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Paid parental leave from 1 January 2011 - are you ready?

The Federal Government's Paid Parental Leave (GPPL) scheme recently passed parliament, and will apply to births or adoptions on or after 1 January 2011.

The scheme provides 18 weeks of government-funded paid parental leave to eligible working parents. The leave is paid in instalments at the federal minimum wage as set by the Fair Work Act 2009 — currently, the rate is $569.90 a week.

By Alison Knight, CrossroadsHR

Who is eligible?

A person (employee, contractor or self-employed) is eligible for the paid leave if they are the primary care giver to a new born child or adopted child under 16. They must satisfy:

  • The work test: they must have worked continuously for at least 10 of the previous 13 months and for at least 330 hours (approximately 1 day a week) during that period; and
  • The income test: their income must be less than $150,000 pa.
  • The 12 months requirement is the same service requirement for an employee to be eligible for unpaid parental leave under the National Employment Standards.

When can a parent apply for the leave?

Arranging GPPL is the responsibility of the eligible working parent. The parent must apply to the Family Assistance Office in the period between:

  • 3 months before the expected date of birth or adoption; and
  • 12 months after that date.

GPPL will not be paid for leave taken 12 months or more after the birth or placement.

May both parents take leave?

More than one person may take a period of paid parental leave in relation to the same child.

What is the total amount of leave available?

The total period of paid leave in relation to a child is capped at 18 weeks. For example:

  • one parent may take 18 weeks leave;
  • one parent may take 10 weeks of paid parental leave and the other 8 weeks.

The period of paid parental leave is not additional to the period of unpaid leave available under the Fair Work Act. The period of paid parental leave will be taken at the same time as the equivalent proportion of unpaid leave, and before, after or concurrently with other paid parental leave entitlements.

In most cases the new entitlements under the Bill will be in addition to existing paid parental leave benefits.

GPPL does not count as 'paid leave' for the National Employment Standards and therefore does not count as service.

Who funds the parental leave pay entitlement?

The entitlement is funded by the Federal Government.

Who administers the payments?

Generally, the payments will be administered by the employer — unless this is not appropriate (for example, an employer cannot be determined or the claimant is a contractor or a self-employed person). In that case, the Federal Government's Family Assistance Office will handle the payments.

If an employer is to be paymaster for an employee's GPPL, then the Family Assistance Office will contact and advise the employer of this.

The Family Assistance Office will arrange to transfer GPPL money to the employer for the employer to pay to the employee on leave. Payments can be made in the employer's normal pay schedule and with other payments that the employee might be receiving, if any.

The Family Assistance Office will endeavour to transfer the GPPL money to the employer prior to the relevant pay period. An employer is not obliged to pay GPPL if the money has not been transferred in time. Late transfers can be paid in the next pay round.

This part of the GPPL scheme does not start until 1 July 2011; although an employer may opt to become paymaster for their employees taking GPPL before that date should they wish to do so.

How are the leave payments taxed?

The payments are taxed as wages in the hands of the parents.

May an employee attend work, keep in touch when on the leave?

During a period of GPPL, an employee may attend work on up to 10 days (for meetings, training, etc) so as to keep in touch.

'Keeping in touch' must be by mutual agreement and be paid for as work (in addition to the GPPL). It counts as service.

How should employers be planning for the introduction of paid parental leave?

Employers should consider:

  • whether they need to change any of: their payroll systems and processes; their employment contracts; or existing parental leave policies;
  • how they may choose to respond to requests that the minimum payments be topped up to an employee's actual salary; and
  • if the employer currently provides paid parental leave under an industrial instrument (for example, a workplace agreement), whether the employer may wish to seek to amend the relevant agreement or negotiate for different benefits under a new agreement to reflect the advent of the new entitlement.

More information from Crossroads HR?

Contact Kim Murrells at Crossroads HR on 9862 5900 if you would like to talk further about Paid Parental Leave or other HR issues.

Information about HR documents from Cleardocs

You can read about the Cleardocs HR Manual here.


Lawyer in Profile

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Leigh Baring
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Qualifications: LLB (Hons), BEc (Hons), Monash University

Leigh is a Partner in Maddocks Tax and Structuring team. Leigh has extensive experience in advising Australian and multinational companies, high net worth individuals, accountants and financial advisers on all areas of taxation law.

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