The Federal Government’s Paid Parental Leave (PPL) scheme will commence on 1st January 2011. This article will explain to members how the scheme will work in practice and what steps employers will need to take.
How will Paid Parental Leave operate?
- Employee contacts the Family Assistance Office to apply for leave payments. Note: the employer does not have to contact the Office if approached by an employee.
- The Office determines whether the employee is eligible for PPL. If yes, it will contact the employer, who is then required to provide the Office with information about the business and payroll arrangements and confirm certain information about the employee. The office will seek information on:
- Business name
- Bank account details
- Pay Cycle details
- Employee history/ commencement dates
- Employee provides the Office with confirmation of the birth or adoption, eg details of birth registration.
- The Office sends payments to the employer, usually by electronic transfer, starting just before the date the PPL is due to commence.
- The employer must notify the Office if the employee returns to work before the full period of PPL has been used up or if the employee resigns.
If an employer believes it likely it will have employees applying for PPL in future it can pre-register with the Family Assistance Office online through Centrelink Business Online Services. Pre-registrations opened on 1st October 2010. (http://www.centrelink.gov.au/internet/internet.nsf/online_services/index.htm)
- The onus is on the employee to apply to the Office for leave. If you receive an application for PPL from an employee, you should advise him/her to contact the Office directly.
- The employer does not decide whether an employee is eligible for PPL. This is decided by the Family Assistance Office.
- Employees may apply for PPL up to three months in advance of the expected date of birth or adoption. The Office is encouraging them to apply well in advance so that all necessary arrangements will be in place by the due date.
To be eligible for Paid Parental Leave an employee must:
- be the mother of a newborn child or the initial primary carer of a recently adopted child under 16 years of age
- meet the Paid Parental Leave work test before the birth or adoption occurs*
- have an individual income of $150,000 a year or less, and
- are living in Australia and meet the residence requirements.
*worked continuously for at least 10 of the 13 months prior to the birth or adoption of your child, and worked for at least 330 hours in that 10 month period (around one day a week).
If the Family Assistance Office determines the employee is eligible for PPL the employee is entitled to take between a minimum of 8 weeks and maximum of 18 weeks PPL anytime within the first 12 months after the child’s birth in one continuous period. Therefore the employee will forfeit to any payment if an application is made 44 weeks after the birth (min of 8 weeks) or receive less than 18 weeks paid time if the application is not made by the 34th week after the birth. For example, the employee will only receive 12 weeks PPL if an application is in week 40 after the date of birth.
The pay rate will be in accordance with the national minimum wage currently $543.78 / week.
The employer will pass on the payment it receives from the Family Assistance Office in the usual pay cycle. The Office is required to send the funds before each relevant payroll cut-off date and the employer does not have to pay the employee PPL until it has received the funds to cover the payment from the Family Assistance Office.
The pay slip should specify the amount that is PPL and the employer should keep a record of both payments made and PPL funds received in line with the usual record-keeping requirements. The employer must notify the employee of the payment within 24 hours.
The employer should deduct tax from payments, but other entitlements and obligations such as superannuation contributions, workers compensation premiums and payroll tax are unaffected by PPL.
The employee may take other paid leave such a annual leave or long service leave while concurrently taking PPL.
The total amount of parental leave granted by the National Employment Standards or workplace agreement (whether paid or unpaid) is also unaffected by the government scheme.
If the employee is covered by an existing award, agreement or other contractual provision that entitles him/her to any paid parental leave, the employer must still honour that provision during the life of that document. The government’s PPL scheme does not replace any official/enforceable paid parental leave obligations that employers already have. This means that employees will be entitled to both payments.
If the employee returns to work before the PPL period ends, payment of PPL will cease and both the employee and employer must notify the Family Assistance Office, however by agreement between the employer and employee the employee may have up to 10 days at work for the purposes of ‘keeping in touch’.
Transition Period until 30 June 2011
For the first 6 months of the scheme, Employers may choose whether to pay PPL or have the Family Tax Office pay direct. The intention of this provision is allow an employer to upgrade payroll software system during a financial year in order to incorporate PPL entitlements. However come 1 July 2011 the obligation will be on employers to pay PPL.
At the time of writing this it is understood that the Coalition have sought amendments to the Paid Parental Leave Act 2010 to have the payments permanently paid via the Family Assistance Office. Members will be advised accordingly in due course.
Reviews and Disputes
At times the employer may not agree that they are to provide Parental Leave Pay to an employee. For example, you may not agree that the person has been employed by you for 12 months or more prior to the expected date of birth or adoption. In this case, you may ask us to review the decision. Further, the the Employer is not satisfied with the outcome of the review, they may appeal the decision to the Social Security Appeals Tribunal (http://www.centrelink.gov.au/internet/internet.nsf/legal/review_appeal.htm).
When the employer and an employee are in dispute about a matter concerning Parental Leave Pay, the family assistance will seek to help the parties resolve the matter. If it is unable to be resolved, it will be referred to the Fair Work Ombudsman (http://www.fairwork.gov.au/) for investigation. The Fair Work Ombudsman will undertake this investigation in line with its existing processes for investigating an allegation that wages have not been paid.
What employers should do now
- Consider pre-registering with the Family Assistance Office if you have employees who may become eligible for paid parental leave.
- Review your payroll and record-keeping systems and update as required to cope with paid parental leave obligations.
- Ensure you have access to information sources on the PPL scheme.
- Introduce or update leave policies and procedures to include references to the PPL scheme.
- Have regular conversations with employees who are pregnant, to ensure they are aware of their options.
(remember to check with Travis Degen, QTA Ltd when seeking to interpret information on the Government website)
Information for employees considering applying for leave is available from the Family Assistance Office website http://www.familyassist.gov.au/, including the publication Paid Parental Leave: Information for Parents which can be found at http://www.familyassist.gov.au/publications/paid-parental-leave—information-for-parents/index.html.
For employers, the Family Assistance Office website also contains an Employer Business Requirement Statement http://www.familyassist.gov.au/publications/paid-parental-leave—employer-business-requirement-statement/part-1—overview/
A private members bill introduced this week into Federal Parliament by Shadow Small Business Minister, Bruce Billson seeks to reverse arrangements that require employers to act as “paymasters” under the paid parental leave arrangements that take effect from 1st January 2011.
The Coalition wants the change, which it unsuccessfully sought in amendments to the Parental Leave Bill, to reduce the administrative and compliance cost “burdens” that its says employers will face when they take on the “pay clerk” role from Centrelink.
QTA Ltd would suggest to members that it is unlikely that this amendment will succeed and or be passed by both Houses of Parliament prior to the Christmas recess. Accordingly we suggest that you should prepare your business having regard to the information contained in the body of this article.