Every December the same question arrives: the office is closing between Christmas and New Year, and the employer says the days come out of your annual leave. Can they do that? Mostly yes, and the Fair Work Act names a Christmas shutdown as the textbook example of a reasonable direction. The question that actually matters is the second one, which is what happens when your leave balance does not stretch far enough. The answer there is different, and it favours you more than most people realise.
Key takeaways
- Your employer can direct you to take accrued annual leave over a shutdown, if your award or agreement contains a shutdown term and the direction is reasonable.
- The modern award shutdown term requires 28 days written notice, shortenable only by agreement with the majority of affected employees.
- A direction can only reach leave you have actually accrued.
- If your balance runs out, unpaid leave requires your written agreement. It cannot be imposed.
- Public holidays inside the shutdown are not deducted from your leave balance.
Can your employer direct you
Section 93(3) of the Fair Work Act allows a modern award or enterprise agreement to include a term requiring an employee to take paid annual leave, "but only if the requirement is reasonable". Section 94(5) gives the same power for employees not covered by an award or agreement, and its Note removes any doubt about shutdowns:
"A requirement to take paid annual leave may be reasonable if, for example: (a) the employee has accrued an excessive amount of paid annual leave; or (b) the employer's enterprise is being shut down for a period (for example, between Christmas and New Year)."
So the Christmas shutdown is not a grey area. It is the example Parliament chose. What remains arguable is whether a particular direction is reasonable on its facts, not whether shutdown directions can be reasonable in principle.
The 28 days written notice
Most modern awards carry the 2023 model shutdown term. Taking the Clerks Award as the reference, clause 32.5 requires the employer to give at least 28 days written notice of a temporary shutdown period, or any shorter period agreed between the employer and the majority of relevant employees.
Two details follow from that. An employee engaged after the notice has gone out must be given notice as soon as reasonably practicable after being engaged. And the direction itself must be in writing and must be reasonable, so a verbal announcement at a team meeting does not satisfy the clause.
Clerks (Private Sector) Award 2020 MA000002 clause 32.5, marked PR751030 ppc 01May23, read from the consolidated award text. The clause is the model shutdown term inserted across modern awards in 2023, so the same shape appears in most awards. Check your own on the award index.
If you have no leave left
This is the question people actually have in December, and it is where the answer turns. A direction can only reach annual leave to which the employee has accrued an entitlement. It cannot create a negative balance and it cannot reach leave you have not yet earned.
For any part of the shutdown not covered by a direction, clause 32.5(g) of the model term says the employer and employee may agree, in writing, for the employee to take leave without pay. The operative word is agree.
So an employer cannot simply place an employee with no accrued leave on unpaid leave over the shutdown. They need that employee's written agreement. Without it, the usual position is that the employee remains entitled to be paid, because it is the employer who has chosen to close. In practice employers offer options: annual leave in advance, unpaid leave by agreement, or being paid. Taking leave in advance is its own agreement and creates a debt if you leave before accruing it.
Public holidays inside the shutdown
A Christmas to New Year shutdown contains Christmas Day, Boxing Day and New Year's Day at minimum, plus any substituted days where those fall on a weekend. Section 89(1) is unambiguous about how they are treated:
"If the period during which an employee takes paid annual leave includes a day or part-day that is a public holiday ... the employee is taken not to be on paid annual leave on that public holiday."
Those days are not deducted from your balance, and you are paid for them under section 116 at base rate for your ordinary hours. A shutdown spanning ten calendar days therefore costs far fewer than ten days of leave. Work out the exact cost for your state with the annual leave planner, and check which days are substituted on the public holidays hub.
If no award covers you
Section 94(5) applies. An employer may require an award-free employee to take paid annual leave where the requirement is reasonable, and the Note quoted above names a Christmas shutdown as an example of exactly that. The 28 day notice figure comes from the award term rather than the Act, so an award-free employee's notice period depends on their contract and on what is reasonable in the circumstances. Very short notice is a strong argument that the requirement was not reasonable.
Common questions
Can my employer make me take annual leave at other times of the year?
Yes, in two situations: a shutdown, and an excessive accrual. Under the model award term, excessive means more than 8 weeks of accrued leave, or 10 weeks for a shiftworker. Our excessive annual leave guide covers the process.
Can I refuse to take leave over the shutdown?
If the award contains a shutdown term, the notice was properly given and the direction is reasonable, then generally no. What you can contest is reasonableness, for example where notice was short or the shutdown was announced after you had approved plans.
Do I keep accruing leave during a shutdown?
On paid annual leave, yes, leave continues to accrue. On agreed unpaid leave, generally no, and the period usually does not count as service. See do you accrue leave while on leave.
Does leave loading apply to shutdown leave?
Yes. It is ordinary paid annual leave, so your award's loading rule applies in the normal way. See how to calculate leave loading.
Author & reviewer
Sarah has spent over a decade advising Australian SMBs on Fair Work, NES compliance, and payroll. Based in Sydney, she has worked across hospitality, retail and professional services.