If you haven’t set up your policies and systems to reflect the new rules, then with the clock ticking, I suggest you get onto it now. Even though the new Paid Parental Leave scheme has been big news for months now, many employers, especially small business owners and managers, are still confused about their responsibilities.
Under the new scheme eligible employees are entitled to 18 weeks’ pay at the federal minimum wage of $570 a week before tax if they are the primary carer of a newly born or adopted child. As an employer, you’re not responsible for funding the scheme but as of the beginning on next month and the new financial year, you will be responsible for administering it.
Essentially, your role in the Paid Parental Leave scheme is one of paymaster. If you haven’t done so already, you have until the end of June to register your business for the scheme through Centrelink Business Online Services. You’ll need to provide information such as your business bank account details, pay cycle details, business name, Australian Business Number (ABN), and contact details.
You’ll also have to make any necessary adjustments to your payroll system as well as developing and implementing appropriate policies in your business so you can fulfil your employer obligations and provide parental leave pay from 1 July 2011.
If you’ve yet to fully prepare your business for the Paid Parental Leave scheme, there are a number of things you really need to do now:
1. It’s not too late – take the time now to understand your obligations: There’s a wealth of information for employers at the Family Assistance Office website (see box).
2. Work out employee eligibility: There are strict minimum work period requirements and an employee’s income cannot exceed $150,000 a year. To qualify for the Paid Parental Scheme, the individual must be an Australian resident, the child’s primary carer, and must not work from the time they become the ‘primary carer’.
3. Provide necessary details to the Family Assistance Office (FAO): Employers need to register through Centrelink’s Business Online Services portal (see box).
4. Work out how you’ll keep appropriate records: You must keep records of the funds you receive from the Commonwealth Government and their subsequent distribution to employees and return any unpaid PPL funds to the FAO. You also have to notify the FAO of important changes like if the employee resigns or returns to work. Should an employee return to work before the end of the 18-week period, Paid Parental Leave payments will cease. You also have to provide details of bank account changes, if your business closes or if any of the Paid Parental Leave funding that you receive is incorrect. Make no mistake, there is a lot of admin involved in this scheme.
5. Communicate with your employees: Develop and implement a Paid Parental Leave Scheme policy in your business, clearly documenting your obligations as an employer. Once you’ve set it down in black and white you need to formally articulate the policy to your staff during induction training and other important HR meetings.
It’s important to note that the Paid Parental Leave scheme does not provide a right to additional leave. Leave entitlements are set out in the National Employment Standards (NES) and have not changed. As you would appreciate, this area has caused a great deal of confusion as the eligibility rules specified in the new paid parental leave scheme are more generous than the existing parental leave entitlements set out in the NES.
What this means is that an employee may be entitled to a parental leave payment but not entitled to take the leave. So you need to be crystal clear about this point in your HR policy and proactively communicate your policy to your employees.
However complicated, please remember that the Fair Work Ombudsman (FWO) can enforce an employer’s obligations under the Paid Parental Leave scheme and will investigate related complaints. Penalties for breaches of these obligations may also be imposed.
The scheme in action
So, if you have an eligible employee – and you’ve registered your business for the scheme – your business will be notified by the Family Assistance Office and asked to provide further information. You will need to confirm that the person is employed by you and you will have to provide employment details.
When your employee becomes eligible for the leave pay, Paid Parental Leave funds will be deposited into your nominated business bank account before your employee’s usual pay cycle cut-off date. The funds will be provided fortnightly over 18 weeks, or through three six-weekly instalments.
When you pay your employee, you will need to withhold tax from the Parental Leave Pay under your usual PAYG withholding arrangements and keep complete financial records. Any unpaid Parental Leave funds need to be returned to Centrelink.
Unlike normal employment conditions, you are not required to make superannuation contributions for Parental Leave Pay and nor is it subject to payroll tax liabilities or workers compensation premium liabilities.
If you think all this sounds like a lot of unnecessary work for something that could have been handled independently from your business, you’re not alone. The Paid Parental Leave Scheme places an administrative burden on employers that is onerous, costly and for the most part unnecessary.
Remember, both the employee and the employer need to register with the Family Assistance Office prior to the leave being taken and provide full details of their circumstances. And the employee is responsible for choosing between Paid Parental Leave and the Baby Bonus – they can’t have both. And they must provide proof of the birth to the Family Assistance Office at their earliest opportunity.
While most employers would agree that it’s important to retain a connection with an employee during a parental leave period, most would also be at pains to point out that placing the burden of administering the scheme on to them is not a positive outcome. Although the scheme is 100 percent funded by the Government, you won’t be reimbursed for your time and expenses in setting up the system and managing it in your business.
–Adrienne Unkovich is MD, Workforce Guardian, Australia’s leading online employment relations service for employers.