Overview

For employers, especially small businesses, the Australian parental leave system can be complex to understand, navigate and apply. The system is a hybrid framework which consists of:

• Unpaid parental leave governed by the Fair Work Act 2009 (Cth) (‘FW Act’) and contained within the National Employment Standards (‘NES’);
• Government-funded Parental Leave Pay (PPL) under the Paid Parental Leave Act 2010 (Cth). The current PPL scheme provides for up to 18 weeks of Parental Leave Pay (‘PLP’) and up to two weeks of Dad And Partner Pay (‘DAPP’); and
• Employer-funded paid parental leave made available through enterprise or other registered agreements, employment contracts and workplace policies.

This article focuses solely on the government-funded PPL scheme and the upcoming changes.

What Has Changed?

On 6 March 2023, the Paid Parental Leave Amendment (Improvements for Families and Gender Equality) Bill passed both houses of Parliament. As a result of this legislative change, the Paid Parental Leave Act 2010 (Cth) is soon to be amended to:

• Merge Parental Leave Pay (PLP) with Dad and Partner Pay (DAPP), establishing a single parental leave payment of 20 weeks that includes (for each claimant) two weeks reserved on a ‘use it or lose it’ basis;
• Eliminate the ‘primary’, ‘secondary’ and ‘tertiary’ claimant categories and the requirement that the primary claimant of PLP must be the birth parent;
• Enable the payment to be taken flexibly within two years of the birth or adoption by claimants;
• In circumstances where families do not meet the individual income test, apply a $350,000 family income limit under which they can be assessed; and
• Broaden eligibility, so regardless of whether the income test or residency requirements are met, or a newly arrived resident’s waiting period is being served, an eligible father or partner is able to receive PLP.

These changes come into effect on 1 July 2023, and are discussed below in more detail.

Key Provisions

Abolishing Dad and Partner Pay (DAPP) 

As mentioned, the current PPL scheme is comprised of two separate payments. These are, up to 18 weeks of PLP and up to two weeks of DAPP. Under the amendment, DAPP is abolished as a distinct payment and subsequently, PLP is able to be claimed by fathers and partners.

‘Use It or Lose It’ Requirement 

The amendment introduces a ‘use it or lose it’ requirement for parents in a couple, by which to claim the full 20 weeks of PPL, each parent is required to take at least two weeks of leave.

NOTE: While neither parent in a couple can take more than 18 weeks of PPL, single parents are eligible to claim the full 20 weeks.

Making All Paid Parental Leave Weeks Flexible 

Presently, there are two components of PLP. These include an initial period of 12 weeks which must be taken continuously, and a subsequent period of six weeks that is flexible. Under the amendment, this distinction is removed and replaced by a single 20-week period of flexible PLP.

In likeness to the current arrangement, only two weeks of the new flexible PLP can be taken concurrently. Also, if an individual is partnered at the time of their first effective claim, they will not be eligible for PLP where the claim is for more than 90 flexible days. This enables another claimant, generally a partner, to access 10 reserved days.

Gender Neutral Claim Rules 

The amendment allows a payment to be claimed by fathers or partners, without the birth parent making a successful claim first.

This means fathers or parents who meet the eligibility criteria can lodge a PLP claim in their own right, instead of as secondary claimants. Further, this applies to situations where the birth mother does not meet the income or residency tests and is therefore ineligible.

NOTE: While fathers and partners are able to claim PLP themselves, permission of the birth mother is normally required (except in adoption cases).

Under the amendment, the definitions of ‘primary’, ‘secondary’ and ‘tertiary’ claimant are removed, and two new categories of claimants are created:

• A PPL claimant is someone who has made an effective claim for a child.
• A special PPL claimant is someone who has made an effective special claim for a child, for which another person has made a claim.

Those who can make a PPL claim include:

• The birth mother (and their partner)
• An adoptive parent (and their partner)
• A parent who is not the birth mother (and their partner)
• Another person caring for the child under exceptional circumstances

Introduction of a $350,000 Family Income Limit 

The amendment introduces a $350,000 family income limit, which is applicable in circumstances where families do not meet the individual income test. This means if a claimant fails the individual income test (including single parents) they will be reassessed against the new family income limit.

What Employers Need to Know

The purpose of the PPL scheme is to financially support employees whilst they are on leave from work and caring for a newborn or recently adopted child. Services Australia managed this scheme, who assesses whether employees are eligible for PLP.

How does this affect employers?  

It is important you are aware of your employee’s leave entitlements under the NES in the FW Act and also any applicable modern awards or enterprise agreements. This is because an employee may have existing entitlements to paid and unpaid leave for the birth or adoption of a child.

Interaction With Other Types of Leave  

An employee’s PPL period can occur before, after or during the same time as other types of paid or unpaid leave such as employer-funded paid parental leave, annual leave, long service leave and unpaid parental leave.

Example:

Emma’s employer provides her with five weeks paid parental leave that commences on the date her child is born. Emma is eligible for government-funded PLP and may choose to have these payments start when her employer-funded leave ceases. Alternatively, she can opt to have these payments made at the same time as her employer-funded leave.

Applications by Employees  

It is the employee’s responsibility to lodge a claim with Services Australia and if this is approved, they will send the employer a letter.

Employer Obligations  

As an employer, you must provide PLP for an eligible employee who:

• Has been employed with you for at least 12 months prior to the expected date of birth or adoption;
• Will continue as an employee of yours for the PPL period;
• Is Australian based; and
• Is expected to receive eight weeks or more of PPL.

Record Keeping and Payslip Requirements  

Employers are required to keep financial records of funds received from Services Australia and payments made to employees. This includes for each PLP payment:

• The date it was made to the employee;
• The period it covers;
• The gross amount;
• The net amount and amount of income tax withheld;
• A statement that identifies it as PLP under the Australian Government PPL Scheme; and
• The amount of any deductions made.

Also, employers must give employees who get PLP a pay slip within 1 working day of the payment being made.

Keeping in Touch Days  

The scheme includes a ‘keeping in touch’ provision which enables employees to work up to 10 days during their PPL period. Employers and employees must both agree to take part in a keeping in touch activity and either party can decide if they don’t want this to occur. Employers cannot ask employees to participate in a keeping in touch day within six weeks of the birth or adoption. However, if an employee requests a keeping in touch day which is more than two weeks after the birth or adoption, they can participate as long as you agree.

What Now?  

In light of the upcoming changes, it is necessary to review and amend your parental leave policies before 1 July 2023 to ensure they are compliant and reflect the new PPL entitlements.