The ability of an employer to direct employees to take annual leave during a period of close-down will be determined by the provisions provided in the applicable modern award, enterprise agreement or, in the case of award/agreement-free employees, the National Employment Standards.
If like many employers, your intend to temporarily shut down your operations over the Christmas and New Year period, it is essential that you understand your capacity to direct employees to take a period of annual leave, or in some instances unpaid leave, during this time. Prior to directing employees to take a period of annual leave at any time, there is a requirement to confirm that:
- There is an entitlement to direct an employee to take leave under any applicable industrial instrument, and if so,
- Any requirement to provide a minimum period of notice of the requirement to take leave is adhered to.
Award Covered Employees
While many modern awards will provide an employer with the right to require employees to take a period of annual leave during an annual close down, it is essential that the terms in each of the applicable modern award/s or agreements which apply in your workplace be carefully reviewed to ensure that this is permitted.
Where such a close down is permitted under the applicable industrial instrument, but an employee has insufficient annual leave accrued, the award will determine how the period of leave is to be processed during a close down.
Where insufficient leave is accrued, some awards will permit for an employee to take:
- A period of annual leave in advance
- A period of unpaid leave
If your award or agreement is silent in regards to close downs or the capacity to direct an employee to take annual leave, you cannot force employees to use their accrued leave. While you can negotiate with them to take paid or unpaid leave, if they do not agree to this, they would be entitled to continue to receive payment during this period.
Providing Notice of Annual Close Down
Most modern awards will require that an employer provide their employees with no less than four weeks’ notice of:
- The intention to close down the business for a defined period, and
- The requirement for employees to take annual leave.
However, it is important to note that some industrial instruments do require that a greater period of notice be provided.
- The Building and Construction General On-site Award 2010 requires that employees be given at least 2 months’ notice before the leave needs to be taken.
- The Textile, Clothing, Footwear and Associated Industries Award 2010 requires an employer to give three months’ notice of the intention of implementing an annual close down.
The Fair Work Act provides that an employer may require an award or agreement-free employee to take a period of paid annual leave during an annual close down, provided that the request is ‘reasonable’.
The following factors are to be taken into consideration when determining whether such a request would be reasonable:
- The needs of both the employee and the business;
- Any agreed arrangements with an employee;
- The timing of the direction to take leave; and
- Whether the period of notice given by the employer is reasonable
- Custom and practice of the business, ie. such a request will be deemed reasonable if the employer’s business annually shuts down over the Christmas-New Year period.
An employer and an award/agreement-free employee can agree:
- On the specified period of notice that must be given to employees prior to the requirement to take annual leave.
- Whether paid annual leave may be taken in advance of being accrued when the close-down period exceeds an employee’s accrued annual leave.
- Whether unpaid leave may be taken when the close down period exceeds an employee’s accrued annual leave.
Prior to confirming any period of annual close down, reference should be made to any applicable modern award to determine the relevant period of notice required to be given to employees.
It is recommended that such notice be provided to your employees both verbally and in writing. A letter template for providing this notice is available from HR Advice Online.
How to Provide Notice to Employees regarding an Annual Closedown
The suggested steps for preparing written notification of the requirement to take annual leave for purpose of a closedown are outlined below:
1. Consult with your employees
You should meet with your employees to advise them of the intended close down period.
You should ensure that the employees understand:
- The reason for the closedown (e.g. Christmas holidays, office renovations)
- The length of the closedown
- That they will receive paid annual leave during the closedown, and
- That this annual leave will be deducted from their accrued entitlements.
2. Prepare a letter of notice to confirm the requirement to take annual leave for the purpose of the closedown
Unless a greater period of notice is required under a modern award, employees should be provided with at least 4 weeks written notice of the requirement to take annual leave during a close down period.
This notice should include
- The dates that the closedown period will start and finish
- The reason for the closedown.
3. Provide the letter to the employee and retain a copy for your records
Provide the letter of notice to each employee, ensuring they receive it at least 4 weeks (or at least before the required minimum notice period) before the start of the close down period.
You should also keep a copy of the letter on each employee’s file for your records.
For assistance ensuring you are meeting your obligations with your Christmas Shutdown contact us at firstname.lastname@example.org or 1300 720 004.