Christmas Shutdown Payroll, Leave & Payday Super Guide

A Christmas shutdown is a well-earned break for lots of small businesses. However, closing the doors also brings a run of payroll decisions, and some of them can’t wait until December.

This is also the first Christmas under Payday Super. So, before you lock up, here’s what to sort out for annual leave, public holidays and super.

Plan your Christmas shutdown leave now

Do you want staff to take annual leave while you’re closed? The rules depend on what covers them. That’s why the planning starts in October or November, not the week before Christmas.

Check your award or agreement

According to the Fair Work Ombudsman, you can direct employees to take annual leave during a shutdown only if their award or enterprise agreement allows it. Most awards have rules about how and when you can do this. Each one is different, so check yours before you give any directions.

For award and agreement-free employees, you can only direct them to take annual leave if the direction is reasonable.

Put it in writing, with enough notice

In most cases, Fair Work says the direction must be reasonable, in writing and given within the required notice period. Since 1 May 2023, many awards require at least 28 days’ written notice of a temporary shutdown. Some awards also let you agree on a shorter notice period with a majority of the affected employees.

For example, if your Christmas shutdown starts on Thursday 24 December, 28 days’ notice means staff need it in writing by Thursday 26 November. Your award may say something different, though, so check it first.

Hiring after you’ve sent the notice? Under the General Retail Industry Award, for instance, you must also give written notice to anyone you engage later who will be affected, as soon as reasonably practicable. Fair Work also has a free Notice of requirement to take annual leave template to help.

Staff without enough leave

Some employees won’t have built up enough annual leave to cover the whole break. If their award or agreement allows it, they can agree with you to take annual leave in advance or unpaid leave instead. Staff with time off instead of overtime pay (TOIL) may also be able to use it.

Even if the award doesn’t allow you to direct leave, employees can still agree to take it. On the other hand, if an employee doesn’t agree, Fair Work notes you may need to pay their usual wages. So get every agreement in writing and keep it with your payroll records. Fair Work’s Agreement to take annual leave in advance template is a good starting point.

Public holidays during the Christmas shutdown

The Christmas and New Year public holidays this year are:

Friday 25 December: Christmas Day
Saturday 26 December: Boxing Day (Proclamation Day holiday in South Australia), except in Tasmania
Monday 28 December: additional public holiday (in Tasmania, this is Boxing Day)
Friday 1 January 2027: New Year’s Day.

Queensland, South Australia and the Northern Territory also have part-day public holidays on Christmas Eve evening. In addition, South Australia and the Northern Territory have one on New Year’s Eve evening.

Don’t take them out of annual leave

Here’s a common payroll slip. When a public holiday falls during an employee’s paid annual leave, it isn’t counted as annual leave under the National Employment Standards. Instead, you pay the employee for the public holiday if it falls on a day they normally work. Their leave balance stays untouched for that day.

For example, take a full-time employee who normally works Monday to Friday and is on leave for the whole break. They get public holiday pay for 25 December, 28 December and 1 January. As a result, those three days don’t come out of their annual leave balance.

Fair Work notes this may not apply to leave above the minimum National Employment Standards entitlement. It also warns that you may need to adjust your payroll software manually. So check your leave settings before your shutdown pay runs.

Casuals and the break

Casuals don’t get paid annual leave during a Christmas shutdown. They also aren’t paid for public holidays they don’t work. If casuals do work over the break, check the public holiday rates in their award. Taking on extra staff for the busy weeks before you close? Our payroll checklist for Christmas casuals covers onboarding and pay rates.

Payday Super over the Christmas shutdown

From 1 July 2026, super guarantee must reach the employee’s fund within 7 business days after each payday. This is the first holiday season under these rules, so plan your final pay runs before you close.

Leave pay attracts super

The ATO lists annual leave, and public holiday pay for days not worked, as qualifying earnings. That means super is payable on them. The ATO also says annual leave loading is included in qualifying earnings unless it’s clearly linked to lost overtime. To leave it out, you need written evidence, such as the award or a documented policy.

Paying leave in advance

Some businesses pay holiday pay before the break in a separate payment. If that payment sits outside your usual pay cycle, it may be an out-of-cycle payment. In that case, the ATO says the super is due 7 business days after the employee’s next regular payday.

Count business days carefully

For Payday Super, weekends don’t count as business days. Neither does a public holiday that applies across a whole state or territory, even if it isn’t a holiday where you are. With 25 December, 28 December and 1 January all on weekdays, your deadlines stretch over the Christmas shutdown.

Even so, the ATO’s advice is to pay super on payday and to allow time for your clearing house to process it. Also, if a payday falls while you’re closed, make sure someone can still run payroll and approve the super payment.

Your Christmas shutdown payroll checklist

Check your award or agreement for shutdown rules and notice periods.
Send written shutdown notices in time (28 days under many awards).
Give notice to anyone you hire later, if your award requires it.
Agree in writing with staff who don’t have enough leave.
Set up public holidays so they don’t come off annual leave balances.
Include annual leave and leave loading in qualifying earnings, unless you have evidence otherwise.
Pay super for every pay run, including any paid before the break.
Make sure someone can run payroll if a payday falls during the break.

Paying out several weeks of leave at once can also squeeze your bank balance. Our guide on how good bookkeeping improves cash flow can help you plan ahead. Your payroll also feeds into your BAS through PAYG withholding. For BAS and tax help, our sister business BN Tax explains how BAS works for Australian businesses.

Let BN Books look after payroll over the break

BN Books has helped Australian small businesses with bookkeeping and payroll for more than 20 years. We’re 100% remote and work with businesses Australia-wide. We can set up Christmas shutdown leave in your payroll software, run your pays, and keep Payday Super and STP reporting on track.

See our payroll and bookkeeping services, call us on 1300 790 113, or get in touch online. We know small business!

This article is general information only. Leave and public holiday rules depend on the award or agreement that applies to your business. Check with the Fair Work Ombudsman or a professional for advice on your situation.

Sources: Fair Work Ombudsman: Rules and entitlements during the end-of-year holiday season · Fair Work Ombudsman: Not working on public holidays · ATO: Payment deadlines for Payday Super · ATO: What payments are qualifying earnings