Employers urged to prepare for July deadline as paid parental leave attracts almost 50,000 takers this year

Just weeks before employers take on the administration of government-funded parental leave payments, it’s been revealed that almost 50,000 peoples have applied for the benefit since it was introduced by the Federal Government at the start of the year.

Government processing of the scheme expires at the end of this financial year, so from July employers will be responsible for processing the payments for up to 18 weeks’ pay at the national minimum wage – currently at $570 per week – to eligible employees who have or adopt a child from that date. Super is excluded in the scheme.

Businesses can choose to pay the employee if they have worked for the business less than 12 months, or are accessing less than eight weeks of parental leave pay. If the business chooses not to provide the employee with pay in this instance, the Government will foot the bill.

Alison Baker, partner in the employment group at law firm Hall & Wilcox, says businesses should get their payroll systems in place before an employee opts to take parental leave.

“We’ve had some clients who’ve come to us and are proactive about it,” Baker tells SmartCompany.

“Most people are aware of the fact that there’s a paid parental leave scheme, but the issue is whether employers are aware of the fact that even though it is government-funded, they play a key role.”

Baker advises businesses to be proactive rather than waiting for a letter from the Government advising that an employee has applied for the scheme.

She says payroll systems need to be up-to-date, and those responsible for payroll will need to be mindful of the new obligation to transfer payments to those on leave.

Baker says under the program, employees are obligated to request the benefit from the Family Assistance Office. The Office then assesses whether the employee has worked 10 of the past 13 months at the company, has worked at least 330 hours in that period, and has not taken more than an eight-week break from work in that timeframe.

There’s also an income test, with employees on more than $150,000 the last financial year excluded, she says. The employee must also pass a residency test.

Once the FAO is satisfied the employee is eligible for the benefit, it contacts the employer to say the employee has put in an application, met the criteria, identified the business as the employer, and the business is obligated to administer the payment. The employer has 14 days to respond, and can request a review.

But in most cases, it is expected the employer will agree with the application. It then needs to provide the FAO with its bank details and details of pay cycle. The FAO then makes the payment to the employer, which passes it onto the employee. The employer is not required to pay the benefit if it has not received the money from the FAO for some reason, but is obligated to notify the office of any changes in its payments; for example, paying weekly instead of fortnightly. It must also provide the employee with a pay cheque.

Baker says she is not surprised by figures released by Families Minister Jenny Macklin that 48,286 workers have signed up for the benefit since the scheme was introduced in January, saying parents are generally aware that they’re eligible either for leave or the baby bonus.

And she doubts that employers will roll back their existing parental leave programs now the Government is picking up the tab.

“In my experience, those with schemes already in place aren’t looking to reduce them. They need to look at why they introduced them in the first place. It was to support women, and to be an employer of choice,” she says.

“This is about getting people back to work,” Baker says, citing studies that parents who receive payments while looking after a child feel more connected to the workforce and more likely to return to work.

She adds that some mothers might opt to take up their employer scheme, before receiving the Government scheme, with the 18 weeks able to be shared between the parents providing they both meet the eligibility criteria.

But the executive director of the Council of Small Business Organisations of Australia, Peter Strong, says the Government should continue to process the payments, rather than asking SMEs to do so.

Strong tells SmartCompany that SMEs already have enough red tape to deal with, and has called for today’s Federal budget to ease the administrative burdens on small business.