Paid Parental Leave - Your Questions Answered

21-Sep-2012

Are you lost when it comes to understanding the rules around parental leave in Australia? Entitlements to Parental Leave seem to have become very complex and difficult to understand by both Employers and Employees. Since the introduction of Paid Parental Leave in 2010, the task of intepreting parental leave has become more difficult for Managers, Payroll Administrators and Human Resource Managers.

Just when you thought you were getting on top of things, another twist to Parental Leave is added with the introduction of Daddy and Partner Leave to commence in January 2013.

So we thought it was timely to republish an article written in 2011 and updated here to include information about Daddy and Partner Leave.

Paid Parental Leave Act 2010 (Cth)

Introduced in 2010, Australia has a Paid Parental Leave scheme that has implications for all employers. To assist with an understanding and with potential processing of entitlements, the following frequently asked questions (FAQ's) have been compiled. We trust that it assist your business and those people processing your payroll with a basic understanding of the requirements.

The Paid Parental Leave Act 2010 ('Act') and Paid Parental Leave (Consequential) Amendment Act 2010 came into effect on 1 October 2010. The following FAQ's provide information to assist with meeting the requirements under these Acts.

What will be paid?

This is a government funded scheme that provides an entitlement (subject to conditions) to employees to receive up to 18 weeks paid parental leave (PPL) following the birth of their child or placement of an adopted child after 1 January 2011.

Do employers have to make the payments?

Employers are not required to administer payments until 1 July 2011 unless they elect to "opt-in" to administering the scheme beforehand. If an employer does not "opt-in" before 1 July 2011 an eligible employee can claim the entitlement directly from the Family Assistance Office (FAO).

Does the Paid Parental Leave entitlement mean that other parental leave entitlements are no longer in force?

The right to paid parental leave under the Act supplements any existing contractual entitlement to paid parental leave and entitlements that an employee otherwise has under the Fair Work Act. The Act provides that eligible care-givers of a child born or adopted and placed after 1 January 2011, will be entitled to a payment of $606.40 per week (at July 2012 and subject to change in accordance with minimum wage orders) for a period of up to 18 weeks during the first year of the child's life or the first year after placement of the adopted child.

What is the eligibility test?

An employee must satisfy the following tests:

  • The work test - been in paid work continuously for at least 10 of the 13 months immediately prior to the birth or adoption of the child, and worked for at least 330 hours in that 10 month period with no more than an eight week gap between two consecutive working days.
  • The income test - has adjusted taxable income of less than $150,000 indexed
  • The Australian residency test
  • Be the child’s primary carer
  • Not have returned to work, and
  • Having met the work test, have chosen PPL in preference to the Baby Bonus.  Only one scheme is available to the applicant

Is it only available to permanent employees?

No, the primary carer does not have to be working full-time to be eligible for PPL payments. The Act provides that a working day is calculated as a day on which the primary carer worked for at least one hour. So, the primary carer may meet the work test even if they:

  • Are a part-time, casual or seasonal worker
  • Are a contractor or self-employed
  • Work in a family business or on a farm
  • Have multiple employers, or
  • Have recently changed jobs.

What are the Employer's obligations?

PPL payments under the Act will be available to employees from 1 January 2011. They will be paid by the employer but funded by the government. Employers are not required to administer payments until 1 July 2011 unless they elect to "opt-in" to administering the scheme beforehand.

Eligibility is decided by the Family Assistance Office (FAO). This means that employers do not have process and make a decision about eligibility.

Employees need to lodge a claim with the FAO who will notify the employer if it is required to pay the employee.

How will the Government reimburse employers?

The Government has indicated that the employer should receive the PPL funds before it is required to make PPL payments. PPL funds will be transferred into the business bank account that the employer nominates before the employer's usual pay cycle cut-off date. Employers can choose to receive these funds fortnightly over 18 weeks, or in three six weekly instalments.

Where the employer agrees to make the payments pre-July 2011 or is required to make the payments post-July 2011, employers must provide details of its bank account and pay cycle to the FAO within 14 days of the date of the Order.

When does the employer pay the employee their PPL entitlements?

The employer is only required to make a payment after it has received the funds from the FAO.

