The Rudd government has announced the introduction of a government paid parental leave (PPL) scheme, which will commence from 1 January 2011. Most of the detail of the scheme has been released, but the government will be consulting employers and business groups about the scheme in the second half of 2009.

Paid Parental Leave – what is it and who gets it?

The scheme will entitle the primary care giver of a child born or adopted on or after 1 January 2011 to 18 weeks of PPL payments at the minimum wage, which is currently $543.78 per week. This entitlement will be available to full-time, part-time and casual employees, as well as contractors and the self-employed, and all recipients will get the full weekly rate. The entitlement will be subject to income tax, and will be income tested at $150,000 based on the primary carer’s adjusted taxable income in the year prior to the birth, adoption or date of claim.

In order to be entitled to PPL, a person must be:

  • the primary carer of a child born or adopted after 1 January 2011 (although applications can be made from 1 October 2010),
  • the mother of the newborn child or the parent of the adopted child,
  • in paid work and have:
    • been engaged in work continuously for 10 of the 13 months prior to the expected birth or adoption of the child, and
    • undertaken at least 330 hours of paid work in the 10 month period (that is an average of one day’s paid work per week)
  • not have worked between the date of birth or adoption of the child and their nominated start date for PPL, and
  • meet the income test.

PPL must be finished within 12 months of the date of birth or adoption. It will not be available after the parent returns to work, however, if the primary care giver returns to work early, they may be able to transfer the remainder of the PPL entitlement to another caregiver who is eligible. Alternatively, the parent may be able to be in the workplace while on PPL under ‘keeping in touch’ provisions.

PPL will be available to mothers in the event of a stillborn baby.

PPL will be able to be taken in conjunction with, or in addition to, an employer funded paid parental leave scheme, and, subject to review within two years of the scheme commencing, superannuation payments will not be paid for PPL. No leave entitlements will accrue while an employee is on a period of PPL

What does PPL mean for employers?

PPL can be taken in conjunction with, or in addition to, employer provided paid leave, such as annual leave or parental leave.

Where an employer provides a paid parental leave entitlement via an industrial instrument (such as a collective agreement or AWA or ITEA), the employer cannot withdraw that entitlement for the duration of the instrument. It is currently unclear whether that prohibition applies if an industrial instrument specifies that employer paid-parental leave will be withdrawn (or provided as a supplement to the Government scheme), if government- provided PPL is introduced, and that may be a matter that the government consults on with employers and business groups.

While employer-paid parental leave cannot be withdrawn during the life of an industrial instrument, in bargaining for a new instrument, it is open to the parties to modify employer provided paid parental leave subject to any other factors that will impact those negotiations.

Where employer-paid parental leave is provided in a policy and that policy is not incorporated in the contract of employment, it is recommended that the policy and contract be reviewed to determine how the employer-paid scheme can operate in conjunction with or to supplement the government-funded scheme.

While PPL will be funded by the state, employers will be required to make the payments to employees where the employee has 12 months continuous service prior to the date of birth or adoption. This imposes administrative requirements on employers, such as receiving payments from the Family Assistance Office (FAO) and then making payments to the employee. The payments are to be transferred from the FAO to the employer in advance of the entitlement to the weekly payment falling due. It appears that it will be an employee’s responsibility to apply for PPL, but it is uncertain whether payments are still required to be made by the employer if the Application is not completed or if payments are not received from the FAO.

Employers will not be required to make superannuation contributions in respect of PPL, but that position will be reviewed when the PPL scheme is reviewed.

Lessons for employers

Employers should review any policies, contracts and industrial instruments they have which currently provide for paid parental leave to determine what their obligations will be when the PPL scheme commences. In the event that an employer wishes to revisit the amount and terms of parental leave it provides – including to provide that its policy is reduced by the government-provided scheme, rather than providing both employer-funded and Government-funded schemes - Deacons recommends a review occur so that employers do not inadvertently breach the law by revoking an entitlement.