Bills Digest no. 175 2009–10
Paid Parental Leave Bill 2010
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage history
Purpose
Background
Financial implications
Main provisions
Concluding comments
Contact officer & copyright details
Passage history
Paid Parental
Leave Bill 2010
Date introduced: 12
May 2010
House: House of
Representatives
Portfolio: Families,
Housing Community Services and Indigenous Affairs
Commencement: 1
October 2010
Links: The
links to the Bill, its Explanatory Memorandum and second
reading speech can be found on the Bills page, which is at http://www.aph.gov.au/bills/.
When Bills have been passed they can be found at ComLaw, which is
at http://www.comlaw.gov.au/.
This Bill establishes a Government-funded
Paid Parental Leave (PPL) scheme from 1 January 2011. The scheme
will provide parental leave pay of up to 18 weeks at the national
minimum wage to eligible primary carers who have or adopt a child
on or after 1 January 2011 and who can satisfy work, income and
residency tests.
Currently, while Australia provides some
financial assistance to assist with the costs associated with
newborn or adopted children (discussed below), it is one of only
two Organisation for Economic Cooperation and Development (OECD)
countries without a national paid parental leave scheme.
Parental leave encompasses maternity leave, paternity leave and
adoption leave. A recent Parliamentary Library publication,
Paid Parental Leave, provides background to the issue of
parental leave.[1]
This Digest draws on that publication.
In Australia, the pursuit of maternity leave as an industrial
entitlement followed earlier initiatives to promote the interests
of working women, such as the abolition of the marriage bar in the
Australian Public Service (1966) and the equal pay cases
(1969–74) conducted before the Australian Conciliation and
Arbitration Commission.
The advancement of maternity leave in Australia has most often
been pursued in the context of the application of the International
Labour Organisation’s Convention Concerning Maternity
Protection (ILO, No.103, Revised 1952), and whether employment
conditions expressed in industrial awards complied with that
instrument. Note however that Australia has not ratified this
convention or its successor convention, No 183: Maternity
Protection Convention 2000. This has been due, in part, to concerns
regarding the compatibility of the conventions’ articles and
local industrial practices. For example, Article 4.8 of the 1952
convention prevented individual employers from bearing the cost of
benefits (paid leave) due to women employed by the employer, while
certain Australian employers in the private sector did provide for
paid maternity leave, and continue to do so, either as a result of
bargaining with employees and unions, or offering the leave as part
of human resource (HR) policy.
In an exercise to ascertain whether Australian employment
conditions could comply with the 1952 Maternity Protection
Convention, a survey of industrial awards conducted by the federal
Department of Labour in 1972 failed to identify any federal awards
containing maternity leave provisions.[2] The same survey criticised factory and
shop legislation of the major states for failing to specify a
period of leave for pregnant female employees. Rather, these Acts
prohibited the pregnant employee from working during specified
periods immediately before and after childbirth (termed the period
of confinement). This was the context that led unions and the
ACTU to make claims for maternity leave for employees under federal
awards. The Commonwealth’s response was to introduce
legislation for paid maternity leave for Commonwealth employees of
12 weeks for female employees and paid paternity leave of one week
for male employees.[3]
Provisions to allow unpaid maternity leave of 52 weeks following
the birth of a child (where the employee had 12 months continuous
services with the one employer) were inserted into federal awards
as a result of an Australian Conciliation and Arbitration
Commission test case in 1979. The case resulted ultimately in
approximately 1.5 million women employed under federal awards being
granted the right to unpaid leave.[4] Thus, the 1979 test case and resulting award
maternity leave provisions were significant milestones.
State jurisdictions followed the 1979 Arbitration Commission
decision, either through award variations by state tribunals, or
through legislation. For example, provisions for 12 months unpaid
maternity leave were inserted into the Industrial Arbitration
Act 1940 (NSW) in 1980, predating similar federal provisions
by fourteen years. On the other hand, state governments
were less inclined to introduce paid maternity leave for their own
employees at the same standard as that applying in the
Commonwealth.[5]
The 1979 maternity leave provisions formed the basis of a
‘last resort’ national standard of unpaid parental
leave and implemented legislatively in the federal Industrial
Relations Act 1988 (from 1994), carried over to the
Workplace Relations Act 1996, and to the Fair Work Act
2009 under the Act’s National Employment
Standards.[6]
There has been a general assumption in Australia that paid
maternity leave (and thus paid parental leave) should be the
responsibility of employers.
