Employer Responsibilities for Paid Parental Leave Payments

PAID PARENTAL LEAVE FROM JANUARY 2011 – YOUR OBLIGATIONS
Paid parental leave becomes a reality in Australia from 1 January 2011 as a result of the Paid Parental Leave Act 2010 (“the Act”), which was passed in the Commonwealth Parliament on 17 June 2010 and received Royal Assent on 14 July 2010.

THE ENTITLEMENT TO PAID PARENTAL LEAVE
Under the Act an eligible parent will be entitled to a maximum 18 weeks’ paid parental leave at the Federal minimum wage, which at 1 July 2010 is $569.90 gross per week. To be eligible for paid parental leave payments, the Act states that a person must:

• satisfy the work test
• satisfy the income test (i.e. has adjusted taxable income of less than $150,000 per annum indexed)
• satisfy the Australian residency test
• be the child’s primary carer
• not have returned to work, and
• not be entitled to the government’s baby bonus.

THE WORK TEST FOR THE PRIMARY CARER
The work test requires the primary carer to have been in paid work continuously for at least 10 of the 13 months immediately prior to the birth or adoption of the child, and to have 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 primary carer does not need to be working full-time to be eligible for paid parental leave payments. The Act provides that a working day is calculated as a day on which the primary carer worked for at least one hour. 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.

Primary carers who have recently resigned from their employment may also be eligible to receive paid parental leave payments provided they meet the eligibility requirements. When an employee who has recently resigned is eligible, the Family Assistance Office will provide the payments.

EMPLOYERS’ OBLIGATIONS

Paid parental leave 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. Eligibility is decided by the Family Assistance Office.

Employees need to lodge a claim with the Family Assistance Office which will then notify the employer if it is required to pay the employee.

The Government has indicated that the employer should receive the paid parental leave funds before it is required to make the payments. Paid parental leave funds will be transferred into the business bank account nominated by the employer 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. The employer is required to forward the funds to the employee as part of its normal payroll process. Paid parental leave payments are taxable as income and PAYG amounts will need to be deducted by the employer.

It should be noted that the employer is not required to make superannuation contributions in respect of parental leave 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 may claim directly from the Family Assistance Office.

Payments made under the paid parental leave scheme are in addition to and do not replace other existing statutory obligations that an employer may have to provide paid parental leave entitlements. For example, if an employer has an existing contractual or award-based obligation to provide paid parental leave benefits, the new paid parental leave payments will be, in addition to those existing entitlements. An existing employer policy may be adjusted to take account of those payments.

[Acknowledgement: This article was drawn from a “Workplace Risk Update” document that was prepared by Philip Brunner, Partner, Kott Gunning Lawyers PERTH WA Ph: (08) 9483 0934]

Please direct any further inquiries that you may have to Mike Fitz Gerald on 0419907443.

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