If your business closes over Christmas, the work that makes the shutdown go smoothly happens now, not in the last week before the office shuts.
A closedown looks simple. Everyone stops, everyone takes leave, everyone comes back in January. In payroll terms, it's one of the busiest and most error-prone periods of the year, because it touches annual holidays, public holidays, new starters and holiday pay all at once.
Here's what I'd check before you lock the doors.
Give your team 14 days' notice
If you want your team to take annual holidays during the closedown, you need to give them at least 14 days' notice before it starts.
For a closedown starting on Thursday 24 December, that means notice by Thursday 10 December at the latest. Earlier is better, and putting it in writing means there's no question later about who was told what.
You can have one annual closedown in any 12-month period. It doesn't have to cover the whole business either - different parts of a workplace can close at different times.
Check everyone actually has enough leave
This is the one that catches people out.
For anyone already entitled to annual holidays, their existing entitlement is used for the closedown and paid in the usual way. The question is whether it covers the whole period.
It often doesn't for:
people who took a big chunk of leave earlier in the year
people whose anniversary date falls later than you think
anyone whose hours or days have changed since they started
If someone doesn't have enough, you can choose to let them take annual holidays in advance. They can also agree to use alternative holidays (days in lieu), take leave without pay, or use other leave.
What you can't do is assume it will sort itself out. It looks fine at a glance and then doesn't, three days before the office shuts.
New starters are handled differently
Anyone who hasn't yet been employed for 12 months isn't entitled to annual holidays yet, so the closedown works differently for them.
They're paid 8% of their gross earnings from the start of their employment up to the closedown, less anything already paid as holiday pay or leave in advance. They're not paid for the closedown itself, unless you agree to give them leave in advance.
You can also move their anniversary date to the start of the closedown (or a date close to it). That way their entitlement falls at the start of each future closedown, which makes the following Christmas much simpler.
The public holidays inside the shutdown
This summer has two public holidays that fall on a Saturday:
Christmas Day: Friday 25 December 2026
Boxing Day: Saturday 26 December 2026 - observed Monday 28 December if Saturday isn't a working day
New Year's Day: Friday 1 January 2027
Day after New Year's Day: Saturday 2 January 2027 - observed Monday 4 January if Saturday isn't a working day
For most Monday to Friday teams, that means public holidays on Friday 25 December, Monday 28 December, Friday 1 January and Monday 4 January.
A public holiday that falls on a day someone would otherwise work is paid as a public holiday. It isn't annual leave, and it shouldn't come out of their balance. Sick leave, bereavement leave and alternative holidays that fall during the closedown are paid the same way - as if the closedown wasn't happening.
The question payroll software can't answer on its own is whether that day would otherwise have been a working day for each person. For part-timers, casuals and anyone on a roster, it depends on what they actually work.
If anyone is working through
If part of your team keeps working over the break, check their public holiday entitlements before the pay run, not after. Anyone working a public holiday that would otherwise be a working day is paid time and a half, and earns an alternative holiday.
Your pre-closedown checklist
Confirm the closedown dates and who it applies to.
Give at least 14 days' notice, in writing.
Check every employee's annual holiday balance against the days they'll need.
Agree how any shortfall will be handled - leave in advance, alternative holidays or unpaid leave.
Identify anyone under 12 months and calculate their 8%.
Decide whether to move any anniversary dates to the closedown date.
Check which public holidays fall on otherwise working days for each person.
Confirm pay dates around the break, and any pay runs that need to move.
Checking now gives you options
Every one of these is easy to sort in November. Most of them are much harder to fix once the office has shut and the pay run has gone through.
If you're closing down this year and haven't looked at the balances yet, I'd love to help you work through it.
About the author
Karyn Campbell is a New Zealand payroll consultant and founder of Payroll Consult. With 5+ years running her own consultancy and a background in payroll software – including roles across client support, onboarding, and partnership management at a leading NZ payroll provider – Karyn brings a rare combination of technical knowledge and real-world compliance experience. She works with business owners, bookkeepers, and payroll teams across New Zealand, specialising in payroll audits, system reviews, and fixing complex payroll issues for teams that don’t work a typical 9-5.
