No fortnight in the Australian payroll calendar packs in more public holidays — or more payroll errors — than Christmas to New Year. Christmas Day, Boxing Day and New Year's Day arrive in quick succession, states add their own variations, and when any of them falls on a weekend, substituted or additional days appear with rules that differ by state and by award. Most December payroll mistakes aren't exotic; they're scenario confusion. So here are the scenarios, one by one.
First: establish this year's actual days
Before any scenario logic, get the season's gazetted list for your state(s): which dates are public holidays, and where a holiday falls on a weekend, whether the following weekday is a substitute (replacing the weekend day) or an additional holiday (both days count — some states do this, which can mean part-days and extra days appearing in the list). Multi-state employers: each employee's entitlements follow where they work, so the same week can hold different holiday counts across your team. This thirty-minute check against the official state lists, done in November, prevents the majority of January's payroll corrections — because every scenario below depends on whether a given date is a public holiday for a given person.
The scenarios
Permanent employee, doesn't work the holiday, would ordinarily have worked it. The base case: paid their ordinary hours for the day at base rates, no leave deducted. The test is whether the day is one they'd ordinarily have worked — the Tuesday-to-Saturday worker isn't paid for a Monday holiday they never work, but watch the substituted-day logic: if the substitute lands on their working day, the entitlement follows it.
Permanent employee, works the holiday. Public holiday penalty rates per their award — commonly in the region of double-and-a-half time, award-specific — for hours worked. Some awards offer alternatives by genuine agreement (a substitute day off, or different combinations); these require actual agreement, documented, not roster fiat. Also remember the request architecture: employers may request work on a public holiday only where reasonable, and employees may refuse on reasonable grounds — the December roster conversation, had early and like adults, is the compliance mechanism here.
Permanent employee, on annual leave across the period. The rule payroll systems get wrong most: public holidays falling within annual leave are paid as public holidays, not leave — the days don't deduct from the leave balance. An employee on leave from 21 December to 4 January loses far fewer leave days than the calendar span suggests once the holidays are carved out. Configure the leave requests now; un-deducting balances in February is nobody's favourite job.
The shutdown overlap. During a close-down (directed under the award clause, as we've covered separately), the same carve-out applies: holiday days are paid as holidays; only the remaining working days consume annual leave (or the agreed alternatives for short balances). The shutdown notice should spell this arithmetic out — it's good payroll and good morale, since the season costs people less leave than they fear.
Casuals. Paid (at the award's public-holiday casual rates, which typically stack loading and penalty per the award's formula) only for hours actually worked. No work, no pay — but minimum engagement periods still apply to any shift offered, and the early communication of the season's shift pattern is basic decency with planning value.
Part-timers. Same logic as full-timers, keyed to their pattern: paid for holidays falling on their ordinary days, not for the others. The substituted-day wrinkle bites part-timers hardest — a holiday observed on Monday matters differently to the Monday worker and the Thursday worker, and the gazetted list decides, not intuition.
The payroll hygiene that wraps it
Three configuration checks before the December runs: the holiday calendar in your payroll/roster system updated with the state-correct dates including substitutes; leave bookings across the period entered so the carve-outs apply automatically; and the post-run variance review (the governance habit we've written about) given extra attention on the holiday-week pays — this fortnight is where misconfigured systems announce themselves. STP will report whatever you ran, so running it right beats explaining it later. None of this is hard; all of it is specific — which is exactly the kind of compliance that rewards a November hour and punishes a January assumption.
FAQ
Do we have to pay penalty rates if we give a day off in lieu instead?
Only where the award provides that option and the employee genuinely agrees — and the substitute arrangements have their own conditions. Default position is the penalty rates; alternatives are exceptions with paperwork.
An employee called in sick on a public holiday they were rostered to work. What applies?
They're not paid public-holiday rates for hours not worked; whether the day is paid as the public holiday (if they'd ordinarily work it) versus personal leave interacts with award specifics — handle with the actual clause open, and consistently.
Are the days between Christmas and New Year public holidays?
Mostly no — apart from the gazetted days, the in-between days are ordinary working days (which is precisely why shutdowns consume annual leave for them). Check your state's list for any local additions rather than assuming.
Holiday payroll is a once-a-year configuration test most systems quietly fail. Our free Business Health Check includes payroll setup — five minutes, fewer February corrections.
If this is the problem you are working on, Valont’s People hub runs award compliance and hr & ir advisory as part of a connected back office, and the award finder shows where to start.
About the author
Nick Lucock
Chief Executive Officer, Valont
Nick Lucock is the Chief Executive Officer of Valont and leads its day-to-day operations across Finance, People, Operations and Growth. He runs the team that does the work Valont publishes about: the bookkeeping, BAS and payroll runs, the award interpretation on every pay cycle, the IT and security layer, and the advisor cadence that keeps an owner's back office current. Nick writes the practical side of Valont's library, the processes, systems and tools that keep Australian SMEs compliant and growing, and he is the author of most of the operational articles on the site. He works with owners across construction and trades, health, hospitality and professional services.
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