Businesses warned to review paid parental leave position with Government scheme to begin within weeks

Businesses are being urged to prepare ahead of the introduction of the Government’s paid parental leave scheme, with one legal expert warning some SMEs may be tempted to change their own schemes without the proper legal authority.

Lesley Maclou, partner at Harmers Workplace Lawyers, says businesses may believe they have the ability to change their existing schemes now the Govenrment’s own scheme is coming into play.

However, Maclou points out the Government has repeatedly said employers should continue with their own schemes, and warns employers may not even have the legal right to change existing schemes at all.

“Basically, the statutory paid parental leave scheme is seen as something that employers must pay in addition to any paid parental leave scheme they have in operation. If you’ve been giving out your own payments, you can’t absorb payments from the Government or offset it,” she warns.

The Government’s scheme will be taxpayer funded and distributed through the Family Assistance Office. Employers will receive those payments from the FAO, and then hand them over the employee, with the Government saying this process keeps the worker and business connected.

Maclou says some businesses may now think they will be able to reduce their own amount of leave. However, she warns this can only work if the arrangement isn’t contained in a contract.

“The only way in which businesses can absorb the Government’s scheme is if you have a non-contractual policy. Even if you imply that the policy is in the term of a contract, then it doesn’t work.”

“There is scope to vary the policy as long as it’s drafted correctly, and you could very well absorb the statutory entitlements.”

However, Maclou says businesses need to check with legal counsel before they make any changes to entitlement programs, especially paid parental leave. She warns business owners must carefully weigh changes against contractual obligations, legal ramifications and any commercial considerations.

She also says businesses need to consider just how much impact a change for entitlements will have on employee morale.

“You may think that what you have is a discretionary policy, but it could very well be that you have an implied contract term and thus, you won’t be entitled to absorb the Government’s own payments.”

“From a legal perspective, employers need to think about their own schemes and then think about how it’s incorporated. If you can absorb the Government scheme, you can make some changes, but only if you are certain after receiving legal counsel.”

Maclou also says businesses need to think about how they’re going to administer the Government’s scheme. With SMEs now responsible after July 1, 2011 for handling all payments to employees, Maclou says businesses need to be ready.

“In addition to reviewing employee contracts, businesses need to ensure they are able to cope with the administration of handling payments. Employees may also want to take more leave because of the Government benefits.”

While businesses won’t have to actually make the payments out-of-pocket, Maclou says they should nevertheless be ready for distributing the payments and making contact with the Family Assistance Office.

“They need to think about how they are going to administer it. It seems simple on the surface, but there is communication needed between the company and the FAO and they need to have the right systems in place.”