Christmas is coming! And to make way for Santa to come and do his thing, many companies will close for a shut down period. However, before the doors close, here are a few points to consider regarding payments to your employees.
Under most awards, full and part time employees are entitled to be paid their usual wage during a shut down period (casuals don’t have to be paid), with rules in place to regulate the type of payment made.
Employees not covered by an award can be directed to use their annual leave, as long as the request is reasonable. However, it is worth investigating the specific rules regarding a shut down period when an award or agreement applies, as they can vary greatly.
Commonly addressed subjects are:
- How much prior notice of the shut down the employees must be given, for e.g. –
- 2 months’ notice, as per the Building and Construction General On-site Award 2010 [MA000020]
- 4 weeks’ notice, as per the Clerks – Private Sector Award 2010 [MA000002]
- Whether the employees can or can’t be ordered to use their annual leave, for e.g. –
- The Road Transport and Distribution Award 2010 [MA000038] states that “Employees can be directed to take annual leave during a shut down” and if they don’t have enough hours accrued, they “will have to take unpaid leave” for the remainder
- The Fast Food Industry Award 2010 [MA000003] states that an employee can agree but “can’t be directed” to take annual leave during a shut down period
If your award or agreement doesn’t specifically address employers being allowed to direct employees to take annual leave during a shutdown period, then you cannot legally force them to use their leave. In such cases, if the employee doesn’t agree to use their leave, they must be paid at their ordinary rate of pay.
The same rule applies to those employees that are given the option in their award/agreement to choose whether to use their leave or not– if they don’t agree to use their leave, they also must be paid at their ordinary rate of pay.
Another option under most awards is to allow those employees with insufficient accruals to take annual leave in advance.
Keep in mind also that while on paid leave, employees will continue to accrue annual and personal leave. However, you will need to check the award or agreement to see whether accruals continue or cease once unpaid leave begins. In addition, any public holidays that fall during the period of annual leave should be paid at the employee’s base rate, with no hours deducted for the day from their leave balance.
From us all at Payroll HQ, we hope that you have a safe and Merry Xmas and we will see you again in the New Year.
By: Barbara Nunn Payroll Subject Matter Expert