Deck the halls – it’s time to sort holiday pay

Tips for paying employees over public holidays and closedown periods

Between packing orders, wrapping up projects and putting your OOO on, as a business owner, there’s also the job of sorting holiday leave. Whether you’re shutting down for a time or have staff working through, getting holiday pay right can be a little bit fiddly.

To help ensure you pay your employees the right amount, here’s what you need to know in the lead-up to Christmas.

First, your legal obligations

As an employer, you’re legally required to meet certain leave obligations under the Holidays Act 2003. That sounds very official, but here are the key points:

  • Your employees are entitled to at least four weeks of paid annual holidays. This doesn’t include public holidays or sick leave.
  • When a public holiday falls on a day your employee would usually work, they’re entitled to a paid day off – even if they’ve only worked for you for a week. If they agree to work, then you must:
    • Pay them at least time-and-a-half for the hours they work on the day
    • Give them another paid day off later (a day in lieu).

Calculating holiday pay – things to consider

Maybe your employees don’t have enough leave, public holidays fall on weekends, or you’ve got special holiday rates – all these things can make calculating holiday pay more complicated.

Here are some common scenarios – and what to do:


Many businesses have an annual shutdown period. If that’s your business, you must:

  • Give your employees 14 days’ notice of the closedown and let them know they’ll need to take annual leave (if they’re entitled to it).
  • For employees who aren’t entitled to annual leave – you can decide to pay out their holidays in advance, or pay them 8% of their gross earnings from the start of their employment or their anniversary.

Public holidays

Every year, 25-26 December and 1-2 January are public holidays.

It can be a tricky time of year, especially if your business is open right through. It’s summer, and most employees want to spend their holidays with family and friends. That often means employees who don’t usually work those days or temporary staff will step in to fill roster gaps.

Pay calculations get even more complicated when an employee calls in sick or has a bereavement on a public holiday and can’t come to work. Here’s what to do when

  • an employee calls in sick on a public holiday. Under the Holidays Act 2003, this is called an unworked public holiday (not sick or bereavement leave). This means the employee will get paid for the day based on the hours they would have worked (whether or not they have sick leave).
  • an employee works for an hour, then goes home sick. In this case, the employee has worked on the day, and is entitled to time and a half for the time worked, plus an alternative holiday day if they would usually work on that day. If they have sick leave, they can use that for the remainder of the day, paid at normal rates.

Check your employment agreements

The easiest way to avoid confusion and make sure you and your staff enjoy the break is to check that your employment agreements are correct. Whether you’re paying holiday pay as a P.A.Y.G rate or you have a special public holiday rate, this should be in writing, and with easy-to-follow calculations for employees on their payslips. If you have any concerns, contact The HR Department for advice.