Paid parental leave scheme and dad and partner pay
The paid parental leave (PPL) scheme, governed by the Paid Parental Leave Act 2010 (Cth), is funded by the Federal Government.
PPL is not a leave entitlement, but is a payment in addition to any existing employer funded paid parental leave either concurrently or consecutively.
PPL complements the existing statutory parental leave entitlements, for example, the National Employment Standards as derived from the Fair Work Act (Cth) 2009 and the Minimum Conditions of Employment (WA) 1993.
An eligible employee is entitled to taxable PPL payments based on the rate of the National Minimum Wage, (increased annually) for a maximum period of 18 weeks.
PPL is available to all Australian employees, including casual employees, contractors and the self-employed. If the primary carer (usually the mother) returns to work before they have used all of their PPL entitlement, they may transfer the unused portion of their PPL to another caregiver (usually the father or partner) assuming the subsequent caregiver also meets the eligibility requirements.
To be eligible for PPL, an employee must be the primary carer of a child and meet the requirements of three tests: the work test, the income test and the Australian residency test.
The work test
To be eligible for PPL an employee must:
- be in paid work
- been engaged in work continuously for at least ten out of the 13 months prior to the birth or adoption of the child
- have worked at least 330 hours in the 10-month period (an average of one day per week).
An employee will still be eligible for PPL if they take paid leave during the ten month period, have a break in their employment of less than eight weeks, or have a pregnancy related illness that renders them unable to fulfil the work test requirements.
The income test
A claimant will be eligible for PPL if they have an adjusted taxable income of $150,000 (indexed annually on 1 July) or less in the financial year prior to the date of birth or adoption of the child or the date of their claim, whichever is earlier.
The Australian residency test
A claimant will satisfy the Australian Residency Test if they are an Australian Resident, permanent visa holder or a special category visa holder residing in Australia at the time of the claim.
Applications by employees
The PPL scheme is funded by the government, through the Department of Human Services (DHS), and administered by employers in the normal pay cycle. As such, the onus is on the employee to apply for PPL to the DHS. Claims can be lodged up to three months before the expected date of birth or adoption.
The DHS is responsible for managing the PPL scheme and should ensure that government funds are transferred to employers in advance of each employer’s usual pay cycle.
Employers are required to facilitate the payment of the PPL scheme for eligible long-term employees who have a baby or adopt a child and where the employee:
- has been employed with the current employer for more than twelve months prior to the expected date of birth or adoption
- will continue as an employee with the same employer for the PPL period
- is Australian based
- is expected to receive eight weeks or more of PPL.
The DHS will facilitate payment of PPL to any employee who falls outside of the criteria listed above.
Contact between the DHS and the employer will generally be via electronic data exchange using Centrelink’s Business Online Services.
In order to use this service, employers must first register an AUSkey via the Australian Business Register website for business access to government online services.
Employers must then register with Centrelink in order to provide details relating to the PPL scheme to DHS.
When employers are required to facilitate payment
The DHS determines whether an employee is eligible for PPL and when an employer is required to make payments by taking into account all of the eligibility criteria.
If the DHS determines an employer is required to facilitate PPL payment, the employer will be notified immediately. Should an employer disagree with the DHS’s determination regarding an employer’s responsibility, a request for a review must be submitted within fourteen days of the date of the notice.
If an employer accepts the decision of the DHS and agrees to facilitate the payment, the DHS will contact the employer requesting the following:
- the business ABN, bank account and pay cycle details of the business; if an employee receiving PPL returns to work or resigns from employment
- payments to employees as part of the usual pay cycle be made only after the money has been received by the DHS
- To withhold tax from the PPL under the usual PAYG withholding arrangements and include parental leave pay in the total amounts on the employee’s annual and part-year payment summary
- keep written financial records of the PPL funds from the DHS and of the PPL paid to an employee
- return any unpaid amounts of parental leave pay to the DHS
- notify the DHS in advance of ceasing to trade, selling the business, transferring ownership or merging with another business.
In addition, the employer must provide an employee with access to a record of their PPL - it is recommended this be in the form of a payslip.
The employer must notify the DHS:
- if and when the employee returns to work
- if and when the employee is no longer engaged with the employer
- if the employer changes their bank account details or the employee’s pay cycle
- if the employer has been advanced the wrong amount of PPL funds.
Payment of PPL from the DHS
The DHS is able to make up to nine fortnightly instalments of PPL funding to employers. An employer can, however, elect to receive funding amounts in as little as three six-weekly instalments.
