Did you know that business owners may also be eligible for the government funded Paid Parental Leave scheme?
As a business owner, there are things you should know if you have employees that might access the scheme but the good news is that if you are self employed you may also be eligible.
The Paid Parental Leave scheme is a government funded payment for 18 weeks that can be taken any time within the first year following the birth or adoption of a baby.
In order to be eligible you need to meet the following criteria:
You must be an Australian resident
You must be the primary carer for a newborn or recently adopted child
You must meet the parental leave birth test before the child is born or adopted
You must have earned less than $150,000 (individual adjusted taxable income) in the financial year prior to the date of birth or date of claim, whichever comes first
You must be on leave or not working at the time you become the primary carer for the child
Under this scheme, as a business owner you are able to oversee the running of your business and still receive Paid Parental Leave. This means that you can manage ad hoc elements of your work to ensure your business is running smoothly, such as paying an account, but you must not participate in your day to day work at this time.
You may also be eligible to receive the Baby Bonus, however you can only claim from one scheme, not both. It is wise to assess your personal situation and decide whether Paid Parental Leave or the Baby Bonus will provide you with the most beneficial outcome.
The government's paid parental leave scheme, is a groundbreaking change for Australian business and workers. For the first time in Australian history, parental leave will be paid by law and funded by the Government.
Key Principles
While the urgency with which you need to understand paid parental leave will depend on whether or not you have staff who are looking to access the benefit, it is important to understand the employers rights and obligations. The main ones are:
The employer acts as paymaster in the scheme, receiving cash from the Government and passing this to the worker.
If you have an existing paid parental leave scheme in place, it must stay in place.
Employees can now take up to two years of parental leave, although it is unpaid after the first 18 weeks.
The scheme is for eligible working parents earning $150,000 who have given birth or adopted a child after January 1, 2011. Completely Government funded, it pays people at the rate of the minimum weekly wage of $569.90 a week for 18 weeks. Under the National Employment Standard, people can also apply to have 52 weeks off for parental leave, and then re-apply for another year. That is unpaid after the first 18 weeks.
Currently about 6,500 workers and about 1,000 businesses have registered for the scheme.
The Process
Under the scheme, an employee planning to take parental leave makes an application to Centrelink which then determines the eligibility of the employee and then notifies the employer. The Family Assistance Office pays the money to the employer who passes that on to the employee on leave, in effect turning the company into the Government's payroll clerk.
The Government's legislation prohibits companies from changing their existing schemes if they are written into contracts or enterprise agreements. There might be room to move if these schemes are part of a policy and not contractual. Nevertheless, the wording of that policy needs to be looked at carefully. You can either do it, or you can't.
Under the National Employment Standards, a select group of employees can apply for flexible work arrangements, something that would be critical for parents returning to work after time off looking after the baby. However, this is restricted to employees with a child under school age or who have a child with a disability. If their youngest child goes to school, they are not eligible. As with the parental leave scheme, this is new territory for Australian business.
Returning after Parental Leave
There is now an obligation on employers to consult with an employee if there are going to be any changes to their role upon their return. This means, for example, that if an employee is away on parental leave and the company plans to change their role, perhaps changing their responsibilities or even making the position redundant, the employer would be required to consult with that staff member first.
Opportunities
Many businesses are now using parental leave obligations to turn themselves into an employer of choice at a time when Australia's skills shortages are set to worsen as the world recovers from the global financial crisis. With talent now harder to find and retain, more are turning to family friendly policies to attract staff.
A new Mercer study has found that out of 284 organisations surveyed, 72% already offer some type of paid parental leave entitlement, with the median being 12 weeks of leave at full pay. It also found the education and research industry offers the highest amount of leave on average, at 23 weeks.
The next highest industries include energy and utilities, healthcare, federal and state governments and local governments.
Some employers plan to pay parental leave out of their own pockets for employees earning over $150,000. Other companies, have extended three weeks of payment to non-primary carers, the supporting partner. Some are even paying their employee the equivalent of a baby bonus on the birth of the child.
The Mercer survey also reveals that out of the 28% of businesses that haven’t introduced their own scheme, about 25% are considering doing so, on top of the government’s new scheme. Mercer says many are intending to offer the difference between the government’s scheme, (which is set at $570 per week), and the employer’s full salary.
This means that companies thinking of not adhering to their policies and reducing the parental leave benefits are doing so at their own peril. They risk losing quality staff.
Administration
Still, there is a cost to the scheme. Opposition small business spokesman Bruce Billson has introduced a private member's bill into Parliament to ensure the government pays the benefit directly to parents. This would reduce the compliance burden on companies. The legislation has been delayed until next year.
The problem is that businesses will not be compensated for the cost of administration. All businesses will need to have systems in place to make sure people are getting the payments. Someone in the organisation will have to take care of it. Someone has to pay for it. That might be the cost of doing business in a skills constrained market but nobody should pretend it is not a cost.
The Mercer study also raised another issue for employers, and that will be making sure they are actually complying with the government’s regulations regarding the new scheme. According to the survey, nearly 33% of organisations are unsure as to how the government scheme will integrate with their own.
Until July 1 businesses have the opportunity to integrate with the plan and start distributing payments, but after that date the employers must administer it all.
Businesses need to start thinking about those plans now, and start developing administration procedures for handling the payments, designating responsibilities, and so on. And should the business replace those employees who go on leave?
As always, continuity of businesses is a key issue. So how are businesses going to fill particular roles? What will they do to make sure the business continues to run?
So these challenges will be particularly true for SMEs and start-ups that do not have extensive human resources back up. For most Australian businesses, paid parental leave is uncharted territory.
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