The revised Maternity Protection Convention (2000) qualified the
1952 prohibition on employers paying benefits. Article 6.8 states
that:
In order to protect the situation of women in
the labour market, benefits in respect of the leave referred to in
Articles 4 and 5 shall be provided through compulsory social
insurance or public funds, or in a manner determined by national
law and practice. An employer shall not be individually liable for
the direct cost of any such monetary benefit to a woman employed by
him or her without that employer's specific agreement except
where:
(a) such is provided for in national law or
practice in a member State prior to the date of adoption of this
Convention by the International Labour Conference; or
(b) it is subsequently agreed at the national
level by the government and the representative organizations of
employers and workers.[7]
Regardless, industrial tribunals have been reluctant to insert
paid maternity leave provisions into industrial awards by way of
arbitration. Until 2006, in circumstances where employers and
unions agreed to paid maternity leave provisions being inserted by
consent, federal awards could be varied providing for such leave.
At the time of the Senate inquiry into paid maternity leave in
2002, 87 federal awards contained provisions for paid maternity
leave. It is now more common for paid maternity leave schemes to be
provided as a result of enterprise bargaining, giving the
entitlement legal enforceability or through human resources
policies of employers. Nevertheless, where such paid maternity
leave provisions cannot be secured through these avenues, low paid
women in particular are likely to be at a disadvantage when
commencing their families. For this reason the Australian Council
of Trade Unions (ACTU) indicated its intention to seek the
introduction of maternity leave assistance measures in discussions
with the then Federal Government in their review of the ACTU-ALP
Accord in 1993-94.
The 1995 Commonwealth Budget subsequently introduced a payment
termed the Maternity Allowance. It was to be a lump sum payment
(then $840.60) equivalent to six weeks of the Parenting Allowance
and available from February 1996. To qualify for the new allowance,
a family had to be eligible to receive the then Family Payment
(similar to the current Family Tax Benefit Part A) within 13 weeks
of the birth. Working and non-working mothers could access the
benefit.
Thereafter the case for reviewing options to broaden access to
paid maternity leave was put by the Human Rights and Equal
Opportunity Commission (HREOC) in its pregnancy and discrimination
report, Pregnant and productive.[8] The report’s recommendations
included, amongst others, a proposed review jointly undertaken
between HREOC and the Department of Employment and Workplace
Relations of funding options for paid maternity leave.
The revised ILO Maternity Protection Convention of 2000 (No 183)
includes 14 weeks paid maternity leave of at least two-thirds of
the woman’s previous earnings (where she had been working).
Australia has not ratified the Convention.[9] However, Article 11.2(b) of the United
Nations’ Convention on the Elimination of all forms of
Discrimination Against Women commits signatories to introduce
‘maternity leave with pay or with comparable social
benefits’.[10] Australia has ratified this convention but maintained
(and still maintains) a reservation to Article 11.2(b), which
pertains to paid maternity leave.
The paid maternity leave debate has been raised frequently in
Parliament, initially through questions of non-government parties
seeking the Howard Government's response to Pregnant and
productive. In turn, the Howard Government supported certain
recommendations of Pregnant and productive, reflected in
its Sex Discrimination Amendment (Pregnancy and Work) Act
2003. At issue has been whether a paid parental leave
entitlement should be provided to all workers, or by an enterprise
to enterprise approach. Community pressure to resolve the paid
maternity leave issue was clearly building.
HREOC’s former Sex Discrimination Commissioner Pru Goward
presented five options for extending paid maternity leave in an
interim report, Valuing parenthood, in April 2002,
followed up by a final report, Time to value, later that
year.[11] The
Australian Democrats developed a paid maternity leave proposal for
the 2001 election, and tabled the Workplace Relations Amendment
(Paid Maternity Leave) Bill in May 2002 as a proposed amendment to
the Workplace Relations Act.
A tax concession termed the First
Child Tax Refund, referred to as the Baby Bonus at the time and
administered by the Australian Taxation Office, was introduced in
2002. It provided mothers with tax refunds of up to $2500 per annum
for five years after the birth of their first child.
