Paid parental leave scheme receives mixed reviews from small business groups

Small business has given the Government’s draft Parental Leave bill mixed reviews, saying it will deliver much-needed parental benefits but also increase red tape for SMEs.

The fully funded Government scheme will allow the primary carer, which the bill identifies as “usually the mother”, to receive up to 18 weeks pay at the national minimum wage, which currently stands at $543.78 per week.

The payment will usually be paid by the employer, and will be taxable in the same manner as salary and wages. Employers will only be required to pay the employee when they have received funding from the Government, and in some cases may not have to pay the employee at all, with the Family Assistance Office to pay in those instances.

“In most cases, parental leave pay will be paid by the employer. The role of employers is being phased in over the first six months of the scheme, to help employers transition to the new arrangements,” the draft bill states.

The Government states that from January 1 until June 30 2011, employers can choose to provide parental leave pay to eligible employees in order to adjust to the program, which will become a requirement from July 1, 2011 for those workers who have been with the company for over 12 months.

“Employers can choose to provide parental leave pay to their employees from the commencement of the scheme with their employees’ agreement. Employers may be required to provide parental leave pay to eligible employees from July 1, 2011.”

A spokesperson for the FAO also says for employees who receive less than eight weeks of payments, the employer will not have to pay and the Government will make those payments directly.

“The FAO will be responsible for paying eligible employees who take less than eight weeks of paid parental leave: for example, where an eligible father takes the remainder of a mother’s Government-funded leave after more than 10 weeks.”

Employers can choose to receive advances of funds from the Government, “in as few as three instalments”, and will only be required to pay the employee when they have received sufficient funds.

“Employers will provide parental leave pay on a ‘business as usual’ basis – they won’t be required to lodge regular reports with the FAO or establish special bank accounts. Parental leave pay will be paid in accordance with an employer’s normal pay practices and the employee’s usual pay cycle.”

To be eligible for the payments, claimants must meet certain tests. The claimant cannot work from the date of birth until when the payments cease, must have been engaged in work for a total spanning period of at least 10 of the 13 months prior to the birth, with no break greater than eight weeks between two work days.

While this allows a woman to resign from work before a birth and still obtain the payments, employers will only have to pay employees who intend to return to work. For those women who resign, but are eligible to receive the payments, the FAO will make payments directly.

“Funding amounts will be paid to employers before the cut-off day for any changes to an employee’s pay for that pay period,” the bill states. It also says the scheme will be funded by reductions in baby bonus and family tax benefit B payments for those parents receiving parental leave pay.

Additionally, claimants must have undertaken at least 330 hours of paid work during the 10-month period, with an income limit of $150,000 to apply based on the primary carer’s adjusted taxable income in the previous financial year before the claim or birth.

Both full-time and part-time employees, along with casual workers, contractors and the self-employed, will be eligible.

Australian Industry Group chief executive Heather Ridout says the Government’s scheme is a “sensible approach” to an unresolved issue.

“A taxpayer funded scheme providing payments to working mothers of 18 weeks at the level of the minimum wage, is consistent with the recommendations of the Productivity Commission and is largely consistent with Ai Group’s proposals,” she said.

“The introduction of an appropriately designed paid parental leave scheme will provide many benefits to the community, not least of which is increased participation by women in the workforce. Increased participation is vital to address Australia’s ageing population and growing skill shortages as the economy continues to recover.”

However, Ridout warned there will need to be a massive education campaign for employers, with many to be responsible for actually making the payments.

However, the National Independent Retailers Association has attacked the method by which payments will be made through employers, saying it adds unnecessary red tape.

“The Government went to great extreme to consult with industry about the best approach to Paid Parental Leave and then decided to ignore all the advice. The PPL payments should be made direct to those who are eligible and not involve small business owners in the process. This is nothing more than extra unnecessary red tape,” chief executive Peter Strong said.

“It is also disappointing that small business and big business have been treated the same way for this issue. When will those that write policy understand that small business has one person doing it all and big business has specialists?”

Strong said the NIRA supports the idea of paid parental leave, but wants the Government to exclude small businesses from having to submit to more processing and planning than is necessary.