Australia’s first Paid Parental Leave Scheme
Jenny Macklin MP, Minister for Families, Housing, Community Services and Indigenous Affairs, has today introduced draft legislation of Australia’s first Paid Parental Leave Scheme. The Bill states a commencement date of 1 October, however it is yet to be debated in the House of Representatives (next week) and then the Senate.
Australia is one of two OECD countries without a national paid parental leave scheme. Currently, only half of all Australian women have access to paid parental leave, with those on low incomes more likely to miss out. The Bill is based on expert recommendations of the Productivity Commission. Under the proposed Bill, casual and part-time workers, contractors and the self-employed will be eligible for paid parental leave, many for the very first time.
What is the entitlement?
The Bill will provide up to a maximum of 18 weeks of government-funded paid parental leave at the Federal Minimum Wage (currently $543.78 per week) for eligible parents of children born, adopted or placed on or after 1 January 2011.
Parental leave will be paid in instalments at the Federal Minimum Wage during the person’s paid parental leave period. It will be paid by either the person’s employer or the Family Assistance Office.
Who will be eligible for paid parental leave?
A person will be eligible for paid parental leave if they meet the criteria set out in the Bill, including:
- satisfy the work test (ie have performed qualifying work during the work test period)
- satisfy the income test (ie the person’s adjusted taxable income is less than $150,000 indexed)
- satisfy the Australian residency test
- be the child’s primary carer
- not have returned to work, and
- not be entitled to a baby bonus(which is now restricted to primary carers of a child who earn less than $75,000 per annum).
When do employers have to start paying parental leave?
From 1 January to 30 June 2011, employers have the option to choose whether or not to provide paid parental leave to their eligible employees. This will become a requirement for employers from 1 July 2011 for eligible employees with more than 12 months continuous service. This timing aligns with the beginning of the new financial year. In all other cases, parents will be paid by the Family Assistance Office.
Parents must apply to the Secretary of the Department, who then makes a determination about the paid parental leave period for which they can receive payment (up to a maximum of 18 weeks). The payments are paid in installments to the employer, who then pays these to the employee. Parental leave will be paid in accordance with an employer’s normal pay practices and the employee’s usual pay cycle.
Employers will only pay employees who intend to return to work. Women who resign, but meet the eligibility criteria, will be paid by the Family Assistance Office.
Generally, the Bill is very complicated, and runs to almost 250 pages. As well as establishing the basic principles on eligibility for and mechanism for payment of parental leave, it also addresses issues like disputes about eligibility for paid parental leave installments, government debt recovery and circumstances in which parental leave payments might be paid directly to the employee.
What this will mean for employers?
While this new regime will add administrative burden to many employers, employers who currently have paid parental leave schemes will welcome the government contribution to this business cost.
This Bill, once passed, will provide certainty to employers who have been considering introducing or updating their paid parental leave policy. Employers may consider:
- increasing the paid leave entitlement for employees to 18 weeks leave at full pay, basically offering ‘make-up pay’ beyond the government’s 18 weeks minimum wage
- introducing more generous entitlements (such as 26 weeks, as proposed by the Coalition) in the competition for talented workers, and
- amending current paid parental leave provisions to provide that employer payment will be reduced by any amounts received under the federal Paid Parental Leave Scheme.
This article was written by Kate Jenkins, Partner and Diana Sayed, Solicitor, Melbourne.
More information
For information regarding possible implications for your business, contact a member of the Employee Relations team.