Christmas, annual closedowns, managing public holidays and annual leave: what employers need to know

Under the Holidays Act, the Christmas and New Year period can create complicated leave and payroll issues. 

If your business has an annual closedown, or would like to, now is the time to make sure employees have been given the required notice, you know how annual leave will be treated, and payroll is ready to deal correctly with public holidays and employees who do not yet have annual leave entitlement. This guide summarises what employers need to know. 

What is a closedown?  

An annual closedown is a period when all or part of a workplace closes and employees are required to stop work. A closedown does not necessarily mean shutting the entire business. Different parts of a business can have different closedown periods, and a closedown can also apply to particular employees while the wider workplace remains operating.  

An employer can generally only have one annual closedown in any 12-month period and employees must be given at least 14 days' notice before it starts. This should be provided for in an employment agreement, or it may have become tradition through custom and practice of the business. Notice should be provided in writing. 

Can an employer require employees to take annual leave during a Christmas closedown? 

Yes. However, there is a difference between accrued and entitled annual holidays. An employee only becomes entitled to annual leave every 12 months. While an employee accrues annual leave during the 12 months, the entitlement vests on the employee's annual leave anniversary date. Employees can be directed to take accrued annual leave to which they have an entitlement, i.e. it has become vested, but not ongoing accrual. An employer cannot require an employee to take leave in advance. 

What is an employee paid during the closedown? 

If an employee is entitled to annual holidays, they can be required to use that entitlement during the closedown, provided the required notice has been given.  

If an employee does not have enough annual leave entitlement to cover the whole closedown period, the employer can agree to allow annual leave in advance. Alternatively, the parties can agree to use another form of leave, such as alternative holidays or unpaid leave.  

An employer may allow an employee without annual leave entitlement to take leave in advance. However, there is no obligation to do so, and this can create a liability for an employer if the employee does not return to work. In those circumstances, the employer will have overpaid the employee and may be left trying to recover the repayment. Accordingly, this should be carefully considered by employers. 

An employee not yet entitled to annual holidays when the closedown begins, must generally be paid by the employer 8% of their gross earnings up to the start of the closedown, less relevant amounts previously paid, including annual holidays taken in advance. Their annual holiday anniversary is then reset to the start of the closedown, or another nearby date chosen by the employer.  

Can an employer require an employee to take unpaid annual leave during a closedown? 

Yes. An employee without annual holiday entitlement during a closedown can be required to take unpaid leave (to discontinue their work) provided they are given at least 14 days' written notice. 

What happens when a public holiday falls during the closedown? 

A closedown does not remove an employee's public holiday entitlements. 

If a public holiday falls on a day that would otherwise be a working day for the employee, they are entitled to the public holiday rather than having the day deducted from their annual leave balance.  

Where an employee works on a public holiday, the usual public holiday rules apply. Where this is an otherwise working day, an employee who works is entitled to time and a half for the work performed and an alternative holiday. If it is not an otherwise working day, the employee receives time and a half for working but not an alternative holiday.  

Determining whether a day is an "otherwise working day" can be straightforward for employees with fixed hours, but more complicated where working patterns vary, or if an employee is casual. An employee's actual pattern of work should be considered.  

What happens if an employee gets sick during the closedown? 

If an employee becomes sick on a day during the annual closedown that would otherwise have been a working day, and they have annual holiday entitlement, that day may be treated as sick leave rather than annual leave. The same principle can apply to bereavement leave and other qualifying statutory leave.  

That differs from an employee simply becoming sick while already taking ordinary annual leave outside a closedown. In that situation there is not the same mandatory requirement for the employer to substitute sick leave, although the employer may agree to do so.  

What if an employee is affected by family violence or bereavement while on annual holidays? 

If an employee is affected by family violence or a bereavement while on annual holidays, an employer must allow the employee to take family violence or bereavement/tangihanga leave (if they are entitled) rather than annual leave. 

What are the public holidays employers should be aware of over the 2026 - 2027 Christmas - New Year season?

For the 2026-2027 Christmas - New Year period, public holidays are:

• Friday 25 December 2026, Christmas Day
• Saturday 26 December 2026, Boxing Day (observed Monday 28 December 2026)
• Friday 1 January 2027, New Year's Day
• Saturday 2 January 2027, Day after New Year's Day (observed Monday 4 January 2027)

Five checks for employers before the Christmas break 

Before payroll is processed and everyone heads on leave, check: 

1. Is this genuinely an annual closedown? You can generally only operate one statutory closedown in a 12-month period.  
2. Has at least 14 days' notice been given? Written notice is the best practice approach.  
3. Which employees are already entitled to annual holidays? The obligations are different for those who are not yet entitled. 
4. Have public holidays been identified separately from annual leave? A qualifying public holiday during the closedown should not simply be deducted from annual leave.  
5. Does payroll know about the closedown? In particular, check the treatment of newer employees, employees taking leave in advance and staff with variable working patterns. 

Planning prior to Christmas can avoid both incorrect holiday payments and difficult conversations when everyone returns in January. 

If you are unsure how the Holidays Act applies to your Christmas closedown, annual leave arrangements or public holiday payments, DTI Lawyers can help employers work through the practical and legal requirements before the closedown begins. Our team of specialist employment lawyers are available by phone on 07 282 0174, or by email [email protected].