Christmas and New Year are just around the corner and depending on your business and industry, this may be one of your busiest seasons when employees work more hours or a time when the business shuts down and employees go on leave. Either way, below is a guide of how to pay employees over the coming season.
Directing Employees to take leave during a shutdown
For businesses that intend to shut down over the Christmas and New Year’s period, it is important that employers are clear on how long the shutdown period will be, including the last day of business and first day back.
For employees covered by awards or registered agreements, there are rules on how and when employers can direct employees to take leave during a shutdown period. It is important for employers to understand these requirements and abide by them. For example, most awards require employers to provide employees with a minimum of 4 weeks’ notice in writing.
For award and agreement-free employees, employers can only require them to take a period of annual leave if the requirement is reasonable.
A requirement to take annual leave may be reasonable if, for example:
- the employee has an excessive annual leave balance, usually 8 weeks or more of annual leave (10 weeks if they are a shift worker)
- the business is being shut down for a period (such as between Christmas and New Year).
In assessing the reasonableness of such a request, the following factors are relevant:
- the needs of the employee and the business
- any agreed arrangement with the employee
- custom and practice of the business
- timing of the direction or requirement to take leave
- the length of the period of notice given
Some employment contracts also contain annual shutdown clauses that provide guidance on how to give an employee notice of the shutdown.
Read our Annual Shutdowns blog to understand your obligations if you intend to shut down over the holiday period.
Not enough annual leave
If an award or agreement allows it, employers and employees can agree that an employee take annual leave in advance or unpaid leave if the employee does not have enough annual leave to cover a shutdown period and employers.
Unless it is allowed under an award or agreement, employers cannot require their employees to take annual leave before they have accrued it or to take unpaid leave.
Award or Agreement without a shutdown clause
If the award or agreement does not include a shutdown clause or give an employer the ability to direct an employee to take excessive annual leave, employers will not be able to direct employees to take annual leave over the Christmas period but they can reach a mutual agreement with their employees to take accrued annual leave, annual leave in advance or unpaid leave during the shutdown period.
Employees that work during a shutdown
Some businesses may reduce their number of staff during a shutdown. Employees who continue to work should receive their normal pay including ordinary hours, penalties, allowances, and overtime if applicable.
If there are any public holidays during the shutdown period, employees must be given the day off or paid public holiday penalties in accordance with their award/agreement.
Overtime and work on a public holiday
Employer can only ask employees to work overtime or on a public holiday if it is reasonable to do so. A request will be reasonable depending on several factors including:
- the needs of the business
- the role and responsibility of the employee
- the employee’s personal commitments, like family or caring arrangements
- how much notice the employee gets about the extra hours
- what the employee’s contract says.
For requests to work on a public holiday, employers must consider all relevant circumstances.
Employers must consult the relevant award, agreement or contract for any additional entitlements like penalties, substitute day off or an added annual leave days for employees who work overtime or on a public holiday.
Employees have the right to refuse to work overtime or on a public holiday if they have reasonable grounds to do so.
Employees who do not working on a public holiday
Employers must pay full-time or part-time employees the base rate for the ordinary hours they would have worked had it not been a public holiday.
The base pay rate does not include:
- any incentive-based payments
- bonuses
- loadings
- monetary allowances
- overtime or
- penalty rates
An employee’s roster cannot be changed to deliberately avoid this payment.
Public holiday pay is paid regardless of whether an employee is on paid annual leave or during a shutdown.
Public holidays and RDO’s
Most awards and agreements will provide how to treat an RDO when a public holiday falls on it. The award may allow an employee to take a substitute day or may allow an employer to pay the RDO in addition to the public holiday pay.
A list of public holidays in each state can be found at https://www.fairwork.gov.au/employment-conditions/public-holidays
Employers should remember to account for how much leave an employee had and record all leave taken by an employee over the holiday period including where an employee cashes out annual leave.
Contact the BetterHR Advice team for any questions relating to what to pay your employees during the festive season.
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