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HG Alert: Paid Parental Leave Scheme now locked in - 22 Jul 2010

Over the next 12 months, Australian employers will face further changes to the minimum safety net of employment entitlements. The Paid Parental Leave Bill 2010 (Cth) received Royal Assent on 14 July 2010, and introduces a national Paid Parental Leave Scheme, which is scheduled to commence on 1 January 2011.

For the first half of 2011, a six-month grace period will apply. In that period employers will be able to "opt-in" to administer parental leave payments, should they choose to do so.

From 1 July 2011, all employers will be obliged to administer the Scheme for their eligible employees.

Overview of the Paid Parental Leave Scheme

The main features of the Scheme are as follows:

  • Subject to qualifying criteria, full-time, part-time and casual employees will be eligible for parental leave payments.
  • Paid parental leave will be a government funded "entitlement" calculated at the Federal minimum wage rate, adjusted annually. This rate is currently $569.90 per week for a full time employee.
  • Parental leave payments will be payable for up to a maximum of 18 weeks to the primary carer, which may be a combination of maternity and paternity leave.
  • Parental leave payments are payable in only the first year after the birth of a child or, in the case of adoption, on placement of a child.
  • Superannuation contributions will not be included, and employers will not be obliged to pay contributions during the paid parental leave period. However, this arrangement will be reviewed after two years.
  • Eligibility for parental leave payments will be determined solely by the Family Assistance Office.
  • Employers will only be responsible for administering parental leave payments for their employees who, broadly, satisfy the following criteria:
    - Those who are an Australian citizen or permanent resident that live, and will continue to live during the paid parental leave period, in Australia (extending to some New Zealand citizens who hold special category visas).
    - Those who earn less than $150,000 gross per annum and have not already received a "baby bonus" for the child for whom the entitlement is claimed.
    - Those who have, or will have, been employed continuously by their employer for at least 12 months immediately before the expected or actual date of birth of the child.
  • Shorter-term employees may be eligible to receive parental leave payments directly from the Family Assistance Office, provided they have worked at least 10 months over the previous 13 month period.

Your role as an employer

The following administrative process will apply for employers, subject to paid parental leave rules still to be published:

  • A claim for paid parental leave must be lodged by the employee directly with the Family Assistance Office. This may be lodged three months before the expected date of birth. The Family Assistance Office will determine eligibility and issue a determination to the employer, where the claim is approved.
  • An employer must respond and give an acceptance notice to the Family Assistance Office within 14 days, containing:
    - a declaration to the effect that the employer accepts the obligation to pay instalments to the employee;
    - details of the bank account into which parental leave instalments can be paid;
    - pay cycle information; and
    - additional information (yet to be) prescribed by the paid parental leave rules.
  • Paid parental leave funds will then be paid in advance by the Family Assistance Office to the employer either fortnightly or in three equal lump sum payments.
  • Parental leave payments are then paid by the employer to the employee as part of the regular pay cycle. PAYG income tax instalments must be withheld.
  • Where the Family Assistance Office believes that an employer has not complied with its Scheme obligations, it may refer the matter for investigation by the Fair Work Ombudsman.

Existing paid parental leave schemes

In May 2009, the Productivity Commission estimated that approximately 54 percent of women and 50 percent of men in the workforce are already able to access paid parental leave voluntarily offered by their employers under industrial instruments, common law contracts and workplace policies. These schemes typically offer far less than 18 weeks support.

Important rules will apply under the Scheme for existing paid parental leave already offered by employers:

  • Parental leave payments cannot be set-off against existing employer payment obligations that are binding - for example, payments under paid parental leave schemes provided for in enterprise agreements or employment contracts.

    In these cases, employees may be able to "double-dip" and claim simultaneously under both schemes. They will also be entitled to access other forms of paid leave such as annual or long service leave in conjunction with paid parental leave payments.
  • Non-binding obligations to make parental leave payments (under workplace policies that do not form part of the contractual terms of employment) may be varied to take into account an obligation to make parental leave payments under the Scheme.

Depending on their existing industrial arrangements for paid parental leave, employers may be able to incorporate government funding under the Scheme into those arrangements, and offer greater benefits without significant additional expense.

By using the funding from the Scheme to subsidise enhancements to their own paid parental leave schemes, employers might, for example:

  • restructure existing paid parental leave arrangements to provide for top-up pay at, or near, replacement wage levels;
  • agree to make voluntary superannuation contributions on parental leave payments; or
  • increase the duration of existing and superior paid parental leave entitlements by up to 18 weeks, or even longer.

However, in many cases, express agreement with the employee will be required. In other cases, it might be necessary to negotiate a variation of collective bargaining arrangements under the procedures prescribed for that purpose by the Fair Work Act 2009 (Cth).

Implementing the Scheme

Employers should now review their existing paid parental leave arrangements, if any, and consider the changes necessary to appropriately implement the Scheme.

For more information about the operation of the Paid Parental Leave Scheme, or how your business may be able to incorporate the Scheme into your existing paid parental leave arrangements, please contact HopgoodGanim's Industrial and Employment Law team.