Q. How big a change is the introduction of a paid parental leave scheme to the Australian workplace relations system? How likely is the regime for parental leave to achieve its objectives of increased workforce productivity and participation?

A. It’s certainly a major change. It significantly increases the proportion of the workforce that has access to paid leave, and it will be especially beneficial to many lower-paid workers. Symbolically too, it’s a reform that many groups have been campaigning to achieve, over very many years.

For women in particular, it’s a big breakthrough. As for productivity and participation though, it’s hard to
be sure. On the one hand, this scheme is making it easier for parents to take longer breaks from work when having or adopting a child. That means a bigger interruption to their job, with the potential for more of a catch-up when they return. On the other hand, the availability of parental leave pay may attract more women to work in the first place. And in principle, it should also encourage them to think about staying with the same employer if they do have a child. I say ‘in principle’, because there will be situations where a parent is eligible for parental leave pay, but is not in fact entitled to take leave from their job – an issue we explore in our book. As for productivity, the idea is that by encouraging parents – again, especially mothers – to take more time off to spend with their child in that crucial period after birth or adoption, both parents and children are likely to be healthier and happier. And for employers, that hopefully translates
into healthier, happier and more productive workers as well, when they do eventually return.

Q. As a lawyer and an author on the topic, has there been anything about the system that has taken you by surprise?

A. The most surprising aspect has been the complexity of the content and structure of the Paid Parental Leave Act, with its combination of industrial, tax and social security concepts and terminology. It is simply not accessible to non-lawyers – in fact even some lawyers find it too difficult to navigate. In
speaking to clients who have been reviewing their systems, and also those who have had made payments under the new paymaster function, there is a real need for greater clarity and guidance for employers on the practical side of actually receiving the funds and making the payments – particularly in relation to small and medium sized employers.

Much of the focus of the government’s publicity has been on the workers’ entitlements and not on what an employer needs to do to prepare for its role in the system. On a different point, I’ve also been surprised to learn that where a couple have a child, other than through adoption, it is the mother’s income that generally determines whether either parent receives parental leave pay which can cause different results for households with the same income but where the woman is the higher earner. I’m not sure I understand why a household with a mother who earns over $150,000 a year is denied any
government payment, even if her lower-paid partner is intending to be the primary carer of the child; whereas if the mother earns less than that amount, she gets the government payment irrespective of her partner’s income. There seems to be an element of discrimination there.

Q. What are legal risks for businesses that don’t manage parental leave obligations properly?

A. The first issue is that in failing to manage parental leave properly, businesses may lose good employees. Organisations spend a lot of time and money recruiting and training the best employees. When parental leave is not properly managed the business risks losing touch with an employee or damaging the trust in the employment relationship to an extent where the employee does not want to return to work. Putting that aside, the legal obligations, particularly in relation to paid parental leave, are incredibly complicated. Failure to adhere to the requirements of the Paid Parental Leave Act or the Fair Work Act can expose the employer to debt recovery proceedings or, in some cases, civil penalties of up to A$33,000. Penalties can also be imposed against managers as individuals if they are proven to be a ‘person involved’ in a contravention.

Q. What are the biggest challenges now for HR advisers/ managers in workplaces dealing with leave  entitlements for parents?

A. Have workplaces stepped up to the paymaster function that transferred to them on 1 July this year?
Employers won’t have to make decisions about eligibility for the government scheme. But eligibility is only part of the story. The biggest challenge for employers is working out how the new entitlements sit within their existing policies, procedures and payroll system. If the employer is acting as a paymaster,
parental leave pay has to come through the employer’s payroll system and must have PAYG tax deducted.

However, the amounts need to be separately identifiable from other salary and wages, since they don’t attract superannuation and aren’t taken into consideration for other purposes such as determining liability for payroll tax. Matters are further complicated if an employee chooses to take their parental leave pay at the same time as receiving another form of paid leave (such as annual or long service leave), which does attract superannuation and is taken into account for payroll tax purposes.

In terms of how employers are coping, the impression I have from talking to clients is that they are finding it exceedingly difficult to understand some of the processes, and that there can be real challenges in communicating with the government’s Family Assistance Office. For example, one HR manager received three notifications about the same employee – one saying they were eligible for parental pay, the second saying they weren’t eligible because the birth hadn’t been verified, and the third reconfirming eligibility. By that stage, the FAO had rescinded the determination requiring the employer to act as paymaster, and the process then had to re-start.

Erin McCarthy is a partner of national law firm Piper Alderman and has more than a decade experience in advising employers in relation to employment law and industrial relations issues. Erin’s particular
expertise is in the areas of enterprise bargaining, occupational health and safety and discrimination
matters although she provides strategic advice to clients on all aspects of workplace law. Erin has also
previously undertaken the role of employee relations manager for a large multinational employer in
the manufacturing industry.

Parental Leave: A User-Friendly Guide is a Thomson Reuters publication. Thomson Reuters is the publishers of this website.