Australia: The New Paid Parental Leave Scheme – What It Means For Employers

In delivering the 2009-10 budget on Tuesday night, the Rudd government confirmed the introduction of a government-funded paid parental leave (PPL) scheme. The PPL scheme will have a significant impact on employers who already provide for paid parental leave as the government PPL scheme can be accessed in addition to employer provided entitlements. All employers will also be required to administer the payments.

The Details

The new PPL scheme, to take effect from 1 January 2011, entitles working mothers who have assumed primary care responsibility for a newly born child or primary care givers of an adopted child to 18 weeks paid parental leave at the rate of the federal minimum wage (currently $553.78 per week). Although this scheme will largely be accessed by mothers as paid maternity leave, the scheme does allow for transfer of entitlement if the primary carer returns to work before using all of their entitlement. Primary caregivers are eligible for the scheme if they:

• Are the primary carer of a child born after January 2011.
• Are the mother of a newborn child or parent of an adopted child.
• Earned less than $150,000 on the full financial year prior to the birth or adoption of a child.
• Have worked at least 330 hours over the 10 months preceding the birth or adoption of the child.
• Have worked continuously with one or more employers for at least 10 of the 13 months before the expected date of birth or adoption.
• Have not worked between the date of birth or adoption and the nominated start date for PPL.

PPL will be available to mothers who have a stillborn child. PPL will also be available to casuals, contractors and the self-employed.

Those not eligible for the scheme or who elect not to participate will continue to be eligible to receive the Baby Bonus and Family Tax Benefit B. Those who elect to take PPL will not be eligible for the Baby Bonus or Family Tax Benefit B, except in cases of multiple births where parents will not receive the Baby Bonus for the first child only.

This idea of electing to participate in the paid PPL scheme is interesting. This means an employee may 'shop' for the best option and might choose the Baby Bonus option if their employer provides for paid maternity leave under their employment contract if it is more beneficial. The government will establish an online calculator to help employees decide which option is best for them.

PPL can be taken in conjunction with or in addition to employer provided maternity or parental leave. So an employee may choose to take all of their employer provided maternity leave and then commence PPL once that leave expires.

PPL must be taken after the birth or adoption of a child and be completed within 12 months of the birth or adoption. However, PPL will not be paid after the employee returns to work unless the employee has been able to transfer the PPL to another primary caregiver (usually the father) or they are eligible for a 'keeping in touch' exception (an employee may be able to work up to 10 days in the 18 week period where work is necessary to strengthen the employment relationship).

PPL will be taxable income. Employees will not accrue leave entitlements while on PPL. At this stage, superannuation contributions are not payable by the employer during PPL but this decision will be reviewed in two years' time.

Who Pays?

PPL will be paid for by the government. Employees will make an application to the Family Assistance Office (FAO), which is part of Centrelink. The FAO will then provide the employer with the relevant funds for payment of PPL in advance of the employee's start date for PPL and in advance of the employer's usual payroll cycle for that period. Employers will be responsible for administering the fortnightly payments to the employee. The PPL scheme has been designed to include employer payments in an effort to maintain the employer/employee relationship while the employee is on PPL.

Existing Policies

Employers who already have maternity leave policies and provide paid maternity leave for employees out of their own pockets will need to carefully review these entitlements in light of the new PPL scheme. In some cases they will not be able to be amended or removed without employee consent. Where the entitlements are in an industrial instrument then the form in which they continue will be a matter of negotiation or will be subject to the current terms.

The DEEWR Portfolio Budget Statement on PPL clearly states:

Apart from whether an employer is entitled to repeal such policies, an employer should also consider the potential negative impact on its workforce of any decision to revoke a benefit or leave entitlement it currently provides.

The government has promised to provide further education for employers and employees about the PPL scheme prior to its introduction in 2011.

Implications For Employers

Understanding how best to manage parental leave is a critical issue for employers. The new rules allow time for employers to determine how they will respond to PPL, how it will be administered and how it will fit with existing entitlements. Getting parental leave right in your organisation is for many a distinguishing feature of the workplace. Employers are well advised to use the time between now and the introduction of PPL to determine and get their response right.

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