The annual Christmas close down and how to calculate annual leave loading

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Posted November 17, 2022

With the Christmas period soon upon us, many salon owners will be considering whether to close down and for how long. Strict rules apply for close downs, so everyone needs to be prepared.

The rules governing periods of close down for employers and employees under the national workplace relations system are derived from the National Employment Standards (NES) in the Fair Work Act and modern awards or enterprise agreements.

Award covered employees

The NES permits modern awards to allow employers to direct employees to take annual leave in reasonable circumstances.

Annual close down under the Hair and Beauty Industry Award 2020

Clause 24.3 in the Award provides:

24.3 Temporary close-down

(a) If an employer intends to close down its operations at all or part of a workplace for a particular period (temporary close-down period), then the employer must give the affected employees at least 4 weeks’ notice of a temporary close-down period.

(b) The employer may require any affected employee to take a period of paid annual leave during a temporary close-down period.

Implementing a Close Down

Notice

The Hair and Beauty Industry Award 2020 requires an employer to provide employees at least 4 weeks’ notice of a temporary close-down period. HABA recommends that the notice is given in writing.

The following is an example of a notice to employees of a close down:

Christmas / New Year Close down
Employees are advised that the salon will close for the purposes of granting annual leave to employees, from the ordinary finishing time on Friday 23 December 2022. Work will resume at the normal commencement time on Tuesday 3 January 2023.

What if an employee does not have enough accrued annual leave to cover the close down period?

The Hair and Beauty Industry Award 2020 does not contain a provision allowing employees to be directed to take unpaid leave during a close down.

In these circumstances, an employer and employee could agree to the employee taking annual leave in advance, or the employee taking unpaid leave. The agreement should be documented in writing.

Managing requests for annual leave

Salon owners intending to exercise their right to implement an annual close down period are advised to manage annual leave requests from employees during the year to ensure that employees will have sufficient annual leave accrued at the time of the close down.

An employer may have regard to the operational requirements of the business in considering requests for annual leave (which may include the need to keep sufficient annual leave accrued for a planned close down) but must not unreasonably refuse to grant leave.

How to calculate annual leave loading using an example under the Hair and Beauty Industry Award 2020

Employees covered by the Hair and Beauty Industry Award 2020 have an entitlement to be paid annual leave loading during periods of annual leave.

Leaving loading is paid ‘during a period of leave’ and is not calculated on a day-by-day basis.

Below is the annual leave loading clause in the award:

24.2 Annual leave loading

(a) In clause 24.2 a relevant weekend penalty amount is an applicable penalty rate prescribed by clause 23—Penalty rates for working on weekends, less the minimum hourly rate.

(b) During a period of accrued annual leave an employee will receive a loading calculated for the period of leave on the employee’s minimum hourly rate specified in clause 17—Minimum rates or clause 18—Apprentice, trainee and graduate rates, as applicable.

(c) The loading for a period of leave will be the greater of the following 2 amounts:

(i) 17.5% of the employee’s minimum hourly rate for all ordinary hours the employee would have worked if they were not on leave during the period; or

(ii) the relevant weekend penalty amounts payable to the employee for all ordinary hours they would have worked on a weekend if they were not on leave during that period.

NOTE: Section 90(2) of the Act contains provisions relating to an employee’s entitlement to payment for any untaken paid annual leave when employment ends.

Example:

If a full-time hairdresser whose ordinary hours of 7.6 per day are worked Tuesday to Saturday applies for a week of annual leave the question is: which is greater, 17.5% on the entire period or 25% applied to the Saturday hours (and 0% on the other days of leave)?

Option 1) 17.5% applied to the whole period of leave:

38 x $24.76 = $940.90 per week, base rate. On this amount, 17.5% leave loading = $164.66

Option 2) With the Saturday 33% penalty applied to the period of leave.

30.4 hours Tuesday-Friday + 0% loading.

33% loading applied on $188.18 (base rate for 7.6 hours on Saturday) = $62.10

In this scenario, 17.5% applied to the whole period of leave is greater than 25% applied to the Saturday rate, so the 17.5% would be the applicable leave loading.

Where to find more information

HABA members can call the HABA Advice Line and speak to a workplace adviser on 02 9221 9911.