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Rudd’s Paid Parental Leave Scheme: Is it supporting working families?

Posted 13 August 2009 by Terri Macdonald (NTEU National Office)

After an intense lobbying campaign by unions, community groups and women, the Federal Government announced in the 2009 Budget the introduction of Australia’s Paid Parental Leave Scheme: Supporting working Australian families, to commence from 1 January 2011.

The scheme will cover either the birth or adoption of a new child by a primary carer, although details on age for adoption are not yet known. While in most situations the ‘primary carer’ will be the mother, the leave can be transferred to the father or same-sex partner if they are the primary carer and meet the requirements. It may also be transferred part way through so parents can share the leave.

To be eligible, the primary carer will have been employed continuously for at least 10 of the previous 13 months before the birth and to have worked at least 330 hours in that period. The criteria will apply to permanent employees, casuals, contractors and the self-employed.

The Government estimates about 148,000 parents will be eligible for the payments each year. According to data cited in the Productivity Commission report, approximately 280,000 mothers gave birth in 2007, of which about 175,000 were working; meaning that (according to official figures) approximately 85 per cent of working parents would be eligible for the payments.

National Maternity Scheme

Eligible primary carers will receive their maternity payment at the rate of the minimum wage, (currently $543.78 per week, to a total of approximately $10,000 over 18 weeks). The scheme will be means tested, but only on the primary carer’s income. Primary carers who earn more than $150,000 a year are ineligible,

Those who are ineligible, or chose not to take the payment, may claim the $5,000 Baby Bonus, which will remain unchanged. The scheme rules out eligibility for Family Tax Benefit B for the duration of the payments, but those who chose the Baby Bonus payment may be eligible.

If there are multiple births, parents would receive one paid leave entitlement but, subject to an income test, would receive the Baby Bonus for extra children.

It’s important to note that the scheme is considered to be taxable income and will count toward the primary carer’s annual income. While the Government estimates that on average, paid parental leave recipients would be about $2,000 better off than current arrangements, much will depend on the rate of taxation, as the higher the rate the more reduced the worth of the parental leave payment. It is estimated that approximately 14 per cent of potential recipients of paid leave will opt to keep the baby bonus and existing welfare payments as the arrangements for the paid parental leave will leave them financially worse off, or with little benefit.

Non-Primary Carer payment axed

An early draft recommendation (made by the Productivity Commission considered the feasibility of a national paid parental scheme) supported payment for the non-primary care-givers (two weeks at the rate of the minimum wage).

It was argued that such a payment would create incentives for fathers to ‘exercise greater caring responsibilities’ and emphasise the important role of the supporting partner. It would also signal to employers that the role of fathers in caring for children was vital, giving weight to the broader issues of work/family balance.

This provision was also applicable to the same-sex partner who was not the primary carer. However, this aspect of the proposal was omitted in the Government scheme in order to reduce costs of the scheme.

Impact on bargaining

Full details of the scheme are yet to be finalised and the Government will be undertaking consultations with business organisations, employers and unions in the second half of 2009, with a view to introducing legislation in 2010. Until that time, no detailed information as to the structure of the scheme is available, save that set out in the Government’s booklet.

The booklet states that the paid parental leave entitlement will be able to be taken in conjunction with, or in addition to, employer-provided paid maternity and parental leave, and other employer-provided leave entitlements. In particular, it says:

‘Employers who provide PPL through an industrial instrument cannot withdraw that entitlement for the life of that instrument. During bargaining for a new agreement, employers and employees will be able to agree to modify existing employer PPL provisions in the light of the introduction of the new Government PPL scheme.’

It is unclear what this means for NTEU’s current bargaining. On the face of it, it would appear to mean that if existing arrangements remain unchanged university staff will be entitled to between 26 and 36 weeks paid parental leave at full pay, PLUS their 18-week entitlement at the minimum wage. However, in recent discussions with the Department of Families, Housing, Community Service and Indigenous Affairs, it became apparent that the inevitable result of some staff thus being entitled to more than 52 weeks paid parental leave had not occurred to them. It is clear that there will be significant political pressure on the Government to allow employers to absorb the Government-funded paid parental leave entitlements where they already pay over 18 weeks.

The Scheme will cover casuals, contractors and the self-employed as well as employees. As most of our Agreements do not provide for paid parental leave for casuals, NTEU needs to consider whether and how we can ensure casuals may also access existing paid parental leave arrangements in our Agreements (the 26-36 weeks) in addition to the 18-week minimum wage payment.

The Family Assistance Office will be responsible for administering the scheme, which will primarily work by transferring funds to employers who will then pass on the paid parental leave payments through their normal pay cycle.

However, employers will only be required to do this for employees that have completed 12 months continuous service. This would appear to mean some staff would not receive their paid parental leave payments through normal payroll. It is unclear whether administration of payments through payroll for this small group of staff could nonetheless be agreed through bargaining.

Finally, in the Government’s scheme employers are not compelled to contribute to superannuation or other industrial entitlements, such as long service leave and annual leave. Currently, it is unclear whether payment of these provisions on the Government paid parental leave payments is something that may nonetheless be agreed through bargaining.

Given the uncertainty of the impact of the new scheme on current and future industrial arrangements, NTEU has drafted a model claim to guide the Union during the present round of negotiations. It is by necessity broadly defined, as much will depend on the fine print in the final legislation of the scheme.