The Paid Parental Leave System

Parliament has recently passed a paid parental leave scheme through the Senate which is set to come into effect on 1 January 2011.

The scheme allows employees who take parental leave up to 18 weeks payment at a rate of $569.90 per week, which is the national weekly minimum wage. The paid leave can be taken any time within the first year after birth.

In order to qualify for paid parental leave, the employee must have:

1. been in paid work continuously for at least 10 of the 13 months prior to the birth or adoption of the child;

2. worked 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.

1. Not earn more than $150,000.00 per year;

2. Been approved by the Family Assistance Office.

Employees are not required to have worked full-time to qualify. Qualification may even be granted to those who are self-employed, casual, recently changed jobs or have multiple employers.

At present both the Labour government and the Opposition have made promises during the recent election campaign that some paid parental leave will be available to fathers, however plans to provide these payments are yet to be finalised.

How the scheme is funded

The paid parental leave scheme is funded by the Family Assistance Office, not the employer. However the payments are to be managed by the employer. The participation of the employer in managing the payments will be voluntary until 1 June 2011, but will be compulsory after that. It is advisable that employers use this 6 month window to make any necessary changes to their pay-roll systems.

Managing payment of parental leave to an employee largely involves using the same systems as making normal payment. For example, employers will be required to withhold PAYG tax as usual, and provide a pay-slip to the employee showing the parental leave payment and tax deductions. However, neither employers nor the Family Assistance Office are required to make superannuation contributions in addition to the payments.

Parental leave – employer obligations

The Fair Work Act 2009 (“the Act”) currently provides that employees who have worked for the same employer for 12 months or more are entitled to 12 months of unpaid parental leave by the employer. This 12 month period can be shared between parents or primary care-givers. Employees are entitled to make a request for a further 12 months parental leave, which the employer must not unreasonably refuse.

At the end of the parental leave, the employee has the right to return to their job as it was prior them taking leave.

If you are concerned about your parental leave obligations, or any other employment law issue, please contact Tony Pattinson or Sarah Quilliam of our office.