Paid Parental Leave

20 Jun Paid Parental Leave

TTIA Members will no doubt have heard and seen media reports regarding the new Paid Parental Leave scheme due to come into effect on 1 January 2011.  Although the details will not be finalised until the end of the month, below is a resumé of employer’s obligations issued from the government’s Family Assistance Office: 

What employers will need to do

The Paid Parental Leave scheme has been designed to minimise its impact on employers required to provide Parental Leave pay to long-term employees.  If employers adhere to their normal and proper pay practices when providing Parental Leave pay to their employees, they will not breach any of their obligations under the Paid Parental Leave scheme. 

A simple set of employer obligations will apply to employers participating in the scheme.  These are as follows:

• The employer must provide required details to the Family Assistance Office so that it can advance the employer Paid Parental Leave funding amounts.  This will include the employer’s bank account details and the employee’s pay cycle details.
• The employer must provide Parental Leave pay to its employee for the Paid Parental Leave period.
• The employer must provide Parental Leave pay to the employee in accordance with employee’s normal pay cycle.
• The employer must withhold tax from the Parental Leave pay under the usual PAYG withholding arrangements and include Parental Leave pay in the total amounts on the employee’s annual and part-year payment summary (statements produced and given to the employee for tax purposes).
• The employer must provide the employee with access to a record of their Parental Leave pay – usually a payslip.
• The employer must keep written financial records of receipt of Paid Parental Leave funds from the Family Assistance Office and of the Parental Leave pay provided to an employee.
• The employer must notify the Family Assistance Office:
  • if and when an employee returns to work
  • if and when an employee is no longer engaged with the employer
  • if the employer changes their bank account details or the employee’s pay cycle
  • if the employer had been advanced an incorrect Paid Parental Leave funding amount by the Family Assistance Office, or if the employer is unable to provide Parental Leave pay to the employee.
• Employers must return any unpaid Paid Parental Leave funds to the Family Assistance Office.
• A Paid Parental Leave employer must notify the Family Assistance Office in advance of ceasing to trade, selling the business, transferring ownership or merging with another business

What employers will not need to do

Employers do not have to assess their employee’s eligibility for Paid Parental Leave.  It is the employee’s responsibility to lodge their claim with the Family Assistance Office and the Family Assistance Office will contact any employer that is to provide Parental Leave pay to an employee.

Employers do not have to provide Parental Leave pay to their employees until after they have received the required funds from the Family Assistance Office.

Employers will not have to provide Parental Leave pay to short-term employees (those with less than 12 months service).  The Family Assistance Office will pay the employee unless their employer chooses to do so. 

Employers will not have to provide Parental Leave pay to independent contractors or a person who ceases to be an employee of the employer (e.g. an employee who resigns before the period of their Parental Leave pay).

Employers do not have to pay employees who are eligible to receive less than eight weeks of Parental Leave pay.

Employers will not need a separate bank account for Paid Parental Leave funds.  If it is standard practice for an employer to earn interest on bank accounts, then they may earn interest on Paid Parental Leave funds.  As is normally the case, any interest earned in this way will be treated as income for taxation purposes.

Employers will not be required to separately identify Paid Parental Leave funds in their annual financial statements.  However, employers are likely to need to account for Parental Leave pay separately from other payroll for superannuation, payroll tax and workers compensation.

Employers will not be required to make superannuation contributions in respect of Parental Leave pay. 

Paid Parental Leave will not result in the accrual of any additional leave entitlements for employees.

Employers will not be required to provide any regular reports to the Family Assistance Office in relation to the Paid Parental Leave scheme.

Parental Leave pay will not give rise to additional workers compensation premium liabilities.

The Australian Government is working with state and territory governments to ensure that Paid Parental Leave is not subject to payroll tax.