Quick Summary
Quick Summary
- Employers can direct employees to take annual leave during a shutdown only if their modern award or enterprise agreement allows it.
- The direction must be reasonable, in writing, and given within the notice period specified by the applicable award.
- Employees who do not have enough accrued leave can agree to take leave in advance or unpaid leave if the award permits.
- Full-time and part-time employees must be paid their base rate for public holidays that fall during a shutdown, even if they are on annual leave.
An annual leave shutdown lets an employer close the business for a period, typically between Christmas and New Year, by directing employees to take accrued annual leave. Under the Fair Work Act 2009, an employer can only direct employees to take annual leave during a shutdown if the applicable modern award or enterprise agreement contains a clause permitting it. The direction must be reasonable, in writing, and within the award’s notice period. For awards without shutdown clauses, employees can voluntarily agree to take leave, but the employer cannot force it.
What Is an Annual Leave Shutdown Under the Fair Work Act?
An annual leave shutdown, sometimes called a Christmas shutdown or holiday close-down, is a period when a business temporarily closes and directs employees to take paid annual leave. The National Employment Standards set out the minimum entitlement to four weeks of paid annual leave per year for full-time and part-time employees, but the rules for how leave can be taken during a shutdown are governed by the specific modern award or enterprise agreement that covers the workplace.
Most awards include shutdown clauses, but each differs in notice required and structure. For leave directed outside shutdown periods, see our guide on when an employer can force an employee to take annual leave.
When Can an Employer Direct Annual Leave During a Shutdown?
An employer can direct employees to take annual leave during a shutdown if three conditions are met: the applicable award or agreement has a shutdown clause, the direction is reasonable, and the employee is given written notice within the required timeframe. If the award has no shutdown clause, the employer cannot direct employees to take annual leave. However, the employee and employer can agree that the employee will take annual leave, including leave accrued in advance, or unpaid leave for the period.
For award-free employees, the employer can direct annual leave if the direction is reasonable. The stand down provisions under section 524 of the Fair Work Act are separate from shutdown rules.
How Much Notice Must Employers Give for a Holiday Shutdown?
The notice period an employer must give depends entirely on the applicable award or agreement. Many awards require at least 28 days written notice before the shutdown begins, but some allow the employer and a majority of affected employees to agree on a shorter period. The notice must be in writing and state the dates the business will close and when employees are required to take annual leave.
For example, the Manufacturing Award requires at least 28 days written notice. Always check your specific award for the exact notice period, and if you operate in a sector with public holiday trading, review your hospitality award wage rates and penalty rates.
📅 Free Webinar: Getting Ready for the Holiday Season
The Fair Work Ombudsman is hosting a free webinar for small business owners on Wednesday 14 October 2026 at 2 pm AEDT, covering Christmas casuals, shutdowns, leave approvals and public holiday entitlements. Register through the Fair Work Ombudsman webinars page.
Key Takeaways
Key Takeaways for Employers
- ✓Check your modern award or enterprise agreement for shutdown clauses before directing any annual leave.
- ✓Give written notice within the required timeframe, typically 28 days for many awards.
- ✓Do not deduct pay for public holidays that fall during a shutdown period.
- ✓Reasonable requests to work on public holidays must consider the employee’s personal circumstances.
- ✓Casual employees are not entitled to payment for public holidays they do not work.
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What If Employees Do Not Have Enough Annual Leave?
Employees who do not have enough accrued annual leave to cover the full shutdown period have two options if the award or agreement permits: they can agree to take annual leave in advance, accruing a negative balance that will be offset against future entitlements, or they can take unpaid leave for the shortfall. The employer cannot force either option without the employee’s agreement. Any agreement should be documented in writing.
Working During an Annual Leave Shutdown: Who Stays On?
An employee who continues to work during a shutdown, such as skeleton staff maintaining core operations, should receive their normal pay. If a public holiday falls during the shutdown period, the employee should be given the day off without loss of pay, or paid public holiday rates under their award if they work on that day.
