Paid Parental Leave – What you need to know

The Paid Parental Leave scheme was introduced on 1 January 2011.
The aim of the scheme is to provide primary carers of new born or adopted children with 18 weeks paid leave at the national minimum wage. There are two primary messages that employers should be aware of:

  1. The scheme will be fully funded by the government, and
  2. There will be a six-month phase in period for employers during which period parents will be able to claim directly from the Family Assistance Office. The phase in period is optional and is designed to make the transition easier for the employer.

After 1st July 2011, employers will be required to make payments on behalf of their long term employees. Long term employees are those who have been with the company for12months or more. In this scenario the employer will receive advanced payment from the government thereby avoiding any cash flow difficulties. Funds may be received from the government fortnightly or in three six week instalments.
Under the legislation, the Fair Work Ombudsman is empowered to investigate any employer who fails to pay. Parental Leave pay is not a leave entitlement, but it will complement parents’ entitlements to leave such as unpaid parental leave under the National Employment Standards.
Parents are only entitled to paid leave after the birth or adoption of the child, not before, and may be taken any time thereafter so long as the entire 18 weeks are taken within the first 12 months of the date of birth.

Who is eligible?

To be eligible, a parent will need to meet the Paid Parental Leave work test, the income test and the residency requirements. Typically this means that the parent has worked for at least 10 of the 13 months before the birth or adoption of the child, worked a minimum of 330 hours during that period and there was not a break of more than 8 weeks between work periods. Only parents with an adjusted taxable income of $150,000 or less will be eligible. Australian citizens, permanent residents, New Zealand citizens who entered on a NZ passport and some specified temporary visa holders are all eligible to claim Paid Parental leave.

Paid Parental Leave verses Baby Bonus?

It should be noted that parents who claim Paid Parental Leave will not be eligible to claim the Baby Bonus at the same time. Consideration should therefore be given to the employees own personal and family circumstance with regard to claim Paid Parental leave. It is estimated that 85% of families will be $2000 better off under the Paid Parental Leave scheme.

How does it Work? The Process...

  1. The employee will lodge their claim no more than 3 months prior to the expected birth or adoption directly with the Family Assistance Office. The first claims can be lodged from the 1st October 2010.
  2. If the Family Assistance Office approves the claim they will notify the employer confirming your eligibility and advising of start date of payments and asking for specific information relating to the receipt of funds from the Family Assistance Office.
  3. The Payment is taxable so all normal pay and payment slip details must be provided to the employee.