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Employers ‘overdue’ to review paid parental leave policies

With Australia’s first statutory paid parental leave scheme now in place and compulsory employer handling of payments pending, Australian workplace law firm Harmers Workplace Lawyers says companies should undertake a comprehensive review of their employee contracts, parental leave policies and practices to ensure a smooth transition and incorporation of the new scheme, and to make sure it does not place the employer at risk legally and/or commercially.

Paid parental leaveThe Paid Parental Leave Act 2010, which came into effect on 1 October 2010, sees the Federal Government provide tax payer-funded paid parental leave. However, in the majority of cases employers will be required to physically distribute payment to their eligible employees, from 1 July 2011.

According to Lesley Maclou, Partner at Harmers Workplace Lawyers, employers should be especially aware of possible implications of existing arrangements for paid parental leave provided in employee contracts, industrial instruments or policies and procedures.

“The statutory paid parental leave scheme is a significant development in Australia that will require a cultural shift for many employers.

“Prior to the introduction of the scheme, Australia was one of only two Organisation for Economic Co-Operation and Development (OECD) countries not to have some type of paid parental leave scheme. While many companies in Australia want to be on the front foot  and many had paid parental leave schemes already in place, many employers are also worried about the extent to which this scheme will impact their business and operations as well concerns about how the business will absorb additional indirect costs,” she said.

Ms Maclou said the question of whether an employer’s current scheme is deemed a contractual obligation, will affect their ability to vary any company scheme, since the Paid Parental Leave Act operates in addition to any current entitlement arising from a contractual term or industrial instrument.

Accordingly, she warned that any potential change to employee benefits should be carefully weighed against contractual obligations, potential legal ramifications, commercial considerations and any potential impact on employee culture and morale.

Ms Maclou said after 1 July 2011 the responsibility will lie solely with the employer to make paid parental leave payments through their normal payroll cycle, as well as withhold income tax and provide payslips as they would for other employees.