December 2010

Paid Parental Leave - coming ready or not in 2011

What is it?

The Paid Parental Leave scheme is a government-funded entitlement for working parents who are primary carers of children born or adopted from 1 January 2011. Parental Leave Pay is paid for a maximum of 18 weeks, and is a taxable payment paid at the National Minimum Wage, currently $570 a week before tax. This amount is indexed annually.

The Paid Parental Leave scheme does not provide an entitlement to leave but is designed to complement existing leave entitlements, for example the unpaid parental leave provisions of the National Employment Standards under the Fair Work Act 2009.

Under the Fair Work Act 2009 if an employee has been employed by your business for 12 months or more, they may be entitled to access up to 12 months unpaid parental leave associated with the birth or adoption of a child. Where families prefer one parent to take a longer period of leave, that employee has the right to request up to an additional 12 months of unpaid parental leave.

Who is eligible?

Working parents of children born or adopted from 1 January 2011 can apply for Parental Leave Pay. In most cases, this will be the birth mother or an adopted child's initial primary carer. Applications are made to the Family Assistance Office.

Most working parents, including full-time, part-time, casual and seasonal employees, as well as the self employed and contract workers, may have access to Parental Leave Pay provided they meet the eligibility criteria.

As an employer, you do not need to work out if your employee is eligible for Paid Parental Pay. This is done by the Family Assistance Office and it will let you know if you have to provide Parental Leave Pay to any of your employees.

How will it work?

Your employee can choose when their Parental Leave Pay starts. It can start at any time from the birth or adoption of their child, and they must receive all of their Parental Leave Pay within 12 months of their child's date of birth or adoption. To be eligible for the full 18 weeks of Parental Leave Pay, your employee must choose a start date that is within 34 weeks of the birth or adoption of their child. Parental Leave Pay can be taken before, after or at the same time as paid leave your business provides, such as annual leave and/or paid and unpaid maternity leave. Parental Leave Pay must be taken in one continuous block of up to 18 weeks.

Parental Leave Pay will not be paid for any period after your employee returns to work. However, your employee can 'keep in touch' with the workplace. If you and your employee both agree, your employee can participate in workplace activities for up to 10 days from the birth or adoption of their child until the end of their Paid Parental Leave period for the purposes of keeping in touch. For example, you may have scheduled a short training course and your employee may wish to be involved. This must be a voluntary agreement between you and your employee. You cannot make this a compulsory requirement for your employee.

What if I already provide paid parental leave?

Employers that currently provide paid parental leave through an industrial agreement or other contractual agreement cannot withdraw those entitlements for the duration of that agreement. If eligible, employees will be able to access up to 18 weeks of Parental Leave Pay, in addition to existing employer provided parental leave. Parental Leave Pay can be taken before, after or at the same time as employer provided leave.

What do I have to do as an employer?

From 1 January 2011, you can choose to provide Parental Leave Pay to your eligible long-term employees if they are receiving more than eight weeks of Parental Leave Pay. This role will be voluntary until 30 June 2011, so you have time to make any necessary adjustments to your payroll system. This also means you will not have to make changes to your payroll system part-way through a financial year. If you choose not to provide Parental Leave Pay to your employees during this period, it will be paid by the Family Assistance Office.

From 1 July 2011, you will be responsible for providing Parental Leave Pay to your eligible employees who have a baby or adopt a child from 1 July 2011, have worked in your business for 12 months or more, and are receiving eight weeks or more of Parental Leave Pay. However, you will have the choice to pay your employee if they have worked for your business for less than 12 months, or are accessing less than eight weeks Parental Leave Pay. In this instance, if you choose not to provide Parental Leave Pay, the Family Assistance Office will pay your employee for you.

In most cases, the Family Assistance Office will provide Paid Parental Leave funds to you before your employee's usual pay cycle. You will have the choice to receive these funds in three six-weekly instalments or fortnightly. This will enable you to provide Parental Leave Pay to your employee through your existing payroll cycle.

You must withhold tax from the Parental Leave Pay under the usual PAYG withholding arrangements and include Parental Leave Pay in the total amounts on the employee's annual or part-year payment summary. You will not be required to make superannuation contributions for Parental Leave Pay. Parental Leave Pay will not be subject to payroll tax liabilities or workers compensation premium liabilities.

Do I need to do anything now?

You should review any current arrangements you have for paid parental leave to determine whether they create an obligation to pay that amount in addition to the Parental Leave Pay, or if you can offset the Parental Leave Pay against those payments.

If you have provided paid leave on a voluntary or ad hoc basis, you might want to consider whether you formalise that arrangement in 2011, taking into account the legislative scheme.

 

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