The employer is required to forward the funds to the employee as part of its normal payroll process. Payments are subject to PAYG tax deductions. If the commencement date for the payments is before the employer receives the funds it will be required to make a back payment on receipt of the funds.

The employer is not required to make superannuation contributions in respect of parental leave payments.

Additionally, employees will not accrue leave while on paid parental leave notwithstanding that their service during this time is considered continuous.

What happens in the case of existing entitlements to PPL through a voluntary scheme, policy or collective agreement?

Payments made under the PPL scheme are in addition to and not a replacement for other existing legal obligations that an employer may have to provide in relation to paid parental leave entitlements. So the new PPL payments will be additional to any existing entitlements.

Do I need to communicate this entitlement to existing employees?

There is no compulsion to advise existing employees, however employment agreements for new employees should be amended to include information about how they access PPL. For existing employees, this information and the attached brochure should provide you with a guideline on how to deal with a request or application.

In any case, it is not up to the employer to determine eligibility and employees should be directed to FAO for application forms and additional information.

How should I advise employees about making an application?

An application and claim for paid parental leave may be made by the primary care-giver, secondary care-giver or such other person as determined by the FAO as having entitlement to such payments (for example, grandparents). No claim can be made by a secondary or other care-giver unless the primary care-giver has made an application/claim.

The application/claim can be lodged any time from 97 days before the birth of a child up until the date of the child's first birthday. However, the entitlement expires on the child's first birthday regardless of whether the applicant has received eighteen weeks of payments.

All applications/claims must be in the proscribed form and have the necessary documentation attached, including verification of the child’s birth.

Is there any paid leave available for Fathers?

Changes to the Paid Parental Leave Act will see the introduction of a new payment for eligible working fathers and partners (including same sex couples) of children born or adopted after 1 January 2013. Eligible working fathers and partners can apply for up to 2 weeks pay to take time off work to care for a newborn or newly adopted child. The payment is intended to help Dad's and partners to take time off work to support their partner and bond with their new child.

How do Fathers and Partners go about applying for Paid Leave?

As with other paid parental leave entitlements, application for the new Dad and Partner paid leave can be applied for through Centrelink. The amount of pay for the 2 weeks will be as per the National Minimum Wage.

Fathers and partners intending to take advantage of this new paid leave should also apply for the time off with their employer just as they would do for any other form of leave.

What notice do employees have to give their employers to be able to take the Daddy and Partners leave?

Employees should provide their employer with the same amount of notice that would otherwise apply. There is nothing preventing employers from granting annual leave or unpaid leave to fathers and partners of new born children for the purpose of support and care; and arrangements can be agreed upon despite these changes to the Paid Parental Leave Act.

What if the employee was granted paid annual leave for the period of paid Daddy Leave?

An employee who is in receipt of paid annual leave would be required to declare those payments when making application through Centrelink.

Is anything else affected by these changes?

There have also been some changes to the Fair Work Act 2009, about unpaid parental leave under the National Employment Standards. These include changes that will assist to clarify:

  • When pregnant employees can start their unpaid leave,
  • Having an understanding of when an employee can (and cannot) perform work on a 'keeping in touch day',
  • Having an understanding of the interaction between the Paid Parental Leave Scheme under the Paid Parental Leave Act and unpaid parental leave afforded under the Fair Work Act.
  • Entitlements where there is a stillbirth or infant death.

Keeping in touch days are a great way to maintain contact with the employee, keeping them in touch with changes at the workplace, whether change comes through technology or work practices and the arrival and departure of employees.

If you have any questions about these changes or require specific assistance, please contact us.

Are there any repercussions if we don’t comply?

Penalties apply if the employer fails to make a payment which it has agreed to make (for births prior to 1 July 2011) or it is obliged to make pursuant to an Employer Determination Order (for births post-1 July 2011), and has not lodged a review of the obligation to pay.

There is a right to seek review of an Employer Determination Order. This will generally be where the employer disputes the obligation to make the payment, including where the person is not an employee.

Where can I get additional information?

The Paid Parental Leave Brochure for families is downloabable following this article and the address for FAO is http://www.familyassist.gov.au/publications/paid-parental-leave-employer-business-requirement-statement/index.html

References made above to the birth of a child and date of birth of the child also means adoption of a child and the placement of an adopted child.

Paid Parental Leave Paid Parental Leave (835 KB)

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