Managing pay/leave issues over the festive season
Many businesses find the Christmas period is one of quiet trading and so will close part, or all, of the business temporarily, for a couple of weeks on and around Christmas. The following are some considerations to keep in mind over the Christmas break:
- how this period is paid
- how public holidays interact with annual leave being taken
- what happens if an employee is sick over this time and claims personal leave
- managing reasonable refusals to work on public holidays; and
- managing annual leave requests over peak trading times.
How to pay over a shutdown period
National system employers (i.e. typically businesses that are Pty Ltd or Inc. and are financial corporations or carrying on trading activities) can require employees to proceed on annual leave during shutdown periods where:
- they are award or agreement free; or
- they are award or agreement covered and the industrial instrument provides the ability to direct employees to proceed on annual leave during shut down periods; and
- the requirement is reasonable.
Where an industrial instrument is silent on the matter of annual shutdowns, there will generally be no ability to direct employees to take annual leave during a shutdown period.
Additionally, consideration must be had to the length of time over which the shutdown occurs, as it may be considered unreasonable to enforce a lengthy shutdown period and require staff to use a large proportion of their accrued annual leave. Generally, a one to two-week period would be considered reasonable.
Shutdown provisions in awards or agreements usually require the business to provide staff with a minimum notice period before shutting down. This is often about four weeks, but it is important to check any underpinning industrial instrument as to the specific requirement in each case. If the notice is not prescribed in the appropriate instrument, then it is the employer’s responsibility to provide reasonable notice.
If an employee has insufficient paid annual leave accrued to cover a Christmas shutdown period, the employer and employee can agree to authorised unpaid leave over the period.
Where there is no such agreement, there will be an obligation to pay employees for the ordinary hours they would have worked during that period. This is the case, despite the business being closed. This payment is necessary in order to meet the business’s contractual obligations to its staff.
In some instances, an industrial instrument may contain provisions requiring unpaid leave be taken where an employee has insufficient annual leave accruals to cover a shutdown.
Employers are recommended to check the relevant industrial instrument accordingly.
In a recent decision by the Fair Work Commission, as part of the four-yearly review of modern awards, affording annual leave in advance of accruals is a provision that has been inserted into many modern awards.
While in many instances there is a mechanism to provide this entitlement to staff, it is important to consider the ramifications of allowing this during annual shutdown periods. For example, where annual leave is granted in advance of accrual, it may be difficult to recover this, particularly where an employee leaves before accruing the deficit amount.
If your business has a practice of shutting down over Christmas, it is recommended advising new employees upon commencement and ensuring that all staff and managers manage annual leave throughout the year to ensure sufficient accruals are present at the time of shut down.
How to handle public holiday pay in this period
Where an employee is on annual leave over the Christmas period, and that period contains a public holiday, then the employee will need to have their annual leave recredited for the public holiday day and instead be paid for the ordinary hours they would have worked on the public holiday.
This is because the Fair Work Act 2009 (Cth) (the FW Act) states that if a public holiday falls during a period of annual leave, then the employee is taken not to be on annual leave on that day and instead must receive payment at their base rate for the ordinary hours they would have worked on that day. The same applies in the case of personal/carers leave.
Injury or illness during a shutdown period
If an employee falls ill or gets injured during a period of annual leave, they may be entitled to be paid personal leave and have their annual leave recredited for the time spent accessing personal leave. This is subject to the employee satisfying notice and evidence requirements, as outlined in the FW Act.
In the event that an employee applies for personal leave over a period that contains a public holiday, they will be taken not to be on personal leave on the public holiday and instead be entitled to payment at their base rate of pay for the ordinary hours they would have worked on that day, if not for the public holiday.
Reasonable refusals and managing end of year absences
The FW Act allows an employer to request an employee work on a public holiday, so long as that request is reasonable. The following are some of the considerations outlined in the FW Act when determining whether a request is reasonable:
- the nature of the workplace or enterprise (including operational requirements)
- the employee’s personal circumstances
- whether the employee is entitled to overtime, penalty rates or other compensation
- the type of employment
- the amount of notice given of the requirement to work and the amount of notice of any refusal.
It is best practice to organise rosters for these days well in advance to give sufficient time for issues to be addressed promptly. If working public holidays is to be the norm, then ideally this should be reflected in the contract of employment. Employees not showing up for scheduled shifts is a common problem and so employers need to stay vigilant and promptly manage employee non-attendance on and around public holidays. If an employee does not attend a rostered shift and they do not provide a valid reason for their absence (such as being ill or injured) the employer may be able to take disciplinary action.
Managing annual leave requests
The FW Act provides that accrued paid annual leave may be taken as agreed between the employer and employee, provided an employer must not unreasonably refuse a request to take paid annual leave. This means, where an employee has accrued annual leave and they apply to take that leave, their employer can’t refuse the request unless they have reasonable grounds for doing so.
Where you have multiple requests for leave and it is not operationally viable to approve all of these, it is important to ensure that your decision to approve/not approve is not based on unlawful discriminatory grounds. This might include family responsibility, illness or injury, age, gender or some other prescribed discriminatory ground. If, due to Christmas being a peak trading period/a busy time of year for the business and the granting of annual leave during this time is not operationally viable, this should be clearly communicated to staff from the outset and well in advance of the period concerned.
This might include family responsibility, illness or injury, age, gender or some other prescribed discriminatory ground. If, due to Christmas being a peak trading period/a busy time of year for the business and the granting of annual leave during this time is not operationally viable, this should be clearly communicated to staff from the outset and well in advance of the period concerned.
It is advisable to include a provision in employees’ contracts making it clear that annual leave requests around this time of year will generally not be approved.
It is also advisable to supplement this with a leave policy that reinforces this point. It is still critical, however, for employers to consider each annual leave application on a case-by-case basis, to ensure they are meeting their obligations under the FW Act. In some instances, the leave may need to be granted where it would be unreasonable not to do so.
State system employers
The above information is relevant to national system employers. While many of the requirements above are similar for employers and employees operating in the state industrial relations system, there are subtle differences. It is, therefore, recommended the employers seek professional advice on these matters before taking any action.
If you would like more information about annual shut downs or any other matters outlined above, contact the CCI Employee Relations Advice Centre on (08) 9365 7660 or email email@example.com