The festive season brings joy, family time, and… the yearly headache of managing the Christmas shutdown. One of the biggest challenges is annual leave. The rules have changed in recent years, and these changes have shifted the power dynamic regarding shutdown leave; importantly, employers can no longer require employees to take unpaid leave over the Christmas shutdown.
What do you need to know?
Understanding the Legal Landscape
The legal framework for directing annual leave during shutdowns differs depending on whether employees are covered by an award.
Award Employees
The relevant award dictates an employer’s ability to direct employees to take leave. Most modern awards now include a standardised shutdown clause that requires employers to give at least 28 days’ written notice of a shutdown period. Employers can direct employees to take accrued annual leave, provided the direction is reasonable, considering factors like business needs, employee circumstances, and notice period. However, you can no longer direct employees to take unpaid leave.
Non-Award Employees
There is more flexibility with respect to employees not covered by an award. Employers can direct these employees to take annual leave if the requirement is reasonable, and a Christmas shutdown could be considered reasonable. However, like employees covered by an award, you cannot force them to take unpaid leave.
Managing Leave When Employees Lack Sufficient Accrual
The inability to direct unpaid leave creates a challenge for employers. Here are some strategies to consider:
Negotiation
While the Fair Work Act changes implemented on 1 May 2023 prevent employers from directing award-covered employees to take unpaid leave during a shutdown negotiation is still a viable option. The key is to secure genuine agreement from the employee, ensuring they understand their rights and are not coerced. To encourage agreement, offer flexibility in scheduling or consider reduced hours with proportionate pay. If an agreement is reached, document it in writing to avoid misunderstandings or disputes later.
Explore Other Leave Options
If employees have accrued time off in lieu, RDOs, or are willing to take annual leave in advance (potentially resulting in a negative leave balance), these options can be used. Remember to check the relevant award or agreement for any specific rules.
Offer Alternative Work
If feasible, provide alternative duties during the shutdown for employees who don’t have enough leave. Of course, this depends on the nature of the work, the employee’s capabilities, and the terms of their employment arrangements.
Proactive Leave Management is Essential
The best way to avoid headaches during shutdowns is through proactive annual leave management. This includes:
Regular Monitoring
Keep a close eye on employee leave balances to identify potential shortfalls early.
Strategic Leave Approval
While you must be reasonable, you can refuse leave requests that would leave employees short for the shutdown.
Clear Communication
Make sure employees understand the need to maintain enough leave for shutdowns. Include this in your leave policy and communicate it regularly.
Leveraging Contracts and Agreements
You can use employment contracts to address shutdown periods and leave:
Employment Contracts
For new employees, consider including a clause outlining the expectation of taking unpaid leave during shutdowns if insufficient leave has been accrued. This should be presented as an agreement, not a condition of employment.
The Last Resort: Paying for the Shutdown Period
If an employee lacks sufficient leave and refuses unpaid leave, you may be obligated to pay them for the shutdown period, even if they’re not working. This is a cost to consider and may not be viable for all businesses.
How we can help
Managing Christmas shutdowns doesn’t have to be a nightmare. By understanding your legal obligations, proactively managing leave, and communicating effectively, you can create a smoother experience for both yourself, and your employees. Call us on (02) 9199 8597 or email us to ensure your shutdown procedures comply with all relevant laws and awards.
The information contained in this post is current at the date of editing – 13 December 2024.
