Paid parental leave looms for small businesses

Small business owners have been told to “get cracking” on their paid parental leave systems, despite a new survey revealing employers’ ongoing hostility towards their paymaster duties.

Alison Baker, a partner at the Hall & Wilcox law firm, says time is running out for employers to finalise their PPL systems before July 1.

Australia’s first national paid parental leave scheme began on January 1 this year. Even though payments are funded by the government, employers are expected to take on administrative responsibilities, therefore essentially acting as paymaster.

The role has been voluntary until June 30, after which point employers will be responsible for administering the payments.

A recent Pulse survey on PPL reveals 68% of respondents believe the government should administer the payments, with the majority highlighting their unpreparedness for the scheme.

Baker says regardless of how employers feel about the scheme or their duties, time is running out for them to finalise their PPL payment systems.

“It’s also important for them to note that any existing obligations they have to provide employer-funded PPL must still be met with the government-funded parental leave pay, generally considered to be an additional benefit for employees,” she says.

Baker says if employers currently provide PPL purely on a discretionary basis, there may be options for them to use government-funded payments to offset their existing scheme.

“However, employers are not able to offset in cases where they are bound by awards, enterprise or collective agreements, or employment contracts that set out an entitlement to employer-funded PPL,” she says.

“Where organisations have a written paid parental leave policy in place, or where they have a practice of providing PPL to employees, they will need to determine whether such schemes amount to obligations they must comply with, or are applied on a discretionary basis.”

“For example, some organisations may have had an ad hoc arrangement in place for providing PPL. Such organisations will need to decide whether they are required to keep these arrangements, together with providing the government-funded payments, or whether they can modify or change these arrangements.”

As this could be difficult to determine, Baker advises employers to seek legal advice prior to making any modifications or changes.

According to Baker, parental leave payments will normally be paid in employers’ usual payroll cycles, and should be treated as salary and wages.

“Typical PAYG withholding arrangements will need to be adhered to. Employers will [also] need to provide records of payments to employees, usually in the form of payslips, and the payments should be included in annual payment summaries,” she says.

“Employers should also keep for seven years written financial records of funding received from the Family Assistance Office and parental leave payments to employees.”

Baker says the right to parental leave pay under the PPL scheme applies to all employees, the self-employed and independent contractors who meet the eligibility requirements.

The Fair Work Ombudsman will have the power to investigate employers that have allegedly failed to make leave payments to eligible employees or which do not meet their obligations under the scheme.

Breaches of the scheme attract a maximum penalty of $6,600 for individuals and $33,000 for corporations.