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Introduction:

The Federal Government's Paid Parental Leave Scheme (PPLS) came into effect on 1 January 2011.

The PPLS provides entitlements to all employees except State Government employees.  State Government employees have had paid maternity for some time under separate provisions.

The PPLS is fully funded by the Australian Government, and provides eligible working parents with a maximum of 18 weeks pay at the weekly rate of the national minimum wage (which is currently $570.00 per week less tax).

However whilst the funding is provided by the Government, the payment will be made through the employer's payroll.  It is therefore essential that all employers are aware of their role and obligations pursuant to the PPLS to ensure compliance.

Who is an eligible employee?

To be eligible, an employee must:

• Be the primary carer of a child born or adopted after 1 January 2011.
• Be an Australian resident.
• Have been engaged in paid work for at least 10 of the 13 months before the child is born or adopted.
• Have worked at least 330 hours during that 10 month period; and
• Have earned less than $150,000 per annum over that 10 month period.
• Be on leave or not working from the time they become the child's primary carer.

An employee is not required to have been working on a full time basis to be eligible. An employee may still be eligible if they are a part time, casual or seasonal worker, a contractor or self employed, have multiple employers or have recently changed job.

Whilst an employee is free to choose the start date of their Parental Leave Pay at any time from the date of the birth or adoption of their child:

(a)    They must receive all their Parental Leave Pay within 12 months of the date of the birth or adoption of their child; and

(b)    To be eligible for the maximum 18 week payment, an employee must choose a start date that is within 34 weeks of the date of the birth or adoption of the child. If they claim after the 34 weeks, the payments are reduced.

Obligations and role of employer

An employer's role under the PPLS was voluntary until 1 July 2011. Since 1 July 2011, all employers have been required to comply.

Employers are responsible for providing the Parental Leave Pay - funded by the Government - to their eligible employees who:-

(a)        have or adopted a child from 1 July 2011;

(b)       have worked in the business for 12 months or more (however this proviso only applies to the employees who do not meet the criteria above, that is, an employee who has worked for 330 hours in the 10 month period referred to above is still eligible, however employees who have not satisfied that criteria fall under this 12 month rule);

(c)       are entitled to 8 weeks or more parental leave.

If the employee does not satisfy the criteria in (b) and/or (c) above, then the employer has the option of not having to provide the Parental Leave Pay, that is, the employee will be paid directly by the Family Assistance Office without the involvement of the employer.

How Does the Employer receive the money?

In most cases, the Family Assistance Office, will pay the money for the Paid Parental Leave to the employer's nominated bank account before the employee's pay cycle. The idea is that this will then enable the employer to have the money to pay the employee through the existing payroll cycle.

What an Employer must do:

• Provide the information and details as required by the Family Assistance Office, such as bank account details and pay cycles, to enable the Parental Leave payment to be paid to the employer.
• The employer has to register for the PPLS with Centrelink through the Business Online Services or by telephone through the Centrelink Business Hotline.
• Pay the Parental Leave Pay that the employer has received from the Family Assistance Office to the employee for the Paid Parental Leave period.
• Provide the Parental Leave Pay as part of the employee's usual pay cycle.
• An employer must deduct income tax from the Parental Leave Pay under the usual PAYG arrangements.
• An employer must include the Parental Leave Pay in the total amounts on an employee's annual group certificate.
• Provide a record to the employee (e.g. a payslip) of the Parental Leave Pay.
• An employer must keep financial records of the receipt of the Paid Parental Leave funds from the Family Assistance Office and a record of the Parental Leave Pay to the employee.
• The employer must notify the Family Assistance Office if:
• The employee returns to work before or during the paid Parental Leave Period;
• The employee ceases to be in your employ;
• The employer changes its bank account details;
• The employer changes the employee's pay cycle;
• The amount of Parental Leave Pay received is not correct;
• The employer has ceased trading, or is selling the business or is transferring ownership of the business.
• Any unpaid Parental Leave funds must be returned by the employer to the Family Assistance Office.

What an Employer does NOT have to do:

An employer:-

• Does not have to apply for PPLS for their employees: the employee is responsible for lodging the application with the Family Assistance Office;
• Does not have to assess if their employee is eligible for the PPLS: this is done by the Family Assistance Office;
• Does not have to pay the parental pay to their employees until after they receive it from the Family Assistance Office;
• Does not have to pay Parental Leave Pay to Independent Contractors or to a person who ceases to be an employee of the business (this does not mean that such persons are not entitled to Parental Leave Pay), however they can deal directly with the Family Assistance Office, and the employer need not be involved;
• Does not have to pay superannuation contributions on the Parental Leave Pay.
• Does not have to pay any payroll tax or incur additional workers compensation premiums on the Parental Leave Pay.
• Does not have to provide additional leave, that is, there is no accrual of annual leave or long service leave or personal/carers leave entitlements.
• Does not have to have a separate bank account for paid parental leave funds, or separately identify these funds in their annual financial statements (however, an employer should be able to separately identify the parental pay for reasons of superannuation, payroll tax etc, as set out above).
• Does not have to provide regular reports to the Family Assistance Office.

Existing Paid Parental Leave

Employers should note that if they already have an agreement in place with their employees which provides for some form of paid parental leave, this cannot now be unilaterally withdrawn by the employer because of the introduction of the PPLS. The PPLS sets the minimum entitlement. An employee with pre PPLS entitlements is still entitled to receive any benefit under their previous arrangement to the extent that they exceed the PPLS.

Compliance and Penalties

Employers must be aware that the Fair Work Ombudsman can enforce an employer's obligations under the PPLS, and it will investigate any related complaints. The Fair Work Ombudsman may impose penalties on employers for breaches of these obligations.