Employers with multiple employees in receipt of PPL pay will generally receive one payment from the DHS per pay cycle for all of the employees in that pay cycle. An employer does not have to provide PPL to an eligible employee until the funds have been received from the DHS.
Record keeping and payslip requirements
Employers will need to keep proper financial records of the receipt of payment of PPL from the DHS as well as the amount paid to the employee. This record keeping requirement is the same as the obligations required of employers under the Fair Work Act 2009 Cth (FW Act).
Employers are required to give employees information about their PPL within one working day of the payment being made. This is consistent with an employer’s obligation under the FW Act to provide pay slips to employees.
Return to work notifications
An employee will not continue to receive PPL if they return to work before the end of the PPL period. An employee who intends on returning to work prior to the end of the 18 week PPL period is required to notify the DHS and provide their return to work date. Employers are also required to advise the DHS if an employee returns to work during their PPL period.
Keeping in touch days
The Paid Parental Leave Scheme includes a ‘keeping in touch’ provision which will allow employees to work up to 10 days during their PPL period. Keeping in touch days is an opportunity to reintegrate the employee into the work environment by, for example:
- allowing the employee to meet new colleagues
- training the employee on new systems
- updating the employee on OSH procedures.
Keeping in touch days are capped at 10 days and require both employee and employer consent. The keeping in touch days while taken during the unpaid parental leave does not extend the leave entitlement. On the employee’s request they may be taken after 14 days from the birth of the child or after 6 weeks (or 42 days) after the birth of the child via mutual agreement between the employer and employee.
Interaction with existing paid leave schemes
If an employer has an existing paid parental leave scheme operating in their business an employee will still be entitled to PPL payments, assuming they meet the eligibility requirements. PPL can be paid before, after or in conjunction with existing employer paid schemes.
For example, if an organisation provides an employee with four weeks paid parental leave at full pay from the date of birth of the child, an eligible employee will be able to opt to have their PPL payments start from when the employer paid entitlement ceases. Alternatively an employee may opt to have their PPL payments made at the same time as their employer paid parental leave entitlement.
Employers may have limited scope to amend existing employer paid parental leave schemes. While reference can be made to the entitlement to PPL in company policy, an amendment to an existing employer paid parental leave entitlement may have legal ramifications.
Dad and partner pay
The Paid Parental Leave and Other Legislation Amendment (Dad and Partner Pay and Other Measures) Act 2012 ( DPPOM Act) extends the Federal Government's PPL scheme by introducing a new payment, called 'dad and partner pay', for eligible working fathers and partners.
The following people can make a claim for dad and partner pay:
- biological father of the child
- partner of the child’s birth mother (including same-sex partner)
- adoptive parent of the child
- person who satisfies circumstances prescribed by the paid parental leave
Eligible fathers and partners will be able to receive two weeks of dad and partner pay at the rate of the national minimum wage (indexed annually on July 1), which is the same weekly rate currently payable for the existing government paid parental leave scheme.
Dad and partner pay will be available during the first 12 months after the birth or adoption of the child. Eligibility requires the father, or partner, to be a primary or joint carer of the child during the time of leave and it may not be taken for another purpose.
Furthermore, the individual must not be on paid leave or at work during the period they receive dad and partner pay. In addition, the father or partner must satisfy the eligibility rules that apply to the existing PPL scheme mentioned above.
The DPPOM Act provides that dad and partner pay may still be payable to eligible partners and fathers whose child is stillborn, notwithstanding their taking paid leave or returning to work during the payment period.
Additionally, the DPPOM Act amends the Paid Parental Leave Act 2010 to ensure keeping in touch days are recognised as paid days of work and do not affect the unpaid parental leave entitlement contained in the Fair Work Act 2009 (Cth). The amendments enable employees who are on unpaid parental leave to perform approved paid work for short periods in preparation for the employee's return to work.
Role of employers
Employers should consider ways to optimise keeping in touch days to reacquaint returning employees with the workplace, e.g. training in new systems, attending planning meetings or a reintroduction to the working team.
The payments will be received upon application to the Department of Human Services (DHS) and unlike the existing government PPL scheme, employers will not be required to act as paymaster and administer the payment.
Frequently asked questions – PPL
Q: I have an employee who is having twins. Will this employee be entitled to double the payment?
An employee who gives birth to more than one child will not be eligible for multiple payments.
Q: Our business offers 12 weeks paid parental leave to our staff, but an employee wants to be paid the PPL and our existing paid parental leave at the same time?
Under the PPL scheme employees are entitled to a PPL payment on top of any existing paid parental leave entitlement offered by an organisation.
