On 12 May 2015, the Commonwealth Treasurer, Joe Hockey MP,
delivered the Federal Budget for 2015–2016 (the "Federal
Budget"). One of the announced changes involves amendments to
the interaction between the current government-funded Paid Parental
Leave ("PPL") scheme and employer-funded PPL schemes. The
government-funded PPL scheme entitles employees to 18 weeks'
PPL at the national minimum wage, totalling $11,500, when they take
time off work to care for a newborn or recently adopted
child.
Currently, employees are eligible for government-funded PPL
payments even if they are also receiving payments from an
employer-funded PPL scheme. This means that employees can receive
dual payments while on PPL, from both the government and their
employer. As a practical matter, however, many employers have made
their PPL schemes complementary to the government schemes, by
"topping up" the government-funded payments to ensure
that employees on PPL receive their usual salary.
If the proposed change is passed, employees will no longer be
eligible to access the government-funded PPL scheme if their
employer provides a more generous scheme. As such, only employees
receiving less than 18 weeks' PPL at minimum wage will be
eligible to receive government-funded payments. When the
employer's scheme offers less than the government-funded
scheme, the employee will receive "top-up" payments from
the government for up 18 weeks at minimum wage, which currently
represents approximately $11,500 in total.
The government intends to implement this change from 1 July 2016.
The Treasurer has estimated that the change will represent a cost
saving to the government of nearly $1 billion. However, it remains
to be seen whether Parliament will pass this component of the
Federal Budget.
Lessons for Employers
If this change is passed by Parliament, employers will need to
consider the appropriateness of offering their own PPL schemes.
This decision will clearly be informed by other considerations
relevant for employers, including the impact of offering PPL
benefits on an employer's ability to recruit and retain
employees. However, depending on how the legislation implementing
the proposed change is drafted, it may be open to employers to
provide other incentives fulfilling those purposes, such as
payments made when an employee returns to work.
Any alterations to an employer's existing PPL scheme could
raise practical and legal challenges. Such schemes are often set
out in employment contracts, employment policies and enterprise
agreements. This means that employers could be bound to uphold such
schemes, and PPL schemes could be difficult to change quickly.
Employers may be obliged to continue providing employees with their
existing PPL entitlements under those instruments, unless employers
can amend or renegotiate the aspects of those instruments dealing
with PPL.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
