Paid Parental Leave in Australia
By Paolo, 01.01.2022
The Paid Parental Leave Act was introduced in Australia in 2010. Parental Leave claims could be submitted from 1 October 2010 whilst the first payments started from 1 January 2011.
The Paid Parental Leave scheme is funded by the Australian Government with the key objectives of:
- providing financial support to parents of a newborn or a newly adopted child;
- promoting balance between work and family life;
- allowing parents to take time off to care for their children;
- improving the wellbeing of both birth mothers and children;
- encouraging women to stay connected with their workplace whilst on Leave.
Following the trend of the Australian Government, a number of Organisations have also started to introduce Internal Policies to promote a more sustainable work-life balance for their workers.
This article focuses on the Parental Leave financial support provided to Employees by the Australian Government and by their Employers. The blog illustrates the rights and obligations applicable to both Employers and Employees when dealing with the Financial aspect of Parental Leave Rights.
This is the second and final chapter of our two-episode blog series on Australian Parental Leave rights. It follows the first episode which focussed on Fair Work Parental Leave rights and financial support options broadly available to new parents.
Government Funded Parental Leave
The Paid Parental Leave scheme is administered by Services Australia (Centrelink) and provides up to 18 weeks* of Parental Leave Pay to eligible Primary Carers of newborn and recently adopted children. This is a taxable payment paid at the current National Minimum Wage pay rate.
Currently sitting in Parliament (December 2021) is also a proposal to amend the Parental Leave Paid Act 2010 and extend Parental Leave Pay rights to parents of a stillborn child.
It is important to understand that the Parental Leave Pay scheme does not provide an additional leave entitlement. It complements Parental Leave rights under the National Employment Standards (NES) by providing financial support to eligible parents whilst on Parental Leave.
* Update. From 1 July 2023, the Dad and Partner Pay scheme has been merged with the Parental Leave Pay scheme extending the Parental Leave period to 20 weeks.
Eligibility Requirements
Paid Parental Leave is available to Full-Time, Part-Time and Casual Employees as well as self-employed workers. To be eligible for Parental Leave Pay an Employee must be the Primary Carer of their newborn or adopted child. The eligible Employee must also pass all the following tests:
- An Income Test
Earn a taxable income less than the set threshold amount in the Financial Year prior to the date of birth or adoption or the date of claim, whichever is earlier.
The threshold amount was set to $150,000 for the 2019-2020 Financial Year and will be indexed each year. - A Residence Test
The Employee must live in Australia, be either an Australian Citizen, a Permanent Resident of Australia or currently hold an eligible Visa - A Work Test
- have worked for at least 10 of the 13 months prior to the birth or adoption of the child;
- have worked for at least 330 hours in that 10-month period (on average, one-two days a week);
- have had no more than an eight-week gap between two consecutive working days;
- be on leave or not working from the time they become their child’s Primary Carer until the end of their Paid Parental Leave period.
The Work Test also includes eligibility provisions for Self Employed Parents.
Application Process
The Employee is responsible for applying for Parental Leave Pay through Services Australia (Centrelink). The Application is available online through myGov (linked to Centrelink). More information on how to submit the Parental Leave Application is available online on the Services Australia website.
Eligible Employees can apply from 3 months before the child’s due date, but no later than 40 weeks of the child’s birth or adoption if they wish to access the full 18 weeks.
Employee’s Rights and Obligations
Employees have the right to access their Parental Leave Pay over 2 periods:
- First Period – Set and Continuous
The set and continuous period is a minimum of 12 weeks (60 days) that must be taken within 12 months of the birth or adoption of the child. - Second Period – Flexible
The flexible period is a period of up to 30 days (6 weeks). These 30 days can be taken either:
– by connecting them to the fixed 12-week period (making it a total of 18 continuous weeks of Paid Leave), OR
– in multiple blocks as negotiated with the Employer. This period must be used within 24 months of the child’s birth or adoption.
Access to Other Entitlements
Employees are not allowed to work whilst on Parental Leave or to receive any other type of Government payments (i.e. JobKeeper or COVID Disaster payments).
However, during this time, they can also take other paid entitlements, including Annual Leave, Personal/Carer’s Leave and Long Service Leave. Employers can also offer additional Parental Leave support incentives (Employer Funded Parental Leave), which the Employee can receive at the same time as they receive Government Funded Parental Leave.
Keeping in Touch Days
Employees on Parental Leave are also entitled to receive 10 ‘Keeping in touch days‘. These days can be used as an opportunity for the Employee to stay up-to-date with their Workplace and facilitate their return to work. Keeping in touch days may include activities like conferences, planning days or training.
Keeping in touch days are paid at the Employee pay rate established in their Employment Agreement. These days do not reduce the Parental Leave period. Parental Leave is simply extended by the number of ‘Keeping in Touch Days’ the Employee chooses to access.
Reporting to Services Australia
Finally, eligible Employees are obligated to inform both Services Australia and their Employer if their circumstances change during this time. This includes deciding to transfer the remaining part of their Parental Leave to their Partner/Spouse by electing them as the child’s new Primary Carer.
Employer’s Rights and Obligations
Government Funded Parental Leave comes at no direct or indirect cost to the Business. Employers are required to pay their Employees on Parental Leave the net amount of Parental Leave payment as received from Services Australia and report any PAYG Withheld on these payments on their Activity Statements.
Parental Leave Pay does not accrue Superannuation and it’s excluded from both the Workers’ Compensation Annual Declaration and Payroll Tax.
Whilst on Parental Leave, Employees do not accrue Annual or Personal Leave entitlements. This period is also considered an ‘Absence period not contributing to Service‘ across all states’ Long Service Leave Acts.