In this situation the employee has the following options:
- The employee may apply to have their PPL paid at the same time as their existing entitlement to 12 weeks paid parental leave offered by their employer.
- The employee may apply to have their PPL payment after their existing entitlement to 12 weeks paid parental leave offered by their employer.
- The employee may opt to have it at any time from the birth of the child up until 12 months after the child’s birth.
The employee must have their PPL payment made in one continuous 18 week period.
Q: How long after an employee gives birth does the employer receive the payment?
Payments to an employer commence after the:
- employer has registered with Centrelink
- employee has lodged an application with the DHS to receive PPL, and
- employee has provided the DHS with evidence the baby has been born.
Q: Does the employer have to withhold tax and make superannuation contributions on the PPL amount?
PPL is considered taxable income and where the employee is required to facilitate the PPL payment, they will be required to withhold the relevant tax amount.
Employers are not required to make superannuation contributions on PPL payments.
For further information regarding your taxation and superannuation obligations please contact the Australian Tax Office on 13 28 66 (business tax enquiries) or 13 10 20 (superannuation enquiries).
Q: Does PPL counts towards leave accruals?
The receipt of PPL payments does no entitle the employee to accrue any leave entitlements.
Where an employee is on paid leave from their employer (e.g. employer provided paid parental leave), accrued annual leave or long service leave, this leave is considered as service for the purpose of accruing leave entitlements.
Q: Is the government’s PPL scheme paid proportionately to part time employees?
No, the PPL Scheme is a flat rate.
Q: I am a sole trader (state system employer) and employ three staff members - what is PPL based on?
The Federal Government’s Paid Parental Leave scheme is based on the Federal Minimum Wage for ALL Australian employees whether they are state based employees or employed by a National System Employer.
Q: If I have an employee who has not been working at the business for 12 months who makes the PPL payment?
If the employee has not been working at the business for twelve months, there is no obligation for the employer to make the PPL payment. In this instance the payment will be made by the DHS.
Q: Do I need to continue to administer the government’s PPL to an employee who resigns part way through the payments?
No. Employers are obliged to advise the DHS if an employee ceases to be employed with the organisation. On advising the DHS the employee has resigned, the DHS will cease to issue monies to the employer on behalf of the employee, and commence paying the employee directly.
Q: If an employee agrees to attend training for an hour and they are compensated for this time, during an unpaid parental leave period, does this count as a keeping in touch day even though it was only for one hour?
Yes. The duration of the work the employee performs on that day is not relevant in the determination of a keeping in touch day.
Q: If an employee comes to work for a keeping in touch day, should I pay them at the Federal Minimum Wage or at their usual contracted rate?
The employee is entitled to be paid at the contracted rate or as obliged by the applicable industrial instrument.
Q: Carole is self-employed and would like to visit her business to keep an eye on operations from time to time during her unpaid parental leave period. Will each occasion she does this count as a keeping in touch day?
No. Carole’s actions fall under the ‘permissible purpose’ definition under the act which allows her to perform the work without it counting as a keeping in touch day
Frequently asked questions – dad and partner pay
Q. An employee wants to take annual leave while on unpaid parental leave. Can they use annual leave to top up the Dad and Partner Pay payments?
No. An employee must not be working during the period of leave and for the purpose of Dad and Partner Pay the definition of working includes when they are on paid leave.
Q. An employee’s partner has given birth to twins. Does this mean the person can take two periods of Dad and Partner Pay?
No. In the event of multiple births, the claimant remains eligible for only one Dad and Partner Pay period.
Q. An employee is on workers compensation at the time of the birth of a child and during the period they have made a claim for Dad and Partner Pay. Will applying for and receiving the Dad and Partner Pay affect the employee’s workers compensation payments or claim?
No. Dad and Partner Pay is taken as a period of ‘unpaid leave’ and has an express exclusion from any interaction with workers compensation. The employee may receive both simultaneously.
Q. If a person has already accessed their entitlement to the 18 weeks Government PPL entitlement, can they also claim Dad and Partner Pay afterwards, or during?
They may claim the Dad and Partner Pay afterwards but it is not allowed to overlap with the Government Paid Parental Leave Payment period for that child.
Q. If a person has twins, can they access the Government Paid Parental Leave Payments for one child and the Dad and Partner Pay for the other child concurrently?
Yes, this is not excluded under the Act - overlap exclusion applies only for ‘a child’.
Q. Is tax withheld from dad and partner payments?
Yes, Tax will be withheld as required.
For more information call the CCIWA Employee Relations Advice Centre on (08) 9365 7660 or email [email protected].