From July 2004, a new Maternity
Payment replaced both the Maternity Allowance and the First Child
Tax Refund. The Maternity Payment was paid as a lump sum of $3000
for each newborn child and each child adopted at less than 26 weeks
of age. No means test or work attachment test applied. The rate of
payment was increased to $4000 in July 2006 and to $5000 in July
2008. The Maternity Payment was introduced as the centrepiece of
the 2004 Commonwealth Budget and was seen as the Howard
Government’s response to the HREOC reports calling for paid
maternity leave, as well as a response to the then
Opposition’s proposal for a universal Baby Care
payment.[12]
Both major political parties were
reserved on maternity policy in the course of the 2007 federal
election debates. The issue of paid parental leave remained a key
political issue over the past decade, and despite the focus on the
issue, the percentage of female employees receiving some form of
paid maternity leave only increased from 38 per cent of female
employees in 2000 to 44.9 per cent in 2008.[13]
Upon winning the 2007 election, the
new Rudd Government referred an inquiry into means of parental
assistance to the Productivity Commission in early 2008. The
Productivity Commission released a draft report in 2008,
recommending that that the Government introduce 18 weeks of
publicly-funded paid postnatal parental leave to be shared between
parents, plus two weeks paid leave for fathers or same sex
partners.[14]
The Rudd Government announced on
Mothers’ Day 2009 that it would introduce Government-funded
PPL. The announcement took the form of the Government’s
response to the Productivity Commission’s draft PPL
report.[15] The
2009 Commonwealth Budget consequently provided $731 million over
five years to fund the new paid parental leave (PPL) scheme. The
proposed funding for the scheme is based on the beneficiary trading
off a number of payments, particularly the Baby Bonus (the
Maternity Payment was formally renamed the Baby Bonus in 2007). Key
points of the proposed PPL scheme are:
- as noted above, the scheme is to commence from 1 January 2011
and pays 18 weeks PPL at the minimum wage ($569.90 from 1 July
2010) for primary care givers earning less than $150 000
annually. A person receiving PPL for 18 weeks would receive
$10 258.20
- the estimated cost of the scheme is $260 million a year, with
an anticipated 148 000 primary care givers to be eligible each
year
- in most cases the new statutory PPL scheme will be delivered
through employers, with the Government to pre-pay them to
‘avoid cash flow pressures’. To be eligible, parents
would need to have worked continuously for at least 10 of the 13
months prior to the expected birth or adoption date
- part-time workers will receive the full weekly rate of payment
and low income earners should pay little, if any, tax on PPL. The
weekly payments will be treated as taxable income and will affect
entitlement to family assistance payments, but not to income
support payments such as the parenting payment, disability support
payment and Newstart allowance and
- parents receiving PPL will be ineligible for the $5000 Baby
Bonus (except for multiple births), Family Tax Benefit Part B,
dependant spouse, child-housekeeper and housekeeper tax offsets for
the 18 weeks.
The Government intends to review the
scheme after two years and will then consider any Productivity
Commission recommendations that it did not adopt first time around.
These include the two weeks paid leave for the child’s
secondary carer and the proposal that employers make superannuation
contributions on the payments.
The Minister for Families, Housing, Community Services and
Indigenous Affairs, Jenny Macklin provided additional details
related to the Rudd Government PPL scheme in her second reading
speech for the Bill. These included:
- in any one year, nine per cent of businesses a year would be
involved in the scheme, and only three per cent of small
businesses
- the Government’s scheme could be taken in addition to
existing employer funded schemes, either at the same time or
consecutively. The Government’s scheme is designed to
complement and enhance the existing family-friendly arrangements
that many employers already offer.
- employers would only provide the parental leave pay for their
long-term employees - those with at least 12 months of continuous
service. Other women would receive the benefit from the Family
Assistance Office (FAO). FAO would determine an applicant’s
eligibility for the benefit
- employers would not have to change their employee’s usual
pay cycle, set up any special bank accounts or report back to the
FAO. They would have to pay the parental leave to their employee
with the appropriate tax deducted
- arrangements allowing employers to opt-out of participation in
the scheme until July 1 (six months after the commencement of the
scheme) will be introduced in a consequential amendment bill
- parental leave would not result in employees accruing any
additional paid leave entitlements, nor would it affect the
calculation of notice periods or severance payments, or
workers’ compensation or accident insurance premiums
- state and territory governments are being consulted to ensure
paid parental leave is not subject to payroll tax.[16]
The Federal Opposition released a substantially more generous
paid parental leave scheme on 8 March 2010. The policy proposes to
provide new mothers with 26 weeks PPL at her full wage or salary
capped at an income level of $150 000. This is to be funded
through a 1.7 per cent levy on the taxable income of 3200 companies
paying company tax of more than $5 million—expected to raise
$2.7 billion.[17]
The then Human Rights and Equal Opportunity Commission (now
Human Rights Commission) presented five options for extending paid
maternity leave in its Valuing parenthood report.
