The government’s introduction of Australia’s first ever Paid Parental Leave scheme was a fantastic win for women and families generally. With the scheme now underway (1st January 2011), the latest argument is who should administer it. The Coalition wants Centrelink to do this. At the time of this writing, the Lower House was about to vote on a bill introduced by opposition small business spokesman Bruce Billson. The proposed bill would have the new Paid Parental Leave scheme (PPL) administered totally by Centrelink, not employers.
The PPL scheme came into effect on 1st January 2011.
The current claiming process: 
- Employee contacts the Family Assistance Office (FAO) / Centrelink to apply.
- FAO determines if employee eligible. If yes, it contacts the employer, who then provides the FAO with their ABN, business name, bank account details, employee’s pay cycle and contact details.
- FAO sends payments to the employer just before the PPL is due to commence. The employer in not required to pay PPL to the employee until the funds have been received, so no cashflow issue for the employer.
- The employer pays the PPL as per the usual pay cycle, e.g. fortnightly or monthly. The employer must notify the employee of any payment made within 24 hours.
- The employer should deduct tax from PPL payments. However, other entitlements like superannuation are not applicable and also any PPL amounts should not be included in the calculation of workers compensation premiums and payroll tax.
The potential sticking points on the above process for small business:
- Double handing – the FMO pays the employer, and the employer pays the employee. It seems more logical for the FMO to pay the employee directly. The employee will no doubt have many more transactions with the FMO in the future if they are accessing the Child Care Benefit or Rebate, so why not keep this the same?
- Burden on the employer – small businesses particularly are under-resourced. Small business owners need to be focusing their time on growing their business, therefore employing more people and contributing to economic development. This process adds another layer of compliance and “to-do”s in the long list of tasks for small business owners.
- Because there is no superannuation paid on the PPL and payments for PPL are not included when calculating workers’ compensation premiums and payroll tax, this further complicates the reconciliation process. Again adding to time involved in managing the PPL payments.
Supporters of the existing process argue that by having employers administer the PPL payments the employee will be more “connected” to the workforce and the relationship will stay intact. I would argue that there are other more effective ways to keep a relationship alive between a business and an employee that is on parental leave. Depositing money into one’s account doesn’t constitute a relationship. Perhaps the real issue is ensuring a connection between the employee and the workforce and that is a topic for another post. All being said, we should not lose sight that the introduction of a PPL scheme is a wonderful start. And like any new scheme, the processes will need to be tested and reviewed. I invite you to let me know what your experience is with it. Too much time involved? Happy to do it? What do you think?
