Handling Annual Closedowns

Jason Ennor, Co-founder and CEO at MyHR
by, Jason Ennor, Co-founder and CEO at MyHR

If you usually close down over Christmas, or you’re thinking about it for the first time; doing it properly is important.

For most of us Christmas is a hectic time. Work and personal commitments escalate in the mad-rush to Christmas Day. While some industries (such as retail and hospitality) are entering their busiest time of year, many industries are preparing to wind down for a summer break. Which means it’s usually the time for the “regular annual closedown.”

When you reach the closedown period you can breathe a sigh of relief, crack a beer and fire-up the BBQ. But before you get there, there is usually a lot to get done; last orders, final repairs, gifts for clients, December billing, Christmas functions and a busy personal life.

If you usually close down over Christmas, or you’re thinking about it for the first time; doing it properly is important.

Like everything in employment law; a closedown requires a certain process to be followed and if the process is not correct it can cause unnecessary hassle. With a little bit of planning the regular annual closedown can be seamless and not get in the way of everything else happening at this time of year.

The Law

NZ employment law allows employers to implement one annual closedown each year in which they close all, or part of, the operation and require employees to take annual leave, even if they don’t have enough leave to cover the break.

This usually happens over Christmas and New Year’s, but it doesn’t have to. A closedown might occur during the year if there is a need; such as servicing a manufacturing plant.

Employers don’t have to close the entire workplace, for example: engineers, maintenance or manufacturing might continue while the office closes down. Conversely the office may continue for customer service queries but operations close down.

The employment agreement does not have to have a closedown clause, but this is advisable as it makes the requirement very clear.


Employers must provide at least 14 days’ notice of the closedown. While there is no legal requirement to notify in writing I recommend writing a simple letter informing staff of the closedown dates, this helps avoid confusion.

I also recommend doing this as soon as possible. Leaving it to 14 days doesn’t give a lot of time for people to plan and any questions or issues can be dealt with before the Christmas rush.

If you know you’re closing down; deal with it early.

Annual Leave

During the closedown the employer can direct employees to take annual leave.

This is easy where the employee has enough annual leave to cover the break.

Employees with less than 1 year of service can be paid 8% of their earnings up to the closedown.

If an employee doesn’t have enough leave, time off during the closedown is unpaid. Employers can agree (at their discretion) to top-up the payment by creating a negative leave balance. While this ensures the employee is not out of pocket it does incur a cost for the employer and if the employee leaves before accruing the leave back the cost may not be recovered.

As with any annual leave payment employees can request to have the leave paid out in full, in advance of the closedown. But it is much more common for leave to be paid in the normal pay-cycle, ideally there is a clause in the employment agreement covering this.

Public Holidays

Public holidays are paid if the day would “otherwise be a working day”.

This applies to the closedown period as if the closedown is not in effect, meaning employers can’t claim that it is not a working day because business is closed.

5 Simple Steps

  1. Decide if there will be a closedown;
  2. Set the dates;
  3. Notify your people with a simple letter as early as you can, at least 14 days out;
  4. Be prepared to speak to anybody who raises an issue so problems are dealt with effectively and the right outcome is achieved for the business;
  5. Enjoy the break!

Don’t forget a bit of festive cheer, letters and communications don’t have to be too dry and legalistic – wish everybody a Merry Christmas.



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