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Budget changes to the Paid Parental Leave Scheme: How will they affect employers?

Submitted By Firm: Corrs Chambers Westgarth

Contact(s): John Tuck

Author(s):

By Janine Young (Partner) & Professor Anthony Forsyth (Consultant)

Date Published: 5/12/2015

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The Government announced in last night’s federal Budget that from 1 July 2016, an employee’s eligibility for the government-funded Paid Parental Leave (PPL) scheme would be removed if the PPL payments they receive from their employer exceeds the amount available under the government scheme.

In the lead up to the release of the Budget, Treasurer Joe Hockey vowed to stop employees receiving government-funded PPL payments if they would receive the same or a greater benefit from their employer. The Treasurer referred to this process as ‘double dipping’, in that some employees are currently able to receive PPL payments from both employer and government schemes.[1]

In this In Brief, we examine this proposed change and its implications for employers – particularly those employers with their own PPL schemes in place.

Further eligibility requirements

Under the Paid Parental Leave Act 2010 (Cth), an employee is entitled to a maximum of 18 weeks’ PPL at the National Minimum Wage. This payment is based on eligibility criteria including caregiver status, amount of work competed prior to leave, income, residency and when the employee returns to work.

The eligibility of a new parent to access the government PPL scheme is independent of any entitlements that an employee may have under a PPL scheme of their employer. In practice, many employers have made their PPL schemes complementary to the government scheme, e.g. by topping up the level of payments to the employee’s actual salary.

The restriction introduced by the Budget will mean that only employees receiving less than 18 weeks’ PPL at the National Minimum Wage from their employer will receive any government support. For employees subject to employer-funded schemes offering greater than this, this represents the removal of $11,500 in financial assistance. Where an employer offers PPL which is less than 18 weeks’ pay at the National Minimum Wage, the government will top up the amount in order for it to reach the maximum level.

The change aims to significantly reduce the amount the government requires to fund the scheme, with Treasurer Hockey estimating a cost saving of nearly $1 billion.[2]

Implications for employers

Employers will need to closely monitor developments in this area, especially whether this specific component of the federal Budget is passed by Parliament.

However, if implemented as the government intends from 1 July 2016, this change will mean that employers currently offering PPL entitlements in excess of the government scheme may wish to consider whether to continue operating their own PPL schemes.

Employers should note, though, that it may not be possible to end any existing PPL schemes quickly, as these are usually set down in employment contracts, workplace policies, or enterprise agreements. Employers will have to continue providing employees with their PPL entitlements under those instruments, until they are changed or renegotiated in consultation with the affected employees; and (in the case of enterprise agreements) varied in accordance with Part 2-4, Division 7 of the Fair Work Act 2009 (Cth).

Of course in deciding whether to retain their own PPL schemes, employers should also factor in the importance of offering PPL benefits as part of an "employer of choice" recruitment and retention strategy. 

In advance of 1 July 2016, all employers will need to ensure that their workplace policies and procedures are updated to ensure consistency with any changes to the government PPL scheme.

 


 

 

[1] Phillip Coorey, ‘Federal budget 2015: Budget to end ‘double dip’ on parental leave’, Australian Financial Review, 11 May 2015.

[2] Ibid.   

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