Before the shutdown begins, discuss whether the employee will need to be contactable. The right to disconnect applies during shutdown periods, so clarify contact expectations in writing.
Public Holiday Pay During End-of-Year Shutdowns
Christmas Day, Boxing Day, and New Year’s Day are national public holidays, and additional dates vary by state and territory. When a full-time or part-time employee does not work on a public holiday, they must be paid their base rate for the ordinary hours they would normally have worked. This applies even if the employee is on paid annual leave during a shutdown.
The base pay rate excludes any loadings, overtime, or penalty rates the employee would normally receive for working that day. Employers should check whether their payroll system needs a manual adjustment to ensure annual leave is not incorrectly deducted for public holiday dates during the shutdown. For detailed guidance on managing leave entitlements and payroll, see our payroll compliance guide for employers.
If an employee works on a public holiday, their award may provide penalty rates, a substitute day off, or extra annual leave. The Fair Work Commission publishes award wage tables with exact rates.
Hiring Christmas Casuals and Young Workers
Many businesses take on casual employees during the holiday period to handle increased demand. Casual employees do not accrue paid annual leave and are not entitled to payment for public holidays they do not work. During a shutdown, a casual is not paid. If a casual would normally have been rostered to work on a public holiday, some awards provide a partial payment, so check the specific terms. Use compliant employment agreement templates for seasonal staff.
Frequently Asked Questions
Yes, but only if the employee’s modern award or enterprise agreement includes a shutdown clause that allows it. The direction must be reasonable, given in writing, and provided within the notice period specified by the award. If the award or agreement has no shutdown clause, the employer cannot direct employees to take annual leave, though employees can voluntarily agree to take leave. Award-free employees can be directed to take annual leave if the direction is reasonable.
The notice period depends on the specific modern award or enterprise agreement that covers the employee. Many awards require at least 28 days written notice, but some allow employers and a majority of affected employees to agree on a shorter period. Employers must check their particular award for the exact notice requirement. For example, the Manufacturing Award requires 28 days written notice, while other awards may specify different timeframes.
If the award or agreement allows it, employees can agree with their employer to take annual leave before they have accrued it, or to take unpaid leave for the remaining period. The employer cannot force an employee to take leave in advance or unpaid leave without the employee’s agreement and an award clause permitting this arrangement. Always document the agreement in writing.
Yes. Full-time and part-time employees must be paid their base rate for the ordinary hours they would normally work on a public holiday, even if they are on annual leave during a shutdown. The base rate does not include loadings, overtime, or penalty rates the employee might normally receive. Employers should check their payroll systems to ensure annual leave is not incorrectly deducted for public holiday dates that fall during the shutdown.
Yes, an employee can refuse a request to work on a public holiday if they have reasonable grounds. Whether a request is reasonable depends on factors including the needs of the business, the employee’s role, their personal commitments such as family or caring arrangements, how much notice they receive, and what their employment contract says. Employers should consider all relevant circumstances before making the request.
Public holiday penalty rates are set by the employee’s modern award or enterprise agreement and vary by industry. Most awards prescribe penalty rates of 150% to 250% of the base rate for work on public holidays, with some providing a substitute day off or extra annual leave instead. Use the Fair Work Ombudsman Pay Calculator to determine the exact rate for your award. Casual employees receive their casual loading in addition to the penalty rate.
Yes, the right to disconnect applies during shutdown periods. Before closing for the end-of-year period, employers and employees should discuss whether the employee will be required to be contactable or remain on call. If certain employees continue working during the shutdown to keep core operations running, clarify expectations about after-hours contact in writing. An employee cannot be required to monitor or respond to work communications outside their working hours unless it is unreasonable not to do so.
No. Casual employees do not accrue paid annual leave under the National Employment Standards. During a shutdown, a casual employee simply does not work and is not paid for the shutdown period. A casual employee is also not entitled to payment for public holidays that fall during a shutdown unless they would normally have been rostered to work on that day, in which case some awards provide a partial payment.
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