Rudd Government delivers Paid Parental Leave

The Rudd Government has made an historic decision to commit $731 million over five years to Australia’s first comprehensive, statutory, Paid Parental Leave scheme.

The Government scheme will be available to parents for births and adoptions that occur on or after 1 January 2011. Parents will be able to lodge claims from 1 October 2010.

The scheme will benefit working families, employers and the broader community. It will support families, promote workforce participation and enhance early childhood development.

The payment will enable more parents to care for their baby full-time during the vital early months of health, cognitive and emotional development. The World Health Organisation has stated “a period of absence from work is of utmost importance to the health of mother and infant“.

The introduction of national Paid Parental Leave also recognises the need to encourage women to maintain their connection with the workforce, which is essential to help prepare Australia for the challenges of an ageing population.

Australia has been one of only two OECD countries, along with the USA, which does not have a comprehensive statutory paid parental leave scheme.

The scheme will provide 18 weeks postnatal leave paid at the federal minimum wage (currently $543.78 per week). This will be of significant benefit to low income mothers. In 2007, less than one quarter of women on very low wages had access to paid parental leave, compared to nearly three quarters of women on high wages.

Around 148,000 mothers and primary carers will be eligible for the scheme each year.

To be eligible for the scheme, a parent in paid work:

• must have worked continuously with one or more employers for at least 10 of the 13 months before the expected date of birth or adoption;

• must have worked at least 330 hours in those 10 months (equivalent to around one full day of work each week); and

• must have an adjusted taxable income of $150 000 or less in the financial year prior to the date of birth or adoption of the child.

As part of the scheme, employers will act as ‘paymasters’ for most employees. The Government will provide employers with funds in advance of the payments they make to employees. The Productivity Commission estimated that only around four per cent of small businesses would make payments under the scheme in any given year.

Parents who are eligible for Paid Parental Leave will be able to continue to access employer-funded leave around the time of the birth or adoption of a child. This includes employer-provided maternity leave and recreation leave. Government-funded Paid Parental Leave can be taken in conjunction with, or in addition to, employer-provided paid leave.

The Productivity Commission found that women working in low paid industries with a high proportion of female workers are less likely to have access to paid parental leave. Women in these jobs are more likely to return to work early. The Government’s Paid Parental Leave scheme will directly support these women and their families.

Paid Parental Leave will be available to contractors, casual workers and the self-employed, many of whom have no access to employer-provided paid parental leave entitlements.

Payments made under the scheme will be taxable. Parents who receive paid parental leave will not receive the Baby Bonus (except in the case of twins or multiple births), or Family Tax Benefit Part B during the 18 week Paid Parental Leave period.

The Government is committed to supporting mothers whether they are in a paid job or at home.

Mothers and primary carers not in full-time paid work will continue to receive the current forms of family assistance (including the Baby Bonus), if they meet the relevant eligibility requirements.

The Government’s new scheme largely adopts the recommendations of the Productivity Commission’s final report Paid Parental Leave: Support for parents with newborn children and acknowledges the importance of supporting parents in the workforce.

In line with a recommendation of the Productivity Commission’s final report, superannuation payments will not initially be introduced for the Government’s Paid Parental Leave. Its introduction will be considered as part of a comprehensive review of scheme, within three years after the scheme’s implementation. Due to the global economic downturn consideration of the recommended paternity leave has also been deferred to the review.

The scheme recognises the difficulties experienced by businesses in the current economic climate and imposes minimal new costs on employers.

Businesses will benefit over the long-term from increased workforce participation of parents and the retention of skilled staff.