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Paid Parental Leave to Australians from 1 January 2011

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The Rudd Government announced, in its federal budget handed down on 12 May 2009, the introduction of a federal government backed paid parental leave scheme to commence from 1 January 2011.

The paid parental leave scheme will provide paid parental leave benefits to most Australian employees and will be funded, for the most part, by the federal government.

Paid parental leave benefits made pursuant to this scheme will be:

  • Means tested applying to Australian employees earning less than $150,000 per annum
  • Payable to the parent that is the primary care giver of the child
  • Equal to 18 weeks’ paid leave calculated on the Australian minimum wage, currently $543.78 per week
  • Receivable within 12 months of the birth or adoption of the child
  • Whilst paid by the employer, the employer will be pre-paid the cost of such benefits by the federal government

Importantly, whilst employers will not be required to make superannuation payments on parental leave benefits paid, employers will be responsible for workers’ compensation premiums and payroll tax payable on such benefits.

Employees should note that they will not accrue leave entitlements during the period of receipt of these parental leave benefits.

The paid parental leave scheme will operate in conjunction with already established employer provided paid leave benefits that may exist in a given workplace. Employers should, accordingly, take care in providing for such benefits to employees under workplace agreements or employer based policies.

Time will tell what impact the introduction of the paid parental leave scheme will have on terms and conditions to be negotiated in collective agreements (to be known as enterprise agreements from 1 July 2009) between employers and its employees between now and 1 January 2011.

Both Australian employers and the ACTU have welcomed the introduction of a paid parental leave scheme that brings Australia in line with its OECD counterparts in having a statutory paid parental leave scheme in place.

Author: Herbert Fischbacher