Business Law

A Small Feat: Parental Leave and Small Businesses

Published in: January 2010

Parental leave, whether paid or unpaid, maternity or paternity, is an important issue within small businesses. Especially in light of the Government Paid Parental Leave 2010 scheme.

Small Business Employers' Current Parental Leave Responsibilities

Currently all small business employers are under an obligation to provide for 12 months unpaid maternity leave for employees with 12 months service.

Small vs Large

Typically, larger businesses can afford to pay their workers for any of that time. Many small businesses find the costs prohibitive, particularly when coupled with the costs of recruiting a person to cover for the period of unpaid leave.

Government Paid Parental Leave (PPL):

Fast Facts

• The Government PPL is applicable for primary carers of children born or adopted on or after 1 January 2011.
• It provides all employees with 28 weeks paid parental leave and four weeks paid paternity leave paid through a fund made up of a government contribution and a pooled levy on all employers of less than 1 per cent of labour costs.
• It provides 18 weeks postnatal leave paid at the federal minimum wage (currently $543.78 per week).
• Around 148,000 mothers and primary carers will be eligible for the scheme each year.

Small Business Owners’ PPL Responsibilities

Payment

Parents who claim PPL must receive their PPL payments through their employer where they are eligible. The PPL scheme is designed to impose minimal new costs on employers. Employers will make payments only to employees who have 12 months continuous service prior to the date of birth or adoption.

Family Assistance Office and payment

The Family Assistance Office will be responsible for administering the PPL scheme. It ensures Government funds are transferred to employers in advance of their usual payroll cycle so they can make payments to employees, and will ensure employers and employees both know when payments to parents are to be made.

Other parents who claim PPL will receive their payments directly from the Family Assistance Office.

Costs

It is estimated that employers will make payments to around 100,000 employees eligible for PPL each year, mostly in larger businesses. The Productivity Commission estimated that only around 4 per cent of small businesses would make payments under the scheme in any given year.

The Government will consult with business organisations and employers to help make the new PPL arrangements as simple as possible for employers. The consultations will take place during the second half of 2009 in the early stages of the scheme’s implementation.

Leave periods

Eligible parents will be able to nominate the period they are paid PPL, which may involve consideration of existing employer-funded leave.

Government PPL can be taken in conjunction with, or in addition, to employer-provided paid leave such as recreation leave and employer provided maternity leave, around the time of the birth or adoption of a child.

PPL must be taken after the birth or adoption of the child, and within 12 months after that event.

As is the case now, parents will generally notify and agree to leave arrangements with their employer before they commence leave prior to the birth or adoption of their new child. This will include parents notifying their employer when they wish to receive their PPL payments.

Employees will not accrue leave entitlements during a period of Government PPL.

Transferring PPL

PPL will not be paid for any period after a parent returns to work. However, a parent may be able to transfer their remaining PPL entitlement to another eligible primary carer (usually the father).

Industrial Instruments

Employers who provide PPL through an industrial instrument cannot withdraw that entitlement for the life of that instrument. During bargaining for a new agreement, employers and employees will be able to agree to modify existing employer PPL provisions in the light of the introduction of the new Government PPL scheme.

Employers who provide paid maternity leave through an industrial agreement cannot withdraw that entitlement for the life of that agreement. Employers may seek to negotiate with employees to amend existing paid maternity leave provisions in the light of the introduction of the new PPL scheme.

Unpaid Leave

The Government's PPL scheme does not provide employees with additional unpaid leave from their employer or result in additional accrual of employer provided leave entitlements.

Superannuation

Employers will not be required to make superannuation payments for Government PPL.

Implementation of PPL

Parents are able to lodge PPL claims from 1 October 2010, so employees can make leave and pay arrangements with their employers before they start leave prior to the expected birth or adoption from 1 January 2011.

It is expected that legislation for the scheme will be introduced to Parliament in 2010. It is recommended to seek legal advice to obtain the current law and small business employers’ responsibilities under the PPL scheme.