didn’t publish anything at that time of year.

I was told before I started that I would have time off without pay. Luckily, I’d accrued enough holiday pay from my previous employer to cover the shortfall.

Can an employer make an employee take unpaid leave where they have insufficient accrued annual leave to cover the period of a Christmas–New Year close-down?

By Jeff Salton

A few years ago I started a new job in November, just after Melbourne Cup Day. Less than two months later the company closed for two weeks over the Christmas-New Year period. Like many businesses, that time of year was ‘dead’ so the time off was compulsory for all staff – there really was nothing to do as we deliberately didn’t publish anything at that time of year.

I was told before I started that I would have time off without pay. Luckily, I’d accrued enough holiday pay from my previous employer to cover the shortfall.

Can an employer make an employee take unpaid leave where they have insufficient accrued annual leave to cover the period of a Christmas–New Year close-down?

Under the National Employment Standards (NES), you can direct an employee to take paid annual leave in particular circumstances, but only if the requirement is reasonable. This will be assessed in terms of:

A reasonable requirement would be:

In my case, my agreement with my employer was that I would have to take unpaid leave. Other companies I have worked for have let me ‘go into the red’, that is, allowed me to take paid annual leave in advance of it being accrued.

So what about unpaid leave? The answer depends on the terms of the applicable award or enterprise agreement, while in the case of award/agreement-free employees, annual leave conditions are subject to the National Employment Standards (NES), which does not provide for annual shut down periods.

For instance, Clause 29.4 of the Clerks – Private Sector Award permits an employer to grant annual leave in advance of accrual. However, if the employee leaves their employment before completing the required amount of service to account for the level they in advance, their employer will be entitled to deduct the amount of leave in advance still owing from any remuneration payable to the employee upon termination of employment.

And the Manufacturing and Associated Industries and Occupations Award 2010 provides that an employee with insufficient accrual of annual leave to cover the close-down period can be sent on unpaid leave for the duration of the close-down.

If an employee does not have sufficient leave, and your agreement with the employee is silent on this matter, it may mean that you will have to advance the employee leave during any periods of shutdown. If that is the case, you should arrange for the employee to authorise you to deduct the amount of any leave advanced from amounts owing should the employee leave your employment before accruing the amount of leave advanced.

This advice might be a bit late for you to do anything about it this year, but it would certainly be worth remembering for subsequent years.

The subject of annual leave is definitely a tricky one to navigate around, especially with hurdles such as:

And if you breach your annual leave obligations to an employee, they may ask a court to order you to pay compensation.

Right now would be a very good time to be familiar with your responsibilities to your employees.

Keep up the good work,
Jeff Salton

Editor, Workplace Bulletin

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