Annual close-down

xmas closedown


This term refers to the general closing down of an employer’s business (or part thereof) for the purpose of allowing all employees, or a section of employees, to take their annual leave simultaneously at a certain date for a specified time. Where an employee has insufficient accrual of annual leave, an industrial instrument may provide for payment of the accrued annual leave with the remainder of the close-down being a period of unpaid leave, although this would usually be regarded as service for the purposes of any entitlements under the instrument.
Annual close-down is particularly common in workplaces over the Christmas‚ ¨New Year period, and also the Easter period, either because it is a popular time for employees to take annual leave, or there is a decrease in business activity over these respective periods. The right of an employer to send employees on an annual close-down is limited and subject to the Fair Work Act 2009, the applicable industrial instrument, or individual contract of employment.

Fair Work Act ‚ Æ award/agreement-free employees
While the annual leave provisions of the NES do not provide a general right for an employer to send employees on an annual close-down, s94(5) of the Fair Work Act provides that an employer may require an award/agreement-free employee to take a period of paid annual leave. Section 94(5)(b) states that a requirement to take paid annual leave may be reasonable if, for example, the employer’s enterprise is being shut down for a period, eg between Christmas and New Year. However, the provision does not appear to give the employer a right to send an employee on unpaid leave during the close down.
Matters that can be agreed upon between the parties include the amount of notice to be given for the close-down and the payment of annual leave in advance of accrual, where the period of the close-down exceeds the amount of accrued annual leave credited to the employee.
Modern awards
Generally, a modern award or enterprise agreement will allow an employer to close down for annual leave purposes. A common provision regarding annual close-down is provided in the Manufacturing and Associated Industries and Occupations Award 2010, which contains the following conditions:
  • an employer may close down an enterprise or part of it for the purpose of allowing annual leave to be taken, provided that:
    • the employee gives at least 4 weeks notice of intention to do so; and
    • an employee with sufficient accrued annual leave is allowed to take it and paid at the rate prescribed by the award; and
    • an employee who has not accrued sufficient annual leave to cover part or all of the close-down period is allowed paid leave for the period for which they have sufficient accrual and given unpaid leave for the remainder of the close-down; and
    • any leave taken as part of a close-down (including unpaid leave) also counts as service by the employer with their employer; and
    • the employer may only close down the enterprise or part of it for one or two separate periods in a year, one of the periods must be at least 14 consecutive days (including non-working days); and
    • the employer may close down the enterprise or part of it for three separate periods by agreement with the majority of employees.
Not all industrial instruments provide such comprehensive conditions with respect to annual close-down, therefore reference should be made to the applicable industrial instrument to determine the employer’s right to send employees on an annual close-down, and the conditions under which such a close-down may occur.
Information sourced from