Employers are reminded that the Federal Government's Paid Parental Leave Scheme (Scheme) commenced operation on 1 January 2011. This Scheme is designed to help employers retain skilled and valuable staff.

In most cases employers will not be responsible for administering the Scheme and distributing payments to employees until 1 July 2011 or earlier if they opt to do so. However, employers should immediately familiarise themselves with their obligations under the Scheme and take steps to integrate paid parental leave entitlements into their current workplace practices.

What is the Scheme?

The Scheme entitles eligible employees up to 18 weeks pay at the national minimum wage rate (A$569.90 gross as at 1 July 2010), amounting to around A$10,260.

Who is eligible for paid parental leave?

Employees will be eligible to receive paid parental leave entitlements provided they:

  • are the primary care-giver of a child born or adopted on or after 1 January 2011
  • have been engaged in work for a total period of at least 10 of the 13 months before the birth or adoption of their child with a break of no greater than eight weeks
  • have undertaken at least 330 hours of paid work during the 10 month period (an average of around one day of paid work per week)
  • are Australian residents
  • lodge a claim with the Family Assistance Office (FAO) for payment of paid parental leave - it is not an automatic entitlement
  • have not worked between the date of birth/adoption and their nominated start date for paid parental leave
  • earn less than A$150,000 taxable income (to be indexed) in the financial year prior to the date of birth/or adoption. This amount will include the employee's base rate of pay, any bonus payments, foreign income as well as income earned from assets such shares or property.

If the employee is eligible, the FAO will provide the necessary funds to the employer who will then be required to remit them on to the employee. Eligible employees will not be able to work from the date of birth until they cease receiving parental leave pay, but may "keep in touch" for up to 10 days during the period while receiving parental leave pay.

What are my business' obligations?

Although the Scheme will be fully funded by the Federal Government, employers will be required to act as "paymaster" and will be responsible for the administration of the Scheme. Employers must:

  • register the business with the FAO following a claim for paid parental leave by an eligible employee
  • make paid parental leave payments to employees on each regular monthly or fortnightly payday for that employee (employers will not be required to pay parental leave payments weekly)
  • withhold PAYG tax from each payment.

Importantly, employers will not be required to make superannuation contributions in respect of parental leave pay and eligible employees will not accrue annual leave entitlements during this period of leave.

Are parental leave payments made in addition to existing entitlements?

Parental leave payments made under the Scheme are in addition to and not in place of any other existing legal obligations an employer may have to provide paid parental leave entitlements. For example, if an employer has a contractual obligation to provide paid parental leave benefits, the Scheme will be in addition to those entitlements.

Implications for employers

Employers should ensure they are informed of their obligations under the Scheme before 1 July 2011, implement administrative measures to facilitate the Scheme in their workplace including adjustments to the payroll system and consider whether they wish to "opt in" and administer the Scheme prior to this date. Employers need to register online for the Scheme before 1 July 2011.

Employers should review their current paid parental leave obligations, including contractual obligations and workplace policies, and consider if any changes should be made. Employers who provide paid parental leave through an industrial agreement or other contractual agreements cannot simply reduce or cease such a payment for the duration of the agreement, unless negotiated or agreed.

Employers must take their obligations under the Scheme seriously as breaches of the Scheme may attract a maximum penalty of A$6,600 for individuals and A$33,000 for corporations.

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.