The lead up to the Christmas and New Year holiday period can be a hectic one, no matter what type of business you run. How busy your business becomes, depends on the type of industry you are in. Some of us are gearing up for a crazy 3 weeks in December getting everything ready for a two to three week shutdown for the holiday season. Whilst some of us are busy trying to accommodate customers who must have that that appointment in the week before Xmas. Others spend the Spring months getting stock and staff ready for the onslaught that Christmas in retail brings. Whatever industry you are in, there are some fundamentals about the Christmas and New Year trading period that affect all of us. It is worth being aware of them so you can be prepared for these well in advance.
At this time of year you need to deal with Public Holidays as well as people taking Annual Leave. You need to understand your obligations as an employer and also understand the cost implications leave can have on your business.
For those of you in the Retail and Services industries that will trade through the public holidays, you need to be aware that the remuneration of staff who work on those public holidays varies depending on whether or not they normally work that day, and what kind of contract they have. Some employees will be entitled to time and half and a day in lieu, whilst others will only be entitled to time and a half. Alternatively staff who would normally work that day and have chosen to take leave will only be entitled to their normal rate of pay. The Department of Labour has detailed guidelines to help you determine who gets what https://www.employment.govt.nz/assets/Uploads/tools-and-resources/flowcharts/public-holidays-flowchart.pdf.
It will cost you more to have a person who normally works on a Monday, to work on a public holiday Monday, than a person who doesn’t normally work a Monday – the pay rates will be the same but there is an Alternative Holiday entitlement there to account for.
All part-time or full-time staff are entitled to a public holiday when it falls. This includes if that public holiday falls on the weekend. In this instance the holiday may be ‘Mondayised’. See this flow chart for further clarity. https://www.employment.govt.nz/assets/Uploads/tools-and-resources/flowcharts/mondayisation-flowchart.pdf
The Annual Leave rates your staff need to be paid will vary depending on when they work, what rates they are usually paid and whether or not they regularly earn bonuses or commission. As such it is important to remember you may need to pay a person at a higher rate when they are off on annual leave.
A lot of people take time off at this time of year and head away. Some businesses choose to combat this by having an annual shutdown over the holiday period. If your business is in an industry that tends to have an annual shutdown at this time of year, then it can often be in your best interests to have one too. However, not all businesses can close at this time of year. If your business falls into this category than you need to allow for the fact that many of your customers might be away after Christmas, through New Year and into January. This will impact your business in terms of money flowing into your business – the customers won’t be there, so the money coming in will drop.
Similarly too, your suppliers could have an annual shutdown or be operating on reduced business hours. This could impact your ability to get the product you need in order to operate your business.
You need to be sure that you have purchased enough in advance of these closures & reduced hours, or have made alternative supply arrangements. The last thing you want is to have customers that want to see you at this time but you can’t provide them with a regular product or service because you didn’t make adequate plans in advance. Get in touch with your suppliers earlier rather than later to find out what their plans are across this period.
Depending on your business you may have wildly fluctuating cashflow at this time. Retail and service businesses should see a greater inflow of cash in December, with the outflow of cash generally moving into January for various reasons.
You need to ensure that your expectations and budget over this period reflect the actuality of what will happen to your business. Having accurate expectations and budgets set will ensure that you have a plan in place to cope with the additional pressure on Cashflow that January brings. For example employees on holiday and providing cover staff in place for them, whilst also paying holiday pay to your regular employees. November’s GST is due January 15th. Provisional tax is due January 15th. Employer contributions is due January 20th for December and then GST for December is due January 28th. Your supplier payments are also due on January 20th for December.
Depending on the type of business you are in, January is a huge month for cash outflows with reduced inflows, so you must plan for this in advance.
If your business has an annual shutdown at this time – it is important to continue to get your Customer Invoicing out at this time. This will help ensure timely receipt of your customers’ payment. You should make allowances for the fact that some of your invoices won’t get paid because a portion of customers are in an annual shutdown. This is something you should plan for and make alternative arrangements with your customers to ensure you are not caught short during this period.
Being aware of your obligations to your employees, together with the environment you operate in, will ensure that you are adequately prepared to survive the Christmas Holiday period.