Every year, small and medium sized business owners need to decide if, or when, they will close their business over the Christmas and New Year holiday break.
While many people look forward to some much-needed time off to relax, recharge, and spend time with family and friends, others may prefer to save their limited annual leave for different times throughout the year.
The decision to close will depend on the type of business you own. Some businesses, such as manufacturing, close to complete essential maintenance works or install equipment upgrades. Others, like construction companies or professional service providers, close as it’s a time of year that’s traditionally quiet and only minimal staff are required to respond to enquiries or take deliveries.
As a business owner, if you choose to close over the break, you need to understand your obligations when it comes to shutdowns that enforce employees to take annual leave.
What is compulsory annual leave?
If you close your business over the Christman and New Year holiday period, you can direct employees to take annual leave for the days they would normally work that aren’t public holidays.
Managing staff leave during closures involves navigating complex legal requirements under the National Employment Standards (NES), industry awards, enterprise agreements, and employment contracts
Under the NES, when you direct employees to take annual leave:
- Provide written notice of the shutdown at least 28 days prior. Some Awards require two or even three months' notice prior to the shutdown.
- If you hire a new employee after the notice has been distributed, you must provide them with written notice as soon as practicable.
- Ensure the direction to take annual leave is considered reasonable.
Before you choose to shut down your business over the holidays, it’s important to review your industry award, agreement, or employee contract carefully. Not all awards or enterprise agreements allow leave in advance or unpaid leave during a shutdown.
Monitoring and managing leave balances throughout the year can prevent staff from running out of leave days before or during the shutdown.
What about new employees?
If you have new employees or employees that haven’t accrued enough leave for the shutdown, you can discuss and offer several options. They can take leave in advance, provided their enterprise agreement or employment contract allows for it, leave without pay, or time off in lieu.
You must be transparent with communication, clearly explaining the business’s reasons for the closure, the dates, and expectations regarding annual leave.
Employee right to refuse annual leave
Most employees cannot refuse a reasonable direction to take annual leave if their award or agreement provides for a shutdown.
A reasonable request can include a business-wide closure except for essential or critical staff. This could be staff overseeing maintenance works or as points of contact for clients and customers.
To ensure all your employees are fully informed of your intention to close your business over the holidays, you should proactively consult with them in the lead-up to the closure. It’s also critical everyone is acutely aware of the date your business close and the date you re-open for new year trading and operations.
To mitigate any confusion, clearly document and distribute all arrangements in writing.
Don’t forget the right to disconnect
If you choose to temporarily close your business over the Christmas and New Year break you still need to adhere to the right to disconnect laws that were introduced on 26 August 2025.
If you’re going to contact an employee outside working hours or while they’re on leave, you need to keep in mind how you manage that contact and clarify your expectations of a reply from the employee. You need to consider the operational needs of your business compared to the wellbeing of your employees on leave.
If you’re unsure of your obligations when it comes to annual leave entitlements for your business shutdown, call and speak to the Peninsula team.
This article is for general information purposes only and does not constitute as business or legal advice and should not be relied upon as such. It does not take into consideration your specific business, industry or circumstances. You should seek legal or other professional advice regarding matters as they relate to you or your business. To the maximum extent permitted by law, Peninsula Group disclaim all liability for any errors or omissions contained in this information or any failure to update or correct this information. It is your responsibility to assess and verify the accuracy, completeness, and reliability of the information in this article.
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