A shut-down is a period of time a Business decides to stop trading. This generally happens over slow periods of the year, more commonly over Christmas and New Year. Shut-down periods may affect Employees in different ways: Casual Employees are not paid over this period, whereas Full-Time and Part-Time Employees may be required to take leave.

Directing Employees to Take Annual Leave

Employees can be directed to take Annual Leave, providing that their Industry Award allows it. Most Awards include this clause; however, Employers may need to give their Employees a set amount of notice. The number of weeks of notice changes from Award to Award. The Fairwork Website has a dedicated page that outlines the rules of taking leave in advance set out in each Award.

Employees that are not covered by an Award can be directed to take Annual Leave providing that the request is reasonable. Alternatively, if the Business is covered by a Registered Agreement, they should check the specific terms of such Agreement.

When Employees do not have enough accrued leave to cover for the entire shut-down period, the business can choose to either pay them leave in advance, allowing them to go into negative leave balances, or direct them to take unpaid leave. This decision can be made on the case by case basis.

Types of Shut-Down Periods

There are substantial differences between a Shut-Down period where a Business chooses to temporarily stop trading (for example, during the festive seasons) and a Shut-Down period due to an enforceable Government Direction. When a Business is shut-down due to a Government Mandate, Employers can direct Employees to take Annual Leave at short notice. Furthermore, for Employees who do not have enough leave accruals to cover the shut-down period, Employers will need to put them on Stand-Down, instead of Unpaid Leave. A Stand-Down period is a period of unpaid leave. However, whilst on stand-down, the Employee is still entitled to accrue all Leave entitlements and to be paid for any Public Holidays that occurred during the period. Please refer to our Stand-Down User Guide if you need to put any Employees on Stand-Down.

Public Holidays over a Shut-Down Period

As shut-down periods normally happen over the festive seasons, it is important to exclude all Public Holidays from the leave calculation. Public Holidays, not worked must be paid as Ordinary Time Earnings. However, if Employees are required to work on Public Holidays (or days observed as Public Holidays), they may be entitled to be paid a penalty rate.

When processing a Leave Application, the Public Holidays full-time are automatically deducted as full-time days (7.6). If your workdays are not all made up of the same hours, or if you are dealing with Part-Time Employees, you may need to adjust those hours manually. We highly recommend that you process these types of leave applications, rather than request the Employee to submit them.

A User Guide on how to manage Public Holidays in Xero is available on our Knowledge Base website.

Paying Leave in Advance

It is also possible to pay leave in advance and calculate the tax across the shut-down period. Whilst on paid leave, employees are entitled to accrue additional leave. 17.5% Leave Loading may also be payable if covered in the Employee's classified Award.

Pay Annual Leave in Advance

If you wish to pay Annual Leave in advance to your Employees, you will still require to process a pay run for each pay period separately. As the pay periods are processed individually, the tax will automatically calculate correctly.

The Pay Date for each period you wish to pay in advance will need to change to the same pay date.

Process all Employee's Leave Applications for the Shut-Down period
Go to Payroll > Pay Employees
Click on [Add Pay Run]

è The Add a Pay Run screen opens
Note: This Pay period ends on Tuesday 28 December and it's normally paid the day after (Wed 29th December). However, the Business has decided to pay the Employees in advance on the 22nd December, which their last day of trade for the year.
Click on [Next]

è The Pay Run screen opens
Click on Payment Date

è The Set Payment Date pop-up screen opens
Change the Payment Date and click on [Save]
Finalise the Pay Run as per normal