Maurice Blackburn

The Federal Government's paid parental leave scheme commenced on 1 January 2011. The scheme complements the employee's entitlement to unpaid parental leave under the National Employment Standards.

The scheme is a significant step forward for Australian employees. However, there are a number of technical traps that employees need to be mindful of. This update summarises the key elements of the scheme and highlights some areas to watch out for.

What does the scheme provide?

Eligible working parents can receive up to 18 weeks of paid parental leave.  Parental leave pay is a fixed rate for all eligible parents - regardless of their income - and is calculated by reference to the national minimum wage. The current rate is $570 per week and will be indexed from mid-2012.

The payments are taxable income.  Tax will be deducted and payments will be recorded on end of financial year employment statements.  Employers are not required to make superannuation contributions on the payments.

Who is eligible?

The payments are available to an employee who:

• has the primary care of a child born or adopted after 1 January 2011
• is an Australian resident or citizen
• meets the 'work test' immediately before the birth or adoption of the child
• received a taxable income of $150 000 or less during the previous financial year (individual income - not family income), and
• has taken leave from their workplace, or not engaged in paid work, from the birth of the baby or adoption of the child.

What is the work test?

To be eligible for the payment, the primary carers must have:

• worked for at least 10 of the 13 months prior to the birth or adoption of the child
• worked for at least 330 hours during that 10 month period and
• have had no more than an eight-week gap between consecutive working days, with at least one hour of work being performed.

When can a employee claim?

The earliest a claim can be made is 97 days prior to the expected date of birth or adoption. The last date that a claim can be made is the day before the child's first birthday, or the first anniversary of the child's placement (in the case of adoption). 

However, employees need to remember that if a claim is made within 18 weeks of the child's first birthday or anniversary of placement, the claimant is only eligible to claim for the period up to the first anniversary. This means that a employee claiming in this period will not receive the full 18 weeks' benefit.

How does an employee claim?

The Family Assistance Office assesses every claim for paid parental leave, even where the payments will be made through the person's employer. The FAO will make a payability determination. The FAO will also make a determination as to whether the paid parental leave must be administered by the person's employer, or through the FAO.

Applications for paid parental leave are not made to employer's directly, even when the employer will facilitate the payments.

Can the Government funded leave be combined with other types of leave?

Paid Parental Leave can be received before, after or at the same time as other entitlements, including employer-provided paid parental leave. 

Who pays?

Paid Parental Leave is funded by the Federal Government.  However, for many employees, it will be paid by their employer who, in turn, receives funding for the payments directly from the Government.

Until 1 July 2011, payments to employees can be made directly by the Family Assistance Office. From 1 July 2011, the employer must provide the parental leave pay to employees who have:

• worked for the employer for at least 12 months before the birth or adoption of the child;
• are Australian-based employees, and
• are entitled to at least eight weeks of paid leave.

In other cases, the Family Assistance Office will continue to provide the payment.

When does the entitlement cease?

On return to work

The entitlement to paid parental leave ceases once an employee returns to work.  A person returns to work on a day if they performs one hour or more of paid work on a single day. This means that if an employee performs even a single hour of paid work, they cease to be eligible. If they are already receiving payments at the time they return to work, their entitlement to any remaining weeks' benefit ceases from the time they perform the work.

However, employees are entitled to 10 'keeping in touch' days while on leave. A keeping in touch day is a working day that allows an employee to keep in touch with their place of work or that facilitates their return to work after their leave.  Training or planning days and conference are examples of 'keeping in touch' activities. Ordinary work activities are not 'keeping in touch' days.

If you are relying on the NES entitlement to 12 months unpaid parental leave

However, an employee who returns to work for a 'keeping in touch day' may lose their entitlement to 12 months' unpaid parental leave under the National Employment Standards - and the protections that go with it, such as the right to return to their substantive role. This is because the NES requires unpaid parental leave to be taken in a single continuous block. A 'keeping in touch day' may break the single continuous block.

The Federal Government has announced plans to amend the NES to allow employees to take 'keeping in touch days' without affecting their NES entitlement.  In the interim, employees should:

• ensure that if they plan to undertake ad hoc work it falls within the definition of 'keeping in touch', and/or
• avoid any paid work if they are relying on the 12 month unpaid parental leave provisions in the NES.

Childcare arrangements

Employees should also be mindful that full time child care may impact on their entitlement. The claimant must remain the child's primary carer. Care of the child cannot be allocated to another person or organisation for more than a reasonable period. The consideration of what is reasonable includes respite for the primary carer. However, a person is likely to cease being the primary carer if the child is in child care for a substantial amount of time. If they cease to be eligible, their entitlement to payments also ceases.

Transferable to secondary or tertiary carers - ensuring employees get their full entitlement

The scheme contemplates that one person will be the eligible primary carer for the child for the full 18 weeks. However, it provides for transfer provisions to secondary and, in some cases, tertiary carers. In eligible cases, the primary carer may transfer the balance of their entitlement to a person who takes over the role of primary carer. However, the new primary carer cannot claim the 18 week entitlement again.

A employee who plans to return to work or otherwise ceases to be the primary carer, should look to utilise the transfer provisions if possible to maximise the benefit they can receive.

Where can I get more information?

Your union may be able to assist you with more detailed information.  A comprehensive Paid Parental Leave guide is available at http://www.fahcsia.gov.au/. If you are experiencing employment difficulties arising from your parental leave, you may wish to make an appointment to see one of our employment lawyers by calling 1800 810 856.