The new national Paid Parental Leave
("PPL") scheme will operate from 1
January 2011. It will provide primary carers with up to 18 weeks of
parental leave pay at the rate of the national minimum wage,
subject to meeting certain eligibility requirements. These payments
will be fully funded by the Commonwealth government. Employers may
be required to distribute, but not fund, the PPL payments after 1
Employers who already fund their own workplace paid parental
leave schemes are not automatically entitled to reduce
employer-funded leave payments by the amount of payments provided
for in the PPL scheme. Employer-funded leave entitlements will
continue unaffected by the PPL scheme. Whether an employer-funded
scheme can be altered will depend on whether the employer is
obliged to continue an existing scheme at current levels, or has
discretion and capacity to vary it without agreement.
An employer can be obliged to provide paid leave to a new parent
by an industrial instrument, a contract of employment or a
legislative obligation (such as state and territory long service
leave legislation). However, if the employer provides paid leave
for new parents under a non-binding policy, the employer may have
discretion to alter that policy to account for the new PPL
Adjusting benefits available to employees because of the
availability of PPL scheme payments needs to be approached
carefully for two reasons. First, while in principle the
distinction between non-binding policies and obligations is clear,
in practice it can be difficult to draw this line. Policies can
become enforceable terms of individual contracts or can be
incorporated into industrial instruments as obligations. Second,
the Fair Work Act 2009 prevents "adverse action"
being taken against a current or future employee because of the
existence of a "workplace right". Any determination from
courts or tribunals on whether access to PPL scheme payments is to
be regarded as a "workplace right" will not be available
for some time.
Employers need to make a judgement whether reducing
employer-funded paid leave entitlements on account of the new PPL
scheme is a worthwhile or retrograde step. The reasons for
introducing an employer-funded paid scheme in the first place may
mean that retention and engagement goals are best met by simply
continuing existing schemes on top of the PPL scheme.
If reduction of employer-funded scheme payments is considered,
the crucial test is whether the employer is under an obligation to
provide them, or they are a benefit provided, and able to be
reduced or removed, at the discretion of the employer.
If an employer-funded paid parental leave scheme is called a
"policy" or "procedure", the scheme could still
have been incorporated into contracts of employment, or an
Care is needed when considering offsetting the PPL scheme
payments or otherwise changing an existing employer-funded scheme,
to avoid allegations that employees (including future employees)
are being subjected to unlawful "adverse action".
Enterprise bargaining demands for employers to fund parental
leave schemes, provide for superannuation contributions during
parental leave and "top-up" PPL scheme payments to normal
wage levels are likely to be strongly pursued by unions in future.
Anticipating those demands with a business case focussing on the
organisational needs will be useful preparation for upcoming
enterprise bargaining. Maximum flexibility may involve implementing
a non-binding policy addressing these demands, rather than agreeing
to create enforceable obligations in an enterprise agreement.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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