LawWorks News

Holiday Payroll Panic - December 2009



December 2009


The tinsel is well and truly up and now is the time to address Christmas leave issues!


Many employers have a closedown period at Christmas and require staff to take their annual holidays.  For the employer to require employees to take holidays or stop work under the Holidays Act 2003, the closedown must be a customary once yearly event.  If you have a closedown period, you must give at least 14 days written notice of the closedown and requirement to take holidays or stop work, but to be fair to staff you should give as much notice as possible. 


If employees have some holidays entitlement, but it will not be enough to cover the closedown, you may grant leave in advance, as well as requiring them to take their holidays entitlement.  Remember that holidays are only an entitlement for employment law purposes after working for one year and then accrue each year on the anniversary, although payroll systems may show an accrual for the part year reflecting the 8% (based on 4 weeks) the employee would be paid out if they left before the next anniversary.


If employees do not have any holidays entitlement at the time of the closedown (employees who have been working less than a year), the default position is that you must pay out 8% of gross earnings from the start of employment up to the start date of the closedown (less any leave in advance or paid with pay).  This will mean the employee has been paid an amount to represent the 4 weeks annual holidays entitlement up to the start of the closedown and will therefore change the employee’s anniversary date to the start date of the closedown.  For consistency, a nearby date can be nominated instead of the closedown start date, as closedown dates often change each year. 


Alternatively, you can also agree with the new employee to allow leave in advance (in which case the anniversary will stay the same).  This can be a better bet if the aim is to get employees to take leave at the quiet time of year, but can lead to problems with claiming back the payments on resignation if you are allowing the employee a significant amount in excess of their 8% gross earnings to that time.


Even if you do not have a closedown period, consider asking staff with a large amount of annual holidays to take them at this time, if it is a quieter time for your business.   You will only be able to require them to take their holidays if the entitlement has been outstanding for some time and you have gone through a process of repeatedly encouraging them to take the holidays and then formally warning them in writing you will set the dates if they do not take it. 


Public holidays can also cause problems.  You can only require an employee to work a public holiday if this is in their written employment agreement and the public holiday would otherwise be a working day for them.  All employees who work on public holidays are entitled to be paid time and a half, even if they don’t normally work that day, but only employees who normally work that day also get an alternative holiday (day in lieu).


If you have staff terminating their employment effective at Christmas, it is important to remember that if their annual holidays entitlement running from when they finish work covers the Christmas and New Year period, then it is treated as if their employment is continuing.  They will be entitled to the paid public holidays, in addition to their annual holidays. 


If you have any questions about leave, call Michelle Dean, Associate, on 303 9913.

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