The end of the year is closer than it feels, and many small businesses close for a week or two between Christmas and New Year. The Fair Work Ombudsman has a set of rules for the holiday season, and a shutdown that is handled badly is an easy way to end up with an underpayment claim.

Can you make employees take annual leave?

It depends on what covers your staff. Most modern awards and enterprise agreements have rules about when and how an employer can direct employees to take annual leave, and some include specific shutdown clauses. Where the rules allow it, a direction generally needs to be reasonable, in writing and given with the required notice. Some awards also limit when a business can close, for example only during the end of year period.

If your employees are not covered by an award or enterprise agreement, the Fair Work Ombudsman says you can require them to take paid annual leave if the requirement is reasonable. That includes a temporary shutdown between Christmas and New Year.

If only part of the business closes

Generally, employees in the part of the business that is shutting can be directed to take paid annual leave, but employees in other parts that stay open cannot, unless an agreement says otherwise.

What if someone does not have enough leave?

If your award or agreement has no shutdown rule, you cannot direct leave under the award alone. Staff can still agree to take annual leave, including leave they have not yet accrued, or unpaid leave. Where the award or agreement permits, options such as annual leave in advance, time off in lieu of overtime or leave without pay can fill the gap, provided the employee agrees in writing.

Public holidays still count

A public holiday that falls on a normal working day must still be paid. Employees should get the day off without losing pay, or be paid the public holiday rate under their award or agreement if they work. This applies even if they are on paid annual leave, and the public holiday is not deducted from their leave balance.

What to do now

  • Find your award or agreement and read the annual leave and shutdown clauses.
  • Check the notice period and give written notice well before the break.
  • Look at leave balances for every employee, including part timers and casuals, and plan for anyone short.
  • Get agreements in writing where staff are using leave in advance or unpaid leave.
  • Map the public holidays in your state and check who is rostered and at what rate.
  • Tell your team early so they can plan their own holidays.

The Fair Work Ombudsman also runs free webinars for small businesses, including a holiday season session, and an Employer Advisory Service if your situation is not clear. This is general information only, so check your own award or agreement.