Delivery of Abbott’s paid parental leave hits a budget bump

Prime Minister Tony Abbott’s controversial paid parental leave scheme has hit another stumbling block this week with the revelation that the Commission of Audit has reportedly criticised the expense of the scheme.

In a report delivered to the federal government, the commission supports the premise of the scheme but says the terms are too generous in the context of Treasurer Joe Hockey’s bid to reduce the federal budget deficit, according to The Australian Financial Review.

The new scheme is due to begin on July 1 next year and is estimated to cost around $5.5 billion every year.

Recipients will receive full pay from the government for six months, which is much greater than the current level of 18 weeks’ pay at the minimum wage. The income threshold would be capped at $150,000.

Abbott continues to defend the scheme, telling Parliament this week he “wants to do the right thing by the women of Australia”.

Reports the commission may deem it too expensive are yet another hurdle for the scheme, with some major industry bodies such as the Business Council of Australia and the Australian Chamber of Commerce and Industry expressing concerns.

Recently the scheme also came under fire amid revelations it would override existing maternity leave arrangements people have with their employers, which was seen by some to be non-competitive for big business to attract good staff.

In January, Marian Baird, a University of Sydney academic who was reportedly briefed by the government on the plan, told the AFR that the step to override existing contracts would be done by using the “social welfare powers of the constitution”.

Baird said this was an “unexpected development” as she did not think this power of the constitution had been used in industrial arrangements previously.

Some argued this would be non-competitive for big business when it came to attracting good staff, while others, including Small Business Minister Bruce Billson, said it would “level the playing field between big and small business when it comes to attracting workers”.

Diversity strategy and compliance consultant Prue Gilbert told SmartCompany this morning the new scheme has many benefits.

“It’s a good scheme from the perspective that the majority of employers are SMEs and it enables them to be more competitive, while also putting the largest employers in a position where they can be innovative about other ways to attract staff,” she says.

Gilbert says the scheme could be pared back without people getting too angry, such as the length of time from six months to around 24 or 18 weeks. However, she thinks a focus on the bottom line cost ignores the humanitarian benefit of the scheme.

“You have to look at the goals of parental leave schemes. They are to enable a mum to care for a child and to recover from the birth. No one talks about the child’s rights in all this.

“What happens is that the period of time the government set as the standard for parental leave tends to be what people take. If SMEs and small business owners can’t afford to top up a scheme, the staff will take the minimum government allocation and go back to work straight away as they can’t afford it.”

Gilbert says having a solid government scheme also helps reduce the potential for discrimination when it comes to hiring females of parenting age.

In November 2013, new legislation introduced into the House of Representatives proposed to cut red tape for small businesses when it comes to paying the paid parental leave.

Due to come into effect next week, the Social Services and Other Legislation Amendment Bill 2013, will see paid parental leave paid directly by Centrelink. Currently, employers pay the entitlements after receiving the allowance from Centrelink.