Factory Closedown

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Last Updated: Wednesday, 26 February 2025 14:19

Annual leave is made available after 12 months of continuous service and in KeyPay made available on the pay period end after the employee anniversary. Prior to this it is up to the employer to grant leave in advance which deducted from the entitlement made available at anniversary.  This is usually granted when a factory closes down for a period such as at Christmas, however, for a recent employee there may not be enough % of earnings to cover this, requiring LWOP or negotiation.

If LWOP exceeds 1 week the period of continuous employment is reduced. Under the Holidays Act this can be adjusted for in two ways.

  1. Extend the anniversary date by the period of LWOP when it exceeds 1 week.
  2. Reduce the time granted as available leave at anniversary in proportion to that time.

The minimum of ether adjustment is therefore two weeks. For example, an employee working a 40 hour week on 4 weeks per year entitlement would normally receive 160 hours. If their LWOP was two weeks then at their anniversary the leave due is 160 x 50/52 = .9615 x 160 = 153.84 or 6 hours less.

KeyPay automatically compensates for this by using several measurements to determine continuous employment.  Earnings and time worked when the anniversary date is applied and the days between start date and anniversary.  Once the time employed has been calculated if this is less than 51 weeks the amount of leave due is calculated from the earnings converted to time by dividing by the leave rate instead of granting the full 160 hours.  The actual method of the three calculations used is the one giving the greatest leave. KeyPay takes this approach in all its calculations and always favours the employee.
If a calculation results in exactly 0.5 cents, KeyPay always rounds up.  Bankers rounding depends on whether the amount is odd or even and is therefore, on average, neutral to the bank. 

If instead the anniversary date is advanced by the LWOP duration, the full entitlement is granted, but they have then had to work that extra time to get it. Either way over the long term the cost to the employer is the same.

KeyPay also has the option to configure a payroll wide date for all employees anniversary. It is usual to set this 1 pay prior to the factory close down date. As this may vary in relation to the pay period end date this may need to be more than this.  In the case of Christmas, a good date is 1st December and ensures that all employees get a leave allocation in time.
When such a date is set all new employees receive this as their anniversary. Thus their first year is extremely likely to be less than a full year and they will receive a reduced entitlement in proportion as its not a full year. However, from that point forward its 52 weeks to the next anniversary. From the employer point of view they are agreeing to those working a shorter period in the first year that going forward they have now started their first year of continuous employment.

In all cases, the Holidays Act requires that these adjustments must be negotiated in good faith.