Paid parental leave – an overview of what it means for your business

The Paid Parental Leave Bill was passed into law on 17 June 2010 and provides a new paid parental leave scheme for Australian workers. From 1 January 2011 the scheme provides the primary carer of a new-born child (or adopted child) leave for up to 18 weeks at the national minimum wage of $570 (gross) per week.

Key features of the Paid Parental Leave Scheme

• Fully funded by the Australian Government.
• From 1 July 2011 an employer will be required to provide a long term eligible employee with paid parental leave as long as the employee is eligible to receive eight weeks or more of paid parental leave.
• A long term employee is an employee who has worked continuously for at least 10 of the 13 months before the birth or adoption of their child and worked for at least 330 hours in that 10 month period (approximately one day a week). The work does not have to be performed for the same employer.
• Means tested – the primary carer must earn less than $150,000 in the previous financial year to be eligible for leave under the scheme.
• An employee can receive parental leave pay before, after or at the same time as other employer provided leave, including parental leave.
• The paid parental leave scheme is in addition to any other obligation an employer has to its employees including obligations under the Fair Work Act 2009 and any employer based paid parental leave.
• “Keeping in touch’  – an employee can agree to participate in workplace activities for up to 10 days during the paid parental leave period without affecting their parental leave pay. The employer cannot require the employee to participate. The employee is entitled to be paid their normal remuneration for any participation in the workplace in addition to their parental leave pay.

What does my business need to do to comply with the Paid Parental Leave Scheme?

• The employer will not be required to provide eligible employees with paid parental leave until 1 July 2011.
• Unless employers elect to make payments from 1 January 2011 and the employee agrees, eligible employees will receive paid parental leave payments from the Family Assistance Office until 30 June 2011.
• The employee must lodge their claim with the Family Assistance Office up to three months before the expected birth date of the child.
• The Family Assistance Office will assess the claim and if they decide the employer is required to provide paid parental leave to their employee the employer will receive a notification informing them of their obligations.
• The employer will be required to respond to the notice within 14 days, by either accepting or disagreeing with the decision.
• If the employer disagrees with the decision it will be reviewed by the Family Assistance Office.
• If the employer accepts the decision they will be requested to provide the Family Assistance Office with details about the business and the employee.
• The employer will receive funds from the Family Assistance Office in advance of their requirement to make paid parental leave payments to their employee.
• The funds from the Family Assistance Office may be received in up to nine fortnightly payments or the employer may elect to receive the payments in as little as three instalments.
• The funding amount forms a part of the income of the employer business and needs to be treated like any other amount received by the business.
• Once the employer’s participation in the scheme commences the employer will be required to:
  • provide the parental leave payments to the employee in accordance with the employee’s normal pay cycle;
  • withhold PAYG tax from the payment;
  • provide the employee access to a record of their parental leave payments. This can be in the form of a payslip; and
  • keep proper financial records of the receipt of funds from the Family Assistance Office  and the payment of the leave to the employee.
• The employer must notify the Family Assistance Office if:
  • the employee returns to work;
  • the employee is no longer engaged with the employer;
  • the employer changes their bank account details or the employee’s pay cycle;
  • the employer receives an incorrect amount from the Family Assistance Office; or
  • the employer is unable to provide the payment to the employee for any reason.

Enforcement and penalties for non compliance – employers be aware

• Initially any non-compliance with the scheme by the employee will be investigated by the Family Assistance Office.
• If the Family Assistance Office cannot resolve the matter they can refer it to the Fair Work Ombudsman.
• Fair Work Australia have the power to issue compliance or infringement notices, enter the employee’s premises to investigate non-compliance or apply to the Federal Court or Federal Magistrates Court.
• A breach of the civil penalty provisions dealing with payments under the scheme may attract a maximum penalty of $6,600 for individuals and $33,000 for corporations.

Future amendments to the scheme

• Both the ALP and Liberal Party have announced that if they form government they will introduce amendments and further developments to the paid parental leave scheme.
• The ALP has announced that if it forms government it will introduce two weeks paid paternity leave for fathers and other partners of mothers with new-born children.
• Similarly to the parental leave scheme, the paid paternity leave scheme will entitle partners to a weekly payment set at the federal minimum wage to commence in July 2012.
• We will keep you up to date with further amendments once they are implemented.