Most Australian businesses that close over Christmas treat the shutdown as a block of annual leave. Count the weekdays, deduct them from everyone's balance, reopen in January.
For the 2026-27 break, that arithmetic is wrong by three days per employee.
A business that closes on Thursday 24 December 2026 and reopens on Monday 4 January 2027 is shut for seven weekdays. Only four of them come out of annual leave. The other three are public holidays, and under the National Employment Standards a public holiday that falls inside a period of paid annual leave is not deducted from the leave balance. The employee is paid for the day, but the day does not cost them any of their accrued leave.
Three days per employee is not a rounding error. On a team of eight full-timers it is 24 days of annual leave that should still be on the books in January and, in a lot of payroll systems, will not be. The Fair Work Ombudsman is direct enough about how often this goes wrong that it puts the warning in its own guidance: employers should check whether they need to manually adjust their payroll system so that other paid leave is not incorrectly deducted during a public holiday.
This year the calendar makes it worse than usual, and there is a notice deadline in November that most owners have not diarised.
Why the 2026-27 break is unusually awkward
Christmas Day 2026 falls on a Friday. Boxing Day falls on a Saturday. When Boxing Day lands on a weekend, every state and territory adds a substitute or additional public holiday, which this year is Monday 28 December.
That produces three public holidays inside four calendar days, then a fourth on Friday 1 January 2027.
| Date | Day | What it is |
|---|---|---|
| 24 December 2026 | Thursday | Part-day public holiday in QLD from 6pm, and in SA and the NT from 7pm. An ordinary working day everywhere else. |
| 25 December 2026 | Friday | Christmas Day. Public holiday in all eight jurisdictions. |
| 26 December 2026 | Saturday | Boxing Day in all jurisdictions except Tasmania. South Australia observes it as the Proclamation Day holiday. |
| 28 December 2026 | Monday | Additional public holiday for Boxing Day in seven jurisdictions. In Tasmania this is Boxing Day itself. |
| 31 December 2026 | Thursday | Part-day public holiday in SA and the NT from 7pm. An ordinary working day everywhere else. |
| 1 January 2027 | Friday | New Year's Day. Public holiday in all eight jurisdictions. |
Two details in that table catch people out.
Tasmania does not observe Saturday 26 December. Tasmania takes Boxing Day on Monday 28 December instead of gazetting both days. For a Monday to Friday business this changes nothing. For anyone with a Saturday roster, it changes the pay rate for that Saturday: public holiday treatment in the other seven jurisdictions, an ordinary Saturday in Tasmania.
Christmas Eve is a part-day public holiday in three jurisdictions. In Queensland the public holiday runs from 6pm to midnight on 24 December. In South Australia and the Northern Territory it runs from 7pm to midnight, and those two also have a part-day public holiday from 7pm on New Year's Eve. If you run evening shifts in hospitality, retail, or any late-trading service, those hours are public holiday hours on what otherwise looks like a normal Thursday. The part-day hours are also excluded from an annual leave deduction, the same as a full day.
The seven-into-four arithmetic
Take the most common shutdown shape: close at the end of Wednesday 23 December 2026, reopen Monday 4 January 2027.
The weekdays inside that period are 24, 25, 28, 29, 30, 31 December and 1 January: seven days. Of those, Christmas Day, Monday 28 December and New Year's Day are public holidays. That leaves four days.
| Shutdown weekday | Treatment |
|---|---|
| Thursday 24 December | Annual leave (plus part-day public holiday hours from 6pm or 7pm in QLD, SA and the NT) |
| Friday 25 December | Public holiday, paid, not deducted from leave |
| Monday 28 December | Public holiday, paid, not deducted from leave |
| Tuesday 29 December | Annual leave |
| Wednesday 30 December | Annual leave |
| Thursday 31 December | Annual leave (plus part-day public holiday hours from 7pm in SA and the NT) |
| Friday 1 January | Public holiday, paid, not deducted from leave |
Four days of annual leave. Three days of public holiday pay. A payroll run that deducts seven over-deducts by three days for every full-time employee who normally works Monday to Friday.
A seven-weekday shutdown costs four days of annual leave, not seven. The three public holidays are paid at the base rate for the ordinary hours the employee would have worked, and they do not touch the leave balance.
