Paid parental leave - what it means for employers

13 May 2009 8:50am

Under the paid parental leave (PPL) scheme set to start in 2011, employers will be pre-paid employees' entitlements to "avoid cash flow pressures", the federal government revealed in last night's budget announcements.

The government announced earlier this week that it would commit $731 million over five years to fund the PPL scheme. From 1 January 2011, primary care givers earning less than $150,000 a year will be entitled to 18 weeks' paid leave at the minimum wage (currently $543.78), following the birth or adoption of a child.

According to the government's guide, Australia's Paid Parental Leave Scheme: Supporting working Australian families, the scheme "has been designed to impose minimal new costs on employers".

Employers will largely be responsible for delivering the payments - only where the employee has completed 12 months' continuous service prior to the birth or adoption - but they will receive the required funds from the Family Assistance Office in advance of making the payments.

As is the case now, the booklet says, parents will generally notify and agree on leave arrangements with their employer, before they commence leave prior to the birth or adoption of their new child. This will include parents notifying their employer when they wish to receive their PPL payments, which might involve consideration of existing employer-funded leave.

Employers will not be required to make superannuation payments for PPL, and employees won't accrue leave entitlements during a period of government PPL.

Existing leave entitlements

Government PPL can be taken in conjunction with, or in addition to, employer-provided paid leave.

The government leave must be taken after the birth or adoption of a child and be completed within 12 months. It won't be paid for any period after an employee returns to work, but a parent might be able to either transfer their remaining PPL entitlements to another eligible primary carer, or be in the workplace under "keeping in touch" provisions (the details of which are yet to be finalised).

Where an employer provides PPL through an industrial instrument, it will not be able to withdraw that entitlement for the life of the instrument, the guide says. Employers and employees will, during bargaining for a new agreement, be able to modify existing employer PPL provisions in light of the introduction of the government PPL scheme.

The government plans to consult with business during the second half of 2009 about how to make the PPL arrangements simple for employers. Legislation is expected to be introduced to Parliament in 2010.

Scheme is "workable": ACCI

According to ACCI chief executive Peter Anderson, the government's PPL scheme is "workable", but employers will be subject to indirect labour and administrative costs, such as higher workers' compensation premiums and payroll tax.

"These will need to be ironed out before 2011 if business is to give it unqualified backing."

Specifically of concern, he says, is that employer-funded superannuation obligations (a Productivity Commission recommendation that the government didn't adopt) have been "temporarily but not conclusively ruled out".

According to ACTU president Sharan Burrow, unions are "delighted that the budget contains an historic commitment to a national, government-funded paid maternity leave scheme for working mothers".

Currently Australia is one of only two OECD countries (the other being the US) which does not have a statutory paid parental leave scheme.

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