This precis was written by Toyne Business Consultants
Understanding the new paid parental leave scheme
The Federal Government's paid parental leave scheme is open for business. Available to eligible parents whose babies are born or adopted from 1 January 2011, the scheme opened for registrations on 1 October 2010.
Expectant parents can apply to access the scheme through the Family Assistance Office (FAO) up to 3 months prior to the birth of their child. During the six month phase-in period of the scheme, employers can opt into the scheme. If they don't, the FAO will administer the parental leave payments for them. From 1 July 2011 however, responsibility for administering the scheme will predominatly fall to employers.
So, what do employers need to do?
Parental leave is paid by the employer in line with the employee's normal pay cycle. The Government's parental leave payments are treated in much the same way that the salary and wages are paid to the employee.
That is:
- Any tax owing will need to be withheld and remitted to the Tax Office
- Any amounts paid are included on the employee's PAYG summary
- Payslips should be provided as per usual
Unlike normal employment conditions:
- Superannuation guarantee does not apply to paid parental leave payments.
- Leave does not accrue during the period of the paid parental leave.
- If your business is enrolled or liable for Payroll Tax, parental leave payments are not included. You will need to make sure you can distinguish between the different payments.
- Parental leave payments are not included in worker's compensation calculations.
The scheme triggers when an employee registered under the scheme advises the FAO about the birth or adoption of a child (parents have 12 months to make the notification and can take the parental leave at any time within this period as long as they do not work during that period). From that point, the FAO will pay the employer and the employer will then pay the employee as part of the normal pay cycle. The employer will be paid in advance of the employee's payment cycle to ensure they are not out of pocket.
Employers are not obliged to pay the employee until they have been paid by the FAO. The first payment is likely to be in arrears as the details of the claim are processed by the FAO which might create some angst if employees are not aware of this.
There are also a series of administrative functions that employers will need to perform outside of the payments to administer the scheme.
These include:
- Providing the employee's bank details and normal payment cycle to the FAO when the employee registers (and keeping the FAO updated of any changes).
- Notify the FAO when the employee returns to work or if they are no longer employed by the employer.
- Keep records of amounts paid to the employee and funding received from the FAO. If the amounts are incorrect, you need to advise the FAO.
- The FAO also needs to be advised if anything occurs that will change the employment relationship such as the business closing down, sale of business or a transition of ownership.
Employers are only responsible for paying the parental leave payments to eligible employees who have been with them for 12 months or more and intend to take 8 weeks or more of parental leave. Anyone who is eligible to access paid parental leave but does not meet these criteria will be paid directly by the FAO.
How does this fit with existing private parental leave schemes?
If you have an existing private parental leave scheme in place, you should consult an employment lawyer. The Government's scheme does not supersede any existing agreements and as such, any agreement will remain in place for life of that agreement.
Parents
For more information about eligibility for this scheme, parents should contact the Family Assistance Office by visiting the website www.familyassist.gov.au or calling 13 61 50.