Firms urged to prepare for paid parental leave scheme

Small businesses offering paid parental leave have been urged to start preparing for July 1, 2011, when employers will be required to distribute payments to eligible employees.

The Paid Parental Leave Act 2010, which came into effect on October 1, sees the government provide taxpayer-funded paid parental leave.

The employer distribution scheme is initially voluntary. However, most employers will be required to distribute payments via Centrelink as of July 1, 2011.

The legislation states the payments will be made for 18 weeks at the minimum wage, which is currently at $569.90 a week.

Lesley Maclou, partner at Harmers Workplace Lawyers, says businesses should review their employee contract and parental leave policies to prepare for the scheme, and ensure it does not place the employer at risk legally or commercially.

“The statutory paid parental leave scheme… will require a cultural shift for many employers,” Maclou says.

“Many employers are worried about the extent to which this scheme will impact their business and operations as well as concerns about how the business will absorb additional indirect costs.”

In addition to reviewing employee contracts, businesses should ensure their systems are equipped to cope with additional administration and operational needs that will result from the handling of payments.

Maclou says the responsibility will lie solely with the employee to make parental leave payments through their normal payroll cycle, as well as withhold income tax and provide payslips as they would for other employees.

Employers can opt to be early adopters of the scheme and begin handling payments from January 1, although this is more suited to larger organisations that may require the six-month period to effectively incorporate the necessary procedures.

Maclou says although the full impact of the scheme is yet to be seen, it “finally places Australia on a more equal footing with the global workforce.”

But the Australian Retailers Association is less convinced, with executive director Russell Zimmerman rejecting the notion of retailers acting as a middleman between Centrelink and employees.

“To become the ‘paymaster’ for parental leave payments means additional staff training, upgrading payroll systems, seeking professional advice from accountants and employment relations specialists, and managing wages without normal benefits like superannuation and workers compensation,” Zimmerman says.

“For retailers, particularly small retailers, handling the government’s parental leave payments is an administrative nightmare that could easily be avoided if the payments came direct from Centrelink to the employee rather than going on a round-about-route via the employer.”

To ensure your business is ready to provide parental leave pay to eligible employees, you can register for the scheme via the Centrelink website or business hotline.

According to a Centrelink spokesperson, an Employer Business Requirement Statement is available to assist employers, HR staff, accountants and tax practitioners prepare for the scheme.

The scheme does not provide an entitlement to leave but is designed to complement existing leave entitlements.

Businesses can prepare for the scheme by following these rules:

1. Provide your bank account details, employee’s usual pay cycle and pay cut-off details to Centrelink.

2. Provide parental leave pay to your employee for their paid parental leave period.

3. Provide parental leave pay as part of your employee’s usual pay cycle.

4. Withhold tax from parental leave pay under the usual PAYG withholding arrangements. You will need to include parental leave pay in the total amounts on the employee’s annual or part-year payment summary.

5. Provide a record of parental leave pay for your employee.

6. Keep written financial records of receipt of paid parental leave funds received from Centrelink and of the parental leave pay provided to your employee.

7. Notify Centrelink:

• If and when your employee returns to work before or during their paid parental leave period.
• If and when your employee resigns from your business.
• If you change your bank account details or your employee’s pay cycle.
• If you receive an incorrect amount of paid parental leave funds from Centrelink or if you are unable to provide parental leave pay to your employee.
• Ceasing to trade.
• Selling your business.
• Transferring ownership or merging with another business.

8. Return any unpaid parental leave funds to Centrelink.

9. Notify Centrelink in advance if you are:

• Ceasing to trade.
• Selling your business.
• Transferring ownership or merging with another business.