A number of Coalition government election promises alter employees’ entitlements to government-funded paid parental leave and the baby bonus, and steps have already been taken by the government to remove the obligations placed on employers to administer payments.  In this blog post, we summarise the recent developments in the area of paid parental leave, and what these changes mean for employers.

Baby bonus scrapped

From 1 March 2014, the baby bonus has been replaced with a rate increase in the Family Tax Benefit Part A.  This will affect parents’ entitlements relating to children born or placed for adoption after 1 March 2014.

The extra Family Tax Benefit Part A payments for families will be $2,000 for their first child and $1,000 for subsequent children.

Work period for leave entitlement

The Paid Parental Leave Act work test has also been changed.  Families with children born or adopted within 13 months of each other will have their previous paid parental leave period count towards the work test for their next child.  This will allow families to more easily qualify for government provided parental leave pay for their subsequent child.

Bill introduced to repeal employer’s compulsory role to administer payments

On 19 March 2014, the Paid Parental Leave Amendment Bill 2014 (Amendment Bill) was introduced into parliament which, if implemented, will abolish employers’ compulsory “paymaster” role in the government funded paid parental leave scheme from 1 July 2014.  The employer will, however, continue to administer the payments if it elects to pay the instalments, agreement is obtained from the employee and certain other conditions are met.

Coalition’s proposed paid parental leave scheme

In August 2013, the Coalition released details of its proposed ”fair dinkum” paid parental leave scheme.  The scheme, if implemented, will provide mothers with 26 weeks of parental leave pay, at their actual wage (capped at an annual income of $150,000) or the national minimum wage (whichever is greater) plus superannuation.

Fathers will be eligible for two out of the 26 weeks for dedicated parental leave at their actual wage (capped at an annual income of $150,000) or the national minimum wage (whichever is greater), plus superannuation.

The policy will be funded by a 1.5% levy on companies with taxable incomes in excess of $5 million.

The draft legislation has not been released but it is intended for the scheme to commence on 1 July 2015.

Effect of Coalition’s policy on employers

Unlike the current scheme, the proposed Coalition policy will not require employers to administer the payments.  Employees will apply to and be paid directly by the Department of Human Services.  Accordingly, there will be no additional paperwork or cash flow issues, for employers.  It is unknown whether employers will be able to elect to make the payments, as is proposed by the recently introduced Amendment Bill.

In addition to the legislative entitlement, it is expected that under the proposed Coalition scheme, employers will continue to determine their own leave policies, including offering “top-up” parental leave pay.

Considerations for employers

In light of the recent legislative changes and announced policies, employers should:

  • Review internal policies to ensure compliance with the revised work period test;
  • Monitor announcements regarding the proposed new scheme; and
  • If the new scheme is implemented, consider if there is a need to adjust existing internal parental leave policies, including whether it is appropriate to reduce benefits.