Paid Parental Leave Changes from 1 July 2011

Understand your obligations

From 1 July 2011, employers now act as “paymasters” whereby the Government provides the employer with funds which are to be distributed to the eligible employee for paid parental leave entitlements.

Employers are required to make paid parental leave payments on each regular payday for that employee if they are paid on a monthly basis. For employees who would not normally receive monthly pay, employers must make fortnightly payments. Employers are required to withhold PAYG tax from each payment.

Note: There is no provision for superannuation in the legislation and employers are not expected to make contributions to their employee’s superannuation fund.

Employees do not accrue annual leave entitlements during this period of leave. However, employers that already have a paid parental leave scheme cannot replace it with the Government’s – an employee already entitled to an employer-funded paid parental leave scheme will also receive their entitlements from the Government.

More information is available at the Family Assistance Office website http://www.familyassist.gov.au/

Know your employee’s eligibility

Employees include casual workers as well as contractors and the self employed. Employees will be eligible to receive paid parental leave entitlements provided they have:

• worked at least one day per week for 10 of the 13 months before the birth or adoption of their child

• Australian residency

• made a claim for paid parental leave (that is, it is not an automatic entitlement)

• given birth or adopted no earlier than 1 January 2011

• the role as primary care giver of the child

• not have worked between the date of birth/adoption and their nominated start date for paid parental leave; and

• earned less than $150,000 adjusted taxable income in the financial year prior to the date of birth/adoption (this includes base rate of pay, bonus, foreign income and income earned from assets like shares or property). This is a flat income test that is not calculated on a pro-rata basis for employees who are not full time

It is probably a good idea to review your existing employer contracts and company policies to determine how the new legislation will be integrated with current schemes.

Provide necessary details to the Family Assistance Officer

Register your organisation (information available at http://www.familyassist.gov.au) and ensure the necessary systems are in place internally to process payments from 1 July.

This will ensure that you (the employer) will receive the required Government funds in advance of making PPL payments to your employee in your usual payroll cycle.

Keep appropriate records

Records must be kept of all funds received from the Commonwealth Government and their subsequent distribution to employees.

Communicate with your employees

Maintain effective communication to minimise confusion about employee entitlements and eligibility.

For more information on managing this process through HR outsourcing and HR consultancy, contact Annette Dixon at End2End Business Solutions www.end2endbusinesssolutions.com.au