Government’s paid parental leave scheme misses the mark for women, employers and productivity

I was pleased to see on the front page of The Australian Financial Review last week that the Productivity Commission has reported doubts that the Prime Minister’s proposed paid parental leave scheme will encourage more women to go back to work.

This confirms my long-held view that the proposed, more generous scheme will not achieve the goals set by the Prime Minister. Specifically the proposed paid parental leave scheme is planned to increase female participation in the workforce, increase productivity and reduce discrimination of female employees. 

The Productivity Commission has made several recommendations in regards to changing how subsidies might be paid, including approved nannies in the assistance package and directing all primary schools to provide after school care for students.  The Commission has also determined that making childcare costs tax deductible would make low and middle income families worse off than they are currently.

These measures, along with other recommendations, make for sensible reading. However, what the Productivity Commission fails to consider are the further impacts that the proposed scheme would have on working women.

The Productivity Commission has made it clear that the new scheme will not meet the stated goals. In fact, when you include the way that employers are likely to react to the new scheme, it becomes clear that the proposed Abbott policy will actually do more harm than good in relation to these outcomes.

Increasing the payments for paid parental leave will only increase one thing: the time that new mothers stay away from the workplace. This will almost certainly decrease female participation in the workplace, not increase it. At six months’ full pay plus any accrued leave and other workplace entitlements, I suspect the proposed scheme would make the option of not returning to work much more realistic for many women who may not be able to afford it otherwise.

But I suspect this would be false economy? Some mothers may choose to take more time than the statutory 12 months away from the workplace and decide to forgo their position until they decide to return to the workforce. Technology, process and employer changes mean there is a risk of not being able to secure a similar role at a comparable salary when the mother decides to return to work. This is likely to erode any financial benefit that the more generous scheme provided in the first place.

One stakeholder that is often not considered is the employer. The costs of the actual parental leave payments are easy to measure, but how about the costs to the employer in finding and recruiting a replacement? Or the cost of training that new member of staff and the loss of productivity that comes with a new team member.

In the payroll sector for example, it is difficult to attract staff for fixed-term contracts. The best people are already in work, so not looking to leave for a short-term assignment. So employers are faced with filling the roles with inexperienced staff and having to spend time and money training them. Additionally, they may be faced with paying a fee to replace the role with a temporary staff member through an agency.

The average length of maternity leave in Australia is 32 weeks. By increasing the amount of parental leave payments, the number of weeks is sure to increase.

I believe the proposed policy will increase pre-employment discrimination for women of child bearing age, whether they intend to have children or not. Most employers I speak to off the record, everything being equal, would prefer to employ a man than a woman of child bearing age. 

Other than the obvious upfront financial benefit, there are also likely to be costs to mothers with the more generous proposed scheme. There is a very real cost, never spoken of in public, of terminating the mother’s employment when the employer decides that her replacement is actually better suited to the role. As unpalatable as this may sound, it happens more often than we like to think.

As a mother of two, the most valuable and pleasurable work I do is raising my children. It’s certainly not something I could put a monetary value on. I don’t think there are many women in Australia that expect full compensation for time they choose to take off during these years. 

Female participation in the workplace is good for employers, workers and the economy. Making a productive contribution in the workplace if they choose to do so assists women financially and socially. Work is proven to improve self-esteem and has other health benefits.

If the Abbott government wants to achieve all the benefits of greater female participation in the workforce, they should direct their reform efforts from the paid parental leave scheme to the childcare industry and current assistance available to working parents. Only then will the three primary goals of the paid parental leave scheme be achieved.

Tracy Angwin is the founder and managing director of the Australian Payroll Association.