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Paid Parental Leave Scheme

Paid Parental Leave at a glance

  • Under Australia's first paid parental scheme employers will be required to pay parental leave to eligible long-term employees who have a baby or adopt a child on or after 1 July 2011.

  • The paid parental leave scheme will be funded by the Australian Government and administered by employers.

  • Paid parental leave is for a maximum of 18 weeks.

  • Parental leave payments are in addition to any paid parental leave entitlement an employee has under a contract of employment, award, enterprise agreement or other law.

How will the scheme work?

The Paid Parental Leave Act 2010 (Act) was passed by the Commonwealth Parliament on 17 June 2010.

Under the Act, employers will be required to provide paid parental leave (PPL) for eligible employees who have 12 months continuous service prior to the date of birth or adoption of a child.

The maximum period for which any person may be paid PPL is 18 weeks (PPL period).

Employers will not be required to make superannuations contributions in respect of PPL.

PPL will not result in the accrual of additional leave entitlements for employees.

Who is eligible to be paid PPL?

To be eligible for PPL a person must:

  • have been engaged in work for at least 10 of the 13 months prior to the expected birth or adoption, and any break between two consecutive days of work does not exceed in eight weeks; and

  • during the 10 months prior to the expected birth or adoption, they have completed a minimum of 330 hours of paid work (and average of one day of paid work per week - this includes part-timers, casuals and contractors); and

  • have earned $150,000 (indexed) or less in the previous full financial year before the claim of birth, whichever is earlier; and

  • be an Australian-based resident during the PPL period; and

  • to be the child's primary carer; and

  • not have returned to work; and

  • not be entitled to baby bonus except in multiple birth cases (PPL recipients are not entitled to the tax-free $5,000 baby bonus however parents eligible for the government scheme may elect to receive the Baby Bonus instead of paid parental leave)

When will PPL become payable?

Arrangements to pay PPL will be phased in over a period of 6 months.

An employer may opt to provide PPL to its eligible employees from 1 January 2011, but all employees must pay PPL from 1 July 2011.

Who will pay for the scheme?

Employers currently are not required to contribute to the government PPL scheme so the Australian Government will fund the PPL scheme.

Funds amounts will be electronically transferred by Family Assistance Office to an employer's nominated bank account.

In most cases the employee will receive the PPL payment through their employer.

Eligible employees who are not paid by their employer for permitted reasons will be paid directly by the Family Assistance Office. For instance, employees who have resigned will still be entitled to receive the payment provided they satisfy the elegibilty criteria in which case payments wil be administered by the Family Assistance Office.

How much PPL is payable?

PPL is paid in instalments at the national minimum wage during the employee's PPL period (as of 1 July 2010 the minimum wage is $569.90 per week).

PPL is payable in addition to any PPL entitlements already provided by the employer under a contract of employment, industrial instrument or other legislation.

What do employees need to do?

It is the employees' responsibility to lodge their claim with Family Assistance Office.

Claims can be lodged up to three months before the expected date of the birth or adoption.

When an employee claims PPL, the Family Assistance Office will decide if they are eligible and will notify the employer of such decision.

What are employers required to do?

The Family Assistance Office will inform employers if they are required to provide PPL to an employee.

The employer is only required to pay PPL instalments to a person entitled to PPL once the employer has been paid sufficient funds by the Family Assistance Office to fund the instalment.

PPL will be paid to the employee on their usual pay day.

The employer must provide required details to the Family Assistance Office so that it can advance the employer PPL instalaments.

Employers will need to keep proper financial records of the receipt of the funding amounts and of the PPL to an employee.

Can an employer object to paying PPL?

An employer will be asked if they accept the decision of the Family Assistance Office to pay PPL.

If the employer is of the view of the decision is not correct, the employer will be able to seek a review of the decision.

An employer will have up to 14 days from the date of the notice to respond to the Family Assistance Officer whether or not the employer agrees with the decision.

Where to now for employers?

Employers are encouraged to:

  • review their administrative and reporting processes to ensure they keep proper financial records of the receipt of these funding amounts and of the PPL to an employee

  • consider training their HR and accounts personnel to become familiar with the new scheme

  • review their existing policies, employment agreements and industrial instruments in the light of the new scheme

More information

For information regarding possible implications for your business, please contact a member of the FAL team.

14 July 2010