Employers' duty to act as paymaster under the
Government's paid parental leave scheme starts from 1 July
The six month transitional period that has applied to the the
Federal Government's new paid parental leave scheme from 1
January 2011, whereby any parental leave payments to be made under
the scheme are to be administered by the Family Assistance Office
(FAO), is set to expire. From 1 July 2011,
employers will be responsible for acting as "paymasters"
under the scheme.
Under the scheme, eligible working parents who have a child born
or adopted after 1 January 2011 are entitled to be paid up to 18
weeks pay at the national minimum wage rate, which will rise to
A$589.40 gross per week from 1 July 2011. The payments are fully
The scheme is available to Australian residents who are the
primary carer of the child, have satisfied certain attendance
requirements and who have a taxable income of A$150,000 or less in
the previous financial year.
Employees who wish to access the scheme must lodge a claim with
the FAO. Thus far almost 65,000 people have lodged claims.
To date, a six month transitional period has applied if the FAO
has considered that an employee has an entitlement to paid parental
leave, it has administered the payments to the employee directly.
This is unless the relevant employer has elected to
"opt-in" to the scheme.
On 1 July 2011, the transitional period will have expired and
employers will be required to act as "paymasters" under
the scheme. This means that employees will still need to make
claims with the FAO but the FAO will notify employers if they are
required to provide an employee with parental leave pay. If the
employee has an entitlement, the FAO will provide the necessary
funds to the employer which will then be required to act as a
"paymaster" and forward them onto the employee.
Importantly, parental leave pay under the scheme is in addition
to and not in place of any other existing legal obligations an
employer may have to provide paid parental leave entitlements. This
means that employers cannot use the statutory scheme to off-set any
paid parental leave benefits they are legally required to provide
employees. For example, if an employer has a contractual or award
obligation to provide paid parental leave benefits, the Government
scheme is in addition to those entitlements. However, if an
employer has a non-binding policy regarding paid parental leave,
the employer may seek to vary that policy to take into account the
The Fair Work Ombudsman will have the power to investigate
employers that have allegedly failed to make parental leave
payments to eligible employees or otherwise do not meet their
obligations under the scheme. Breaches of the scheme may attract a
maximum penalty of A$6,600 for individuals and A$33,000 for
Employers should inform themselves of their responsibilities
under the scheme and put measures in place to ensure they are in a
position to make parental leave payments if they are notified by
the FAO that they are required to make such payments from 1 July
Given that parental leave payments made under the scheme are in
addition to and not in place of any legal obligations an employer
may have to provide paid parental leave entitlements, employers
should consider their current obligations with respect to paid
In particular, employers should review their current parental leave
obligations and determine the source of any such rights to
determine whether or not they can lawfully make any changes to
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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