“Q: What’s an annual closedown and, as a business owner and employer, what do I have to do?”
Every year, your Kiwi small business can choose to have an 'annual closedown' over a specified period. But what exactly do we mean by an annual closedown?
“A: When you shut your business during a seasonal period, this is called an annual closedown.”
This closedown is an agreed period when you can temporarily shut down all, or part, of your workplace and require your employees to stop work.
Shutdowns generally happen at Christmas or at the end of the season for your business or industry. You can specify one shutdown every 12 months and need to inform your workforce 14 days in advance of the shutdown.
Who has to take annual leave during a closedown?
There are clear rules around which employees need to take annual leave and which employees will need to take unpaid leave.
Employees entitled to annual holidays:
Staff who’ve worked continuously for 12 months or more and have built up paid annual holiday entitlement must use their leave to cover the closedown period.
Employees without enough leave (or under 12 months' service):
Leave in advance: As the employer, you can choose to allow your employee to take paid annual leave in advance by agreement.
Unpaid or alternative leave: You can agree for employees to use alternative holidays (days in lieu) or unpaid leave to cover the shutdown.
Closedown pay (8% payment): If your employee is not entitled to annual leave (whether they are too new, have taken upaid leave or received payments for their annual holidays), they must be paid an additional 8% of their gross earnings, up to the annual closedown date from:
The start of their employment, if they’ve not worked continuously for 12 months
Their last anniversary date for annual holidays, if they’ve already worked for at least 12 months.
5 important things to communicate with your workforce
If you’re planning an annual shutdown for your company, it’s important to communicate this to your employees in a clear and timely way.
Official 14-Day written notice: Give employees at least 14 days' written notice before the closedown starts. Tell them the exact dates the business will close and when work will resume after the closedown.
Leave entitlement and options: Inform each member of staff what their current leave balance is and explain their options if they don’t have enough paid holidays. For example, they could take leave in advance or take unpaid leave.
Public holidays during closedown: Remind your employees that public holidays falling on their usual working days during the closure are paid as public holidays, not deducted from their accumulated annual holiday balance.
Other paid leave types: Explain what happens if an employee becomes sick or experiences a bereavement during the closedown on what would usually be a working day. Outline how the relevant paid leave types apply instead of annual leave.
Work expectations and reopening: Outline the company’s expectations regarding final shift handovers before shutdown, emergency contact procedures if needed, and the exact time and date everyone is expected to return to work.
If you need help calculating your employees’ annual leave, or entitlement to days in lieu, come and talk to us. We can help you review your HR and payroll system to work out exactly what leave is due and who needs the 8% payment.
