As reported in our August 2013 update, the Federal Government is proposing to displace existing paid parental leave awards, agreements and company policies in favour of its own national scheme. Prime Minister Tony Abbott appears keen to secure legislation giving effect to his new scheme before the new senators take their seats on 1 July 2014 (the rationale being that after such time it may be more difficult for the legislation to pass through Parliament).

The purpose of the new policy is to prevent employees from “double-dipping” into both the Government’s paid parental leave scheme and their own employer’s arrangements. Relevantly, the Abbott Government plans to exercise its social welfare power, under section 51 (xxiiiA) of the Constitution, to override all such employer arrangements to achieve this goal.

The new paid parental scheme will provide eligible women with the higher of the national minimum wage, or their replacement wage (capped at $150,000) for 26 weeks, in addition to superannuation. Mothers will be allowed to take up to six weeks of paid parental leave before their baby is due, and the fathers will have the choice to take two weeks’ leave. According to Treasurer Joe Hockey, the 1.5% levy on companies with annual taxable incomes in excess of $5 million will cover the scheme’s net costs for the four-year forward estimates period.

What does this mean for employers? If the legislation implementing the new scheme passes through both Houses of Parliament, employers will need to review their policies to remove paid parental leave arrangements in preparation for commencement of the new scheme on 1 July 2015. For those employers who used paid parental leave as a means of attracting and retaining employees, the changes will mean additional family-friendly benefits such as childcare, and flexible work agreements may be more viable options in the absence of being able to provide paid parental leave. We will keep you updated on the progress of this legislation through Parliament.