Unpaid Parental Leave has been a long standing feature of the workplace relations and award system and is currently provided by the National Employment Standards of the Federal Fair Work Act 2009 for employers in the Federal workplace relations system. However, on 1 January 2011, Australia’s first national Paid Parental Leave Scheme commenced, which provides financial assistance in the form of Parental Leave Pay to parents providing care to their newborns.
As Unpaid Parental Leave and Parental Leave Pay are covered by separate sets of laws with different definitions and eligibility criteria, it is important that businesses have a good understanding of both.
Unpaid Parental Leave
Under the Federal Fair Work Act 2009, employees who have completed at least 12 months’ continuous service, including long term casual employees, immediately before the birth date, or in the case of adoption, the placement date of the child, are entitled to 52 weeks of unpaid parental leave to be the primary caregiver of a newborn or recently adopted child. A ‘long term casual employee’ is a casual employee who has been employed on a regular and systematic basis for a sequence of periods of employment during a period of at least 12 months.
An employee may combine a period of Unpaid Parental Leave with other paid leave entitlements, including annual leave and long service leave but not personal leave or compassionate leave. However, this does not extend the leave period past 52 weeks but results in the employee receiving payment either for annual leave or long service leave during Unpaid Parental Leave.
Since the introduction of the National Employment Standards in January 2010, employees are entitled to request an additional period of up to 12 months of unpaid parental leave immediately following the end of the available parental leave period. To be eligible to request an extension, the employee must first take their full entitlement of 12 months’ unpaid parental leave. The period cannot be extended beyond 24 months after the birth or the day of placement of the child. A request for additional parental leave may be refused by the employer on reasonable business grounds.
After completing a period of Unpaid Parental Leave, the employee is entitled to return to their previous position or an available position for which the employee is qualified and suited nearest in status and pay to the pre-parental leave position.
Parental Leave Pay
Parental Leave Pay, under the Paid Parental Leave Act 2010, on the other hand, is not an entitlement to leave, but an entitlement to financial support for the primary caregiver of a child born or adopted on or after 1 January 2011. The Parental Leave Pay is a taxable payment, commencing on 1 January 2011, paid at the National Minimum Wage, currently $570.00 per week.
While Parental Leave Pay is payable for a maximum of 18 weeks, the payment does not have to start immediately after birth or adoption. Parental Leave Pay can be received anytime in the first year after birth; however, it must be taken in one continuous block. It is a requirement that all payments must be made within 12 months of the date of birth or adoption.
It is not necessary for the employer to determine whether their employees will be eligible for Parental Leave Pay, the Family Assistance Office will be responsible to assess claims against a set of criteria.
To be eligible, the applying employee must:
- be the primary carer of a child born or adopted on and from 1 January 2011;
- be an Australian resident ;
- have met the Paid Parental Leave Scheme Work Test before the birth or adoption occur;
- have received an individual taxable income of $150,000 or less in the previous financial year; and
- be on leave or not working from the time the employee became the child’s primary carer.
The ‘Paid Parental Leave Scheme Work Test’ requires employees to have worked for at least 10 of the 13 months prior to the birth or adoption of the child and for at least 330 hours in that 10 month period (just over one day a week), with no more than an eight week gap between two consecutive working days.
The onus will be on employees to contact the Family Assistance Office and lodge a claim. Once a claim has been approved, the Family Assistance Office will assess the claim and contact employers and notify them of their obligations to pay.
Employers will not be required to pay superannuation or payroll tax on Parental Leave Pay and employees will not accrue any leave while receiving Parental Leave Pay. In addition, Parental Leave Pay does not give rise to additional workers’ compensation premium liabilities.
To administer the payment of Parental Leave Pay to eligible employees, the Family Assistance Office will take on the temporary function of PayMaster between 1 January and 30 June 2011. During this time, employers should make the necessary adjustments to their payroll system in order to exclude Parental Leave Pay from superannuation, payroll tax and workers compensation calculations and leave accrual.
However, from 1 July 2011, employers will be responsible for administering the payment function of Parental Leave Pay. This means that once an employee’s application for Parental Leave Pay has been approved, the employer is then responsible for providing the Parental Leave Pay to the employee. According to the Family Assistance Office, employers will be provided with the Paid Parental Leave funding amounts before they are required to pay an employee to eliminate any cash flow issues.
It should be noted that in November 2010, the Federal Opposition introduced a Private Members Bill into Federal Parliament, which, if supported, would remove the PayMaster function of employers and make the Family Assistance Office responsible for providing Parental Leave Pay on a permanent basis and not only for the first 6 months of the Scheme. It is anticipated that the bill will be debated when Federal Parliament returns in February 2011.
How Business SA can assist your business
To assist businesses in preparing for the commencement of the Parental Leave Pay Scheme, Business SA is currently running sessions on the Paid Parental Leave Scheme. To register, or for more information, visit
www.business-sa.com/events-and-seminars or contact Customer Service on
08 8300 0103.
Business SA’s Telephone Advisory Service can also assist you with your questions regarding Unpaid Parental Leave and Parental Leave Pay. For further information, call 08 8300 0101.
Australian Chamber of Commerce and Industry Poll
A one-question poll on the Government’s Paid Parental Leave Scheme is now on the Australian Chamber of Commerce and Industry (ACCI) website. The poll asks employers whether the Government's Family Assistance Office should make parental leave payments direct to eligible employees.
The information will assist the ACCI network in its advocacy work consistent with its policy position that the Government Scheme should be aligned with the New Zealand Scheme where payments are made directly to employees. Employers who wish to participate in the poll can access the poll at:
www.acci.asn.au/Research-and-Publications/Research/Polls
The poll will close at 4.30pm (ACST), 17 February 2011.