The qualifier that matters is "ordinary hours the employee would have worked". Public holiday pay under the National Employment Standards goes to employees, other than casuals, who normally work on the day the public holiday falls. A part-timer rostered Tuesday to Thursday gets paid for Friday 25 December only if Friday is a day they normally work. If it is not, they are not paid for it and it is not deducted either. Saturday 26 December works the same way: it is only a paid public holiday for someone whose ordinary hours include Saturdays.
Casual employees are not entitled to payment for a public holiday they do not work. If a casual does work one, the award sets the rate.
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The notice deadline in November
This is the part with a date on it.
On 1 May 2023 the Fair Work Commission varied the shutdown provisions in 78 modern awards. The model term that went into those awards requires an employer to give at least 28 days written notice of a temporary shutdown to all affected employees. Where an award already required a longer period, the longer period stays.
Twenty-eight days before a shutdown that starts on Thursday 24 December 2026 is Thursday 26 November 2026.
| Shutdown starts | Written notice must be given by |
|---|---|
| Thursday 24 December 2026 | Thursday 26 November 2026 |
| Monday 28 December 2026 | Monday 30 November 2026 |
| Monday 4 January 2027 | Monday 7 December 2026 |
The notice period can be shortened, but only by agreement between the employer and the majority of affected employees. It is not something an employer can shorten unilaterally because the decision to close came late.
The awards varied in 2023 include several that cover the trades and service businesses most likely to close for a fortnight: the Building and Construction General On-site Award, the Electrical, Electronic and Communications Contracting Award, the Gardening and Landscaping Services Award, the Vehicle Repair, Services and Retail Award, the Animal Care and Veterinary Services Award, and the Health Professionals and Support Services Award, among others. The Fair Work Ombudsman's own worked examples for the new rules use the Cleaning Services Award and the Restaurant Industry Award.
If you are covered by an enterprise agreement rather than an award, the agreement's own shutdown clause governs, and it may say something different.
You can no longer direct unpaid leave
The second half of the 2023 change is the one that reshapes what you do about an employee whose leave balance will not cover the break.
The Commission's majority held that it had no power to include a term in an award allowing an employer to require an employee to take leave without pay. The practical effect: an employer cannot direct an employee to take unpaid leave during a shutdown. You can require paid annual leave, provided the requirement is reasonable. You cannot require unpaid leave to fill the gap.
What is left is agreement. An employee who does not have enough accrued annual leave to cover the whole shutdown can agree with their employer on other options for the uncovered days, such as using accrued time off in lieu, taking annual leave in advance, or taking unpaid leave by consent. Some employers find useful work inside the award's duties provisions instead.
Then comes the detail that surprises people who have negotiated their way to agreed unpaid leave:
Where an employee has agreed to take unpaid leave during a shutdown, they may still be entitled to payment for the public holidays that fall inside it. Whether they are depends on whether they have ordinary hours of work on those days, what the award or agreement says, and what the employer and employee agreed.
So an employee on agreed unpaid leave across the 2026-27 break may still be owed Christmas Day, Monday 28 December and New Year's Day. The unpaid arrangement covers the ordinary working days. It does not automatically sweep up the public holidays sitting inside them. This is the opposite of the general rule that public holidays during unpaid leave are not paid, which is exactly why it gets missed.
A shutdown is not a stand down
A related mistake is reaching for the stand down provisions instead. The Fair Work Ombudsman states plainly that a shutdown is not the same as a stand down, and the distinction decides whether anyone gets paid.
Section 524 of the Fair Work Act lets an employer stand an employee down without pay only for a period when the employee cannot usefully be employed because of one of three things: industrial action, a breakdown of machinery or equipment the employer cannot reasonably be held responsible for, or a stoppage of work for any cause the employer cannot reasonably be held responsible for. A shortage of work or a downturn in trading conditions does not meet that test.
A planned Christmas closure is a decision the business makes. It is not an external stoppage, so it is not a stand down, and an employer cannot use the stand down provisions to close the doors over Christmas and stop paying people. What governs a planned closure is the shutdown clause in the award or agreement, which is the clause the Commission rewrote in 2023. Where an enterprise agreement or contract has its own stand down term, section 524 does not apply at all and the instrument's own terms govern.
