As you will be aware, Australia now has a Paid Parental Leave (PPL) scheme with implications for all employers. To assist with an understanding and with the potential processing of entitlements, the following information has been compiled. I trust that it assist you your payroll administrator 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. Here are some frequently asked questions about the scheme and responses.
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 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Does the Paid Parental Leave entitlement mean that other parental leave entitlements are no longer in force?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 2009 (Cth).
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 $570 per week (as adjusted from time to time in line 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 this 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.
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?
Download the “Family Assist Brochure” brochure here regarding paid parental leave and the address for FAO is;
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.
By Shirley Farrell