The Federal Government has announced the introduction of a paid parental leave scheme for parents who are the primary carers of a child born or adopted on or after 1 January 2011.

Key elements of the scheme are as follows:

  • It will be available to employees who have worked a minimum average of 1 day of paid work per week for at least 10 of the 12 months prior to the expected birth or adoption.
  • To be eligible the employee’s pre leave income must be less than $150,000 per annum.
  • The payment will be approximately $540 per week for a period of 18 weeks with payment made by the government, but through the employer. The payment does not include superannuation.
  • Employees can elect to continue to receive the Baby Bonus instead of the paid parental leave scheme.

As many employers already provide some form of parental leave payment it would be prudent for employers to now consider what approach they will take in relation to this benefit going forward. This is particularly important where new enterprise agreements are about to be negotiated, or new parental leave policies are about to be published.

There are numerous approaches that could be adopted in anticipation of the government’s scheme.

For example, if a current employer benefit was 12 weeks full pay for an employee on $1,000 per week, an employer could seek to:

  • simply let the government scheme apply for the first 18 weeks and then the employer provides paid leave for 12 weeks making a total of 30 weeks of partially and fully paid leave
  • convert the 12 weeks paid leave into a make up pay arrangement for the 18 weeks of the government scheme, thereby topping the $540 payment up to the employee’s actual $1,000 salary per week for the full 18 weeks
  • convert the 12 weeks at $1,000 into 22 weeks at $540 per week and add the government’s 18 weeks of $540 per week, thereby providing for 40 weeks partially paid parental leave.

If paid parental leave is a term of an enterprise agreement which is due for renewal, employers are recommended to consider the inclusion of these or similar options in the new agreement.