What a closed business still pays
It is worth stating the total plainly, because "we shut, so we are not paying anyone" is a common and expensive assumption.
For every full-time employee who normally works Monday to Friday, a business closed from 24 December 2026 to 1 January 2027 pays:
- Four days of annual leave, drawn from the accrued balance
- Three days of public holiday pay at the base rate for ordinary hours, drawn from nothing
- Superannuation on both, because annual leave and public holiday payments are ordinary time earnings
The three public holiday days are a genuine cost of the fortnight that does not reduce any liability on the balance sheet. The four annual leave days do reduce a liability you were already carrying. They are not the same kind of expense, and a provision that treats the whole shutdown as a drawdown of accrued leave will understate the cash cost of the break.
If you want to put a number on what an employee costs across a period like this, our employer cost calculator works through base pay, super, payroll tax and workers compensation. For the leave balances themselves, the annual leave calculator handles accrual, and the casual loading calculator covers the casual side where public holiday entitlements do not apply.
Long service leave is handled differently
One more wrinkle, because long service leave gets taken over summer more than any other time of year.
Whether an employee on long service leave is paid for a public holiday that falls inside it is not a National Employment Standards question. It is set by the long service leave legislation of the relevant state or territory, and those eight Acts do not agree with each other. If someone is taking long service leave across the Christmas break, check the Act that applies to their state rather than assuming the annual leave rule carries across. Our long service leave calculator sets out the accrual rate and qualifying period for each jurisdiction, which differ more than most employers expect: South Australia and the Northern Territory accrue 13 weeks at ten years where the other six accrue 8.6667 weeks.
A checklist for the next six weeks
Working backwards from the deadline:
- Decide the exact shutdown dates now. The notice clock runs from the first day you are closed, so the dates set your deadline.
- Check your award or agreement for the notice period. Twenty-eight days is the model term in the 78 varied awards. Some awards and many enterprise agreements require more.
- Get the written notice out by late November. For a 24 December start that is 26 November 2026. Put it in writing to every affected employee, not just on the wall of the smoko room.
- Pull every leave balance before you send the notice. You need to know who cannot cover the break, because the conversation with those employees has to be an agreement, not a direction.
- Reach agreement individually with anyone short. Time off in lieu, leave in advance, consented unpaid leave, or available work. Record what was agreed.
- Load the public holidays into payroll, including 1 January 2027. A shutdown that crosses the new year crosses a calendar year in your payroll system too, and a holiday table that stops at 31 December 2026 will not flag New Year's Day.
- Check the leave deduction before you approve the pay run. Four days, not seven, for a Monday to Friday full-timer. Confirm the public holidays were paid and not deducted.
- Check part-day holidays if you trade evenings in QLD, SA or the NT. 6pm on Christmas Eve in Queensland, 7pm in South Australia and the Northern Territory, and 7pm on New Year's Eve in those last two.
The honest summary
The rules here are not complicated so much as asymmetric. Public holidays inside paid annual leave are not deducted. Public holidays inside unpaid leave normally are not paid, except during an agreed shutdown, where they might be. Boxing Day is a public holiday in seven jurisdictions and not in Tasmania. Christmas Eve is a public holiday in three jurisdictions, but only after 6pm or 7pm.
None of that is discoverable from a calendar. All of it changes what you pay in the first week of January, and the one deadline that cannot be fixed afterwards falls in November.
Sources
Public holiday dates for every state and territory are from the Fair Work Ombudsman's 2026 public holidays and 2027 public holidays listings, cross-checked for New South Wales against the NSW Government public holidays page. The payment rules for public holidays not worked, and the treatment of public holidays inside paid and unpaid leave, are from the Fair Work Ombudsman's guidance on not working on public holidays. The shutdown notice requirement and the removal of the power to direct unpaid leave are from the Fair Work Ombudsman's new shutdown rules for awards and the Fair Work Commission's decision in the four yearly review of modern awards, [2022] FWCFB 246.
This is general information about the statutory position, not advice about your business. Your award or enterprise agreement can require more than the minimum, and where it does, it governs.