11 May 2010

Paid parental leave from 1 January 2011 - are you ready?

The Federal Government has for some time been flagging its intention to introduce a paid parental leave scheme in Australia. On Tuesday 4 May 2010, the Federal Government released an Exposure Draft Bill for public consultation, and it expects to have the Bill introduced into Parliament, debated and passed by the end of June, with the scheme to start from 1 January 2011.

This means:

  • parental leave payments will only be payable from 1 January 2011 onwards; and
  • employers need not be responsible for channelling the payments to employees until 1 July 2011 (although they can do so earlier if they wish).

The operation of certain aspects of the Bill and the paid parental leave scheme is to be further clarified by Paid Parental Leave Rules, which have not yet been made.

What is the parental leave pay entitlement?

The entitlement will be up to 18 weeks' paid parental leave per child, paid in instalments at the national minimum wage as prescribed under the Fair Work Act 2009 (Cth) from time to time (presently $543.78 per week).

More than one person may take a period of paid parental leave in relation to the same child, but the total period of paid leave in relation to that child must not exceed 18 weeks. For example, one parent may take 10 weeks of paid parental leave and the other 8 weeks.

The period of paid parental leave is not additional to the period of unpaid leave available under the Fair Work Act. The period of paid parental leave will be taken at the same time as the equivalent proportion of unpaid leave.

The entitlements under the Bill may be taken before, after or concurrently with other paid parental leave entitlements. The Bill does not allow employers to reduce the quantum of an existing paid parental leave entitlement already available to an employee under an industrial instrument, contract or policy proportionately to the amount payable to that employee by the Federal Government under the Bill. In the case of existing industrial instruments or contracts, any reduction will need to be by way of negotiations to vary or replace the relevant terms of the instrument or contract. Policies may be varied more easily, depending upon their terms. Therefore, in most cases the new entitlements under the Bill will be in addition to existing paid parental leave benefits.

The Bill states that an absence on paid parental leave is not an absence on paid leave for the purposes of industrial laws and instruments. This means it may not constitute part of an employee's "continuous service" for the purposes of calculating some entitlements. You should seek advice on how this will apply in your specific circumstances.

Who pays the parental leave pay entitlement?

The entitlement is funded by the Federal Government, but the payments will generally be administered by the employer, unless this is not appropriate (for example, an employer cannot be determined or the claimant is a contractor or a self-employed person). In that case, the Federal Government's Family Assistance Office will handle the payments.

When is parental leave pay paid?

The claim for parental leave must be made in the period between three months before the expected date of birth and the child's first birthday.

The payments (which will be made for up to 18 weeks) may commence from the date the child is born or later, depending on when the payment is applied for and the child's birth is verified, but must cease before the child's first birthday.

Payments may also be made in cases of adoption, in which case the date of placement of the child will be the key date.

Who can make a claim for parental leave pay?

As long as they are the child's primary carer and can satisfy certain tests, all types of workers, including full, part time and casual employees, contractors, and the self-employed.

There are three types of claim - primary, secondary and tertiary. In most cases, a primary claim must be made before another type of claim may be made:

  • A primary claim can only be made by the child's birth mother; an adoptive parent; or another person in special circumstances (for example, a grandparent in the case of the death of both of the child's parents).
  • A secondary claim can only be made by the partner of a primary claimant, a parent who is not the primary claimant or their partner; or another person in special circumstances.
  • A tertiary claim can only be made in special circumstances.

How should employers be planning for the introduction of paid parental leave?

Employers should consider:

  • whether revisions to their payroll systems and processes will be necessary;
  • whether their employment contracts or existing parental leave policies require amendment;
  • how they may choose to respond to requests that the minimum payments be topped up to an employee's actual salary; and
  • if the employer currently provides paid parental leave under an industrial instrument such as a workplace agreement, whether the employer may wish to seek to amend the relevant agreement or negotiate for different benefits under a new agreement to reflect the advent of the new entitlement.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.