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Shutdown Periods

Christmas is coming, time to organise your shutdown period!

Most companies decide to shutdown and give their workers time with friends and family. I consider this a good business decision for a number of reasons.

  1. Taking a break is good for workers health and wellbeing. There are always the workers that never stop working. A shutdown period ensures that these workers and management get a break.

  2. Reduces Annual Leave liability for your company because some time is taken off worker’s annual leave entitlements. This still allows time for a break during the year.

  3. Stops staff saying they will be available and then letting anyone down. This time of year, is a difficult busy time, staff who don’t turn up to work create further stress that is unnecessary.

  4. Increases worker engagement because they know they will get a break to be with their families over the all-important Christmas period.

Shutdowns should be a time of celebration for your team. It is best to start communicating your shutdown period with your staff earlier in November, getting their feedback as to how long they want off, and how it affects them and their income. Shutdown periods must be communicated to staff in writing 14 days before the shutdown period.

Depending on how long employees have been with you will depend on their available annual leave entitlements.

For employees who are entitled to annual leave during this time:

If an employee gets 14 days’ notice, they are required to stop work and take whatever balance they have available, and use this. It is calculated as per normal holiday leave.  

If the employee doesn’t have a high enough annual holidays entitlement balance to cover the whole close down period, then they take the balance owing, and at the discretion of the employer may take some annual leave in advance, and/or leave without pay.

For staff who are not entitled to annual leave during this time because they haven’t worked 12 months continuously for you, or they have no entitlement to annual leave, or they have been paid their annual leave as they go then:

They must get paid 8% of their gross earnings as at the close down date from:

  • the start of their employment if they haven’t worked continuously for 12 months for their employer, or
  • their last anniversary date for annual holidays if they have already worked for their employer for at least 12 months, less any amount already paid as 8% pay as you go or already taken as annual holidays in advance.

The employer and employee may agree to taking some of their annual holidays in advance or change their employee’s anniversary date for to ensure the employee is entitled to all their annual leave at the start of shutdown periods.

When employers choose to change the anniversary date of an employee to either the start of the shutdown period or another suitable date, this will become the date when their annual leave entitlement kicks in each year regardless of their actual start date. This only applies to those businesses that have a regular shutdown period every year. The date decided upon must be associated with the shutdown period.

  • For example, when there is a Christmas close down, the date could be set at 15 December to make sure that it always comes before the annual close down starts. This will mean that unless the employer agrees that an employee can take annual holidays in advance, the employee will always get their full entitlement to annual holidays just before the start of the close down. This is the only situation where an employer can choose a particular date for employees to be entitled to annual holidays 

MBIE shutdown flow chart >> https://www.employment.govt.nz/assets/Uploads/tools-and-resources/flowcharts/closedowns-guidance-flowchart.pdf


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