The Paid Parental Leave Bill was released in draft form by the Federal Government on 4 May 2010 and subsequently introduced to Parliament on 12 May 2010. A second Bill dealing with transitional issues was introduced on 25 May 2010.  

The proposed scheme has been, for the most part, welcomed by both employer and employee interest groups. However, it is clear that the scheme is still in need of some tweaking, and to this end submissions are being made as part of a Senate Community Affairs Committee Inquiry on the issue.  

Despite the title, the Bill does not create any new entitlement to parental leave as such. What is does is provide for payments for up to 18 weeks at the weekly federal minimum wage, wholly funded by the Federal Government for the primary caregivers of children who are born or adopted on or after 1 January 2011.  

In order to be eligible for the payments workers (including contractors and the self employed) will need to meet certain criteria, including:  

  • A work test requiring the worker  
  • to have worked at least ten of the thirteen months preceding the birth or adoption without any breaks of more than 8 weeks, and  
  • to have worked at least 330 hours during that period (average of one day per week)  
  • An income test requiring the worker to have earned less than $150,000 (indexed) in the last full financial year  
  • An Australian residency test requiring the worker to be either an Australian citizen or resident, and to be living in Australia at the time of the birth/adoption and during the parental leave pay period  
  • That the worker has not returned to work during the parental leave pay period, and  
  • That the worker, and his or her partner, do not also claim the baby bonus.  

Any unused amount may be directed to another person who subsequently becomes the primary caregiver of the child in certain circumstances.  

The Bill also provides “keeping in touch” provisions, which allow an employee to return to work for 10 days during the parental leave payment period in order to maintain a connection with the workplace.  

In most cases, the role of employers will be confined to acting as “paymasters” for the scheme in receiving funds from the Government and paying these to eligible employees as part of their normal pay cycle. However, the Bill provides for a six month transition period (from 1 January 2011) during which employer involvement is voluntary and the Family Assistance Office will administer payments for employers who are not yet participating.  

The requirement for the employer to act as paymaster applies only in relation to employees who have completed at least 12 months continuous service. The Family Assistance Office will administer the payments for all other recipients.  

The process for obtaining paid parental leave will generally involve:  

  • A worker making a claim in the approved form  
  • A payability declaration being made in relation to that worker if eligible  
  • Where a payability declaration is in force, an employer declaration being made and provided to the employer (where applicable)  
  • The employer approving or applying for review of the declaration within 14 days  
  • Where an employer declaration is in force, the employer making the required payments to the employee on each pay day, provided that the employer has received sufficient funds from the Family Assistance Office.  

Submissions made to the Senate Committee have highlighted some key issues with the draft Bill.  

The ACTU position is that there are insufficient links between the Bill and relevant provisions of the Fair Work Act. In particular, the ACTU points out that there is a discrepancy between the eligibility for the parental leave payments and the entitlement to actually take unpaid parental leave under the National Employment Standards (NES).

Professor Andrew Stewart, consultant to Piper Alderman, has also highlighted the Bill’s failure to address the interaction between the parental leave payment scheme and any existing rights to paid parental leave that an employee might be entitled to under an employer’s policy, a contract of employment or industrial instrument.  

The need to provide information and education about the scheme has also been highlighted in several submissions. The Ai Group is advocating for an education program for employers, while the ACTU wants an obligation to be placed on employers to hand out a Government-prepared information sheet explaining the scheme to their employees.  

Both the Ai Group and the ACCI are concerned about the obligations that the Bill places on employers, especially in light of potentially large civil penalties and exposure to criminal offences for failures to comply. The ACCI is completely against the idea of employers acting as paymasters for the scheme. However, the Ai Group supports this feature, agreeing that it will help employees to maintain their connection to the workplace whilst taking paid parental leave.  

The Senate Committee is set to report back on the submissions on 2 June 2010. We will provide an update on the progress of the scheme in our next edition.