Here is a interesting article that explains the proposed changes to the paid parental leave scheme. What are your thoughts?
Changes to paid parental leave: what do they really mean?
What are the proposed changes?
The Budget papers and Budget delivery speech contained very little detail about how the proposed changes would operate in practice. On 25 June 2015, the Fairer Paid Parental Leave Bill 2015 was introduced into Parliament to implement the changes.
Budget Paper No 2 said that, from 1 July 2016, the ability of parents to access benefits under the Government’s PPL scheme as well as PPL benefits provided by their employers would be removed. If the employer provided PPL benefits equal to or more generous than the Government PPL scheme, the employee will only be entitled to access the employer-provided benefits. The Bill effectively provides that if the employer makes ANY payment in respect of paid parental leave it will be deducted from the legislated 18 weeks.
If an employee under the current system claimed the Government payment of 18 weeks and the employer provided a “top-up” of a further 10 weeks, the 10 weeks will now be deducted from the Government payment, meaning that the employer will pay 10 weeks and the Government 8 weeks. If the employer is currently paying 18 weeks or more, the employee will no longer have any entitlement under the Government scheme.
In both the above scenarios, the employer will have to decide whether to substitute the loss of Government-paid entitlements with payments from its own funds, in order to preserve the employee’s income at its existing level, or cancel its existing top-up payments. The latter will have the effect of reducing the employee’s entitlement to the legislated minimum of 18 weeks.
The wording in Budget Paper 2 is: “The Government will remove the ability for individuals to double dip, by taking payments from both their employer and the Government”.
The Bill makes it possible to take payments from two schemes, but only when their combined entitlement does not exceed 18 weeks pay.
The proposed change still guarantees that all parents eligible for PPL will still receive at least the amount provided by the Government scheme (ie 18 weeks payment of the National Minimum Wage).The Budget predicted that this change would save the Government $967.7 million over four years, and that is its rationale for it.
How likely is it to become law?
If passed, the Bill is scheduled to become law on 1 July 2016. From 1 April 2016, payments to employees will be made directly by the Department of Human Services. (Currently, the Department makes payments to employers, who then make payments to employees via their own payroll.)
Implications for employers
Note that all employees who are eligible for the Government PPL payment of 18 weeks pay at the National Minimum Wage rate will remain entitled to that payment AS A MINIMUM ENTITLEMENT.
As noted above, any PPL entitlement in excess of 18 weeks pay at the minimum rate will have to be fully funded by the employer. Where an employer is unwilling or unable to do so but is under pressure not to reduce an employee’s remuneration package and/or conditions of employment, it may be worth looking at some alternative payments to compensate employees. A possible example is some form of return-to-work incentive or bonus payment, payable after the employee has returned to work after taking parental leave. Employers would have to be careful to word this entitlement so that it does not relate to paid parental leave.
By Mike Toten on 29 June 2015