Therefore, Employers are never out of pocket when paying this entitlement.
Employers can also hire a temporary replacement for the role currently on leave. However, they are obligated to re-established the Employee in the same role upon their return.
Application and Registration Process
Employers are not responsible for submitting Parental Leave applications on behalf of their employees or determining their Employee’s eligibility for the scheme.
Employers are notified by Services Australia in the instance one of their Employees has been deemed eligible for the Scheme.
Once they receive the notification, Businesses are required to submit an acceptance notice to Services Australia within 14 days from the notification date. The acceptance notice can be submitted either online or by post.
In order to receive Parental Leave payments and pass them on to their Employees, Businesses must register to scheme online. Registration can be processed at any time, even before an Employee submits an application.
Parental Leave Payments
Once the Employee submits the Parental Leave application, Services Australia has the power to determine whether to pay the Employee directly or to request the Employer to make payments to their Employees.
As general guidelines, payments are made directly to the worker when their Employment in an organisation has been less than 12 months. However, Employers can opt to always pay their Employees on behalf of the Government.
Services Australia will inform the Employer when they are required to make Parental Leave Payments to their Employees and for how many weeks. Payments can be made fortnightly or in 6 weekly instalments at the discretion of the Employer.
Finally, Employers are not obligated to make Parental Leave payments to Employees prior to receiving the funds from the Government.
Parental Leave payments must be processed through the Employer’s payroll and reported through Single Touch Payroll. The applicable Record-Keeping requirements for Parental Leave payments are the same as any other Fair Work wage and salary payments.
Employers can contact the Paid Parental Scheme for Employers line on 131 158 for enquiries on Parental Leave Pay.
Dad and Partner Pay
Included in the Paid Parental Leave Act 2010 is Dad and Partner Pay. This is a 2-week payment made to the Non-Primary carer of the newborn or newly adopted child.*
Similarly to Paid Parental Leave, the Employee is responsible to submit the application to Services Australia. Eligibility criteria include the same income and residency tests applicable to Parental Leave Pay and the ability to provide evidence of being the child’s biological father or mother’s partner/spouse.
The Dad and Partner Pay scheme is not available to the birth mother.
This entitlement is always paid directly from the Government to the individual. The Employer must record this 2-week period as unpaid leave. As per Parental Leave, Dad and Partner Pay is paid at the Minimum National Wage pay rate and reported on Income Statements as assessable income.
The Employee receiving Dad and Partner Pay cannot be working during the 2-week period, receiving any other type of Government payments (i.e. JobKeeper or COVID Disaster payments) or taking paid leave entitlements (i.e. Annual or Long Service Leave).
* Update. From 1 July 2023, the Dad and Partner Pay scheme has been removed and merged with the Parental Leave Pay scheme extending the Parental Leave period to 20 weeks.
More details on the Parental Leave scheme legislation updates are available on our news page.
Employer-Funded Parental Leave
Employer-Funded Parental Leave is an additional entitlement available to employees. There is no obligation for an Organisation to introduce Paid Parental Leave. However, according to the Workplace Gender Equality Agency (‘WGEA’), 2019-2020 survey data, over 50% of the Australian non-public sector Organisations provide access to some form of paid parental leave.
Employer Funded parental leave can be offered to an Employee either through an Enterprise or Private Agreement or by developing a Company Policy. The policy may also include non-financial benefits (for example, Special Parking available or flexible working arrangements upon the return from leave).
Some of the financial support arrangements commonly included in Paid Parental policies are:
- topping up the Government Funded Parental Leave payment amount to the Employee pay rate stipulated in their Award / Employment Agreement;
- accruing superannuation on the Government Funded Parental Leave;
- continuing to accrue other paid entitlements (i.e. Annual and Personal Leave) whilst on Parental Leave;
- extending the paid parental week period over the 18 weeks paid by the Government;
- providing employees with the options to take twice as much Annual Leave or Long Service Leave paid at half pay whilst on Parental Leave.
Any of the above benefits are exclusively provided at the discretion of the Employer. There is no specific mandate or restriction in place to follow. However, before introducing a Paid Parental Leave Policy, Employers should familiarise themselves with the legislative requirements of Government Funded Parental Leave to ensure a smooth interaction between their Policy and the Government’s Scheme.
Finally, Employers should make sure their Parental Leave policy is not in breach of basic Employees’ rights on the grounds of gender, sexual orientation and family relationships.
The Workplace Gender Equality Agency (WGEA) provides a number of resources to help Employers develop Parental Leave Policies in the workplace.
*** UPDATE ****
From 1 July 2023, the Dad and Partner Pay scheme has been merged with the Parental Leave Pay scheme extending the Parental Leave period to 20 weeks. More details on the Parental Leave scheme legislation updates are available on our news page.
References
https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd0910/10bd175
https://www.legislation.gov.au/Details/C2021C00447
https://www.fairwork.gov.au/leave/maternity-and-parental-leave
https://www.servicesaustralia.gov.au/parental-leave-pay
https://www.servicesaustralia.gov.au/about-paid-parental-leave-scheme?context=23121
https://www.servicesaustralia.gov.au/dad-and-partner-pay
https://www.servicesaustralia.gov.au/employers-role-paid-parental-leave-scheme?context=23121
https://www.servicesaustralia.gov.au/sites/default/files/fpr081-2111en.pdf
https://www.service.nsw.gov.au/transaction/unpaid-parental-leave
https://www.servicesaustralia.gov.au/parenting-payment
https://www.wgea.gov.au/parental-leave
Disclaimer
This blog and attached resources are of general nature designed for informational and educational purposes only. They should not be construed as professional financial advice for your individual business. Should you need such advice, consult a licensed financial or tax advisor.