Valuing parenthood included a summary of the main
arguments in favour of such a scheme:
- a national paid maternity leave scheme would go some way to
addressing the male/female wage disadvantage and compensate for the
period of childbirth and time shortly after when women take time
off work or reduce their labour force activity
- maternity leave is generally restricted to long term, permanent
employees. Industries with high proportions of women and casual
workers, such as retail and hospitality, are generally less likely
to offer paid maternity leave
- for couples who save money to afford each child, a period of
paid leave would enable them to bring forward their decision to
have a child. It may also encourage some couples to have an
additional child
- paid maternity leave would assist with the direct costs of
having children, especially the increased costs faced at the time
of the birth of a child
- paid maternity leave encourages women to participate in the
labour force and promote their economic security by enabling them
to retain skills and expertise and maintain income and
- paid maternity leave would assist to reduce attrition rates,
particularly for women, and would encourage women who have had
babies to maintain their attachment to the workforce (benefiting
the employer by reducing retraining and staff replacement
costs).[18]
Examples of arguments made against PPL include:
- on the issue of fertility rates, there is no evidence that paid
maternity leave increases the fertility rate—and further,
Australia is already in a better position than many other nations
to maintain its fertility rate and
- paid maternity leave would be a major new burden on taxpayers.
As such, there is little justification for taxpayers contributing
an additional half a billion dollars to mothers in the paid
workforce while ignoring all other mothers.[19]
The OECD released a review of the pros and cons for parental
leave (both paid and unpaid) as well as the practices pertaining to
the provision of such assistance across OECD countries in its
seminal report, Babies and Bosses.[20] Since then through the OECD Family
Database in the OECD Social Policy Division’s Directorate of
Employment, Labour and Social Affairs, updates to the 2002 work
have been provided.[21]
In most countries it is up to parents to decide which parent
takes parental leave. The median period of maternity leave taken
(at previous earnings) is about 18 weeks across OECD countries.
Maternity leave taken in Australia is shown as about 6 to 7 weeks
and recorded, perhaps incorrectly, as unpaid leave (supplemented
with employer ‘top-ups’ as noted below).[22] Some countries, to
achieve gender equity objectives (Norway, Iceland and Sweden), have
introduced a ‘father quota’ in parental leave systems.
The report also noted that differences in other national
child-related policies affect international comparisons of leave
systems. These differences include:
- the role of other child payments. For example Australia is one
of two OECD countries without paid maternity leave but makes
lump-sum payments at childbirth and income-tested family tax
benefit payments to families with one earner
- some countries have additional high child benefits to families
with very young children or ‘home-care payments’ to
families with very young children who do not use public childcare
facilities (Austria, Finland and Norway)
- local governments can provide additional financial support for
parents on leave such as the US states of California and New York.
In Germany, some jurisdictions make leave payments for a third year
above the payments for the first two years provided at Federal
level
- employer-provided top-up payments are not accounted for and
these can sometimes be significant and vary greatly across the
OECD.
Notwithstanding the difficulties in comparing countries
described above, the PPL scheme proposed by this Bill has a number
of important aspects of its design that make it different to most
schemes in other OECD countries. These include:
- it is primarily located within the social security system,
rather than as part of a workplace based contributory scheme such
as social insurance
- it is funded through general taxation revenue, rather than a
combination of individual, employer, and government
contributions
- it is paid at the minimum wage, rather than at a certain
percentage of wage replacement (most OECD countries set a certain
percentage of wage replacement, ranging from 50 per cent to 100 per
cent of wages)[23]
- it is means tested (to be eligible an applicant’s
adjusted taxable income must be $150 000 or less), rather than
universal (available to all, regardless of income)
Further, while the proposed Australian scheme is
to be paid at around the OECD average of 18 weeks, this is
considerably shorter than a number of countries, including
Lithuania (88.3), Hungary (72.8), Estonia (62), Sweden (52.8
weeks), Czech Republic (50.3) and South Korea (42.3).[24]
On the one hand, most of the differences outlined above could be
said to indicate that the PPL scheme proposed in this Bill is
modest by international standards. However, such differences
largely could be said to reflect substantial differences between
Australia’s welfare system and those of other comparable
countries.
Broadly speaking, Australia’s welfare system has
traditionally been based around what is sometimes called the
‘Robin Hood’ objective: taking from the rich to give to
the poor.[25] This
objective tends to be associated most strongly with targeted (means
tested) approaches to welfare on the grounds that it allows
expenditure to be concentrated on those most in need.
In contrast, the primary objective of most other welfare states
is what has been called the ‘piggy bank’
objective.[26] This
refers to the objective of providing income maintenance aimed at
addressing adverse life contingencies (for example, unemployment,
disability, sickness). It also refers to redistribution across the
life-cycle, either to periods when individuals have greater needs
(for example, when there are children), or would otherwise have
lower incomes (such as in retirement)’.[27] The idea is that individuals,
either through taxation or participation in social insurance,
effectively ‘save’ throughout their lives in order to
ensure they are protected against the various risks to their
incomes that occur throughout the life course.
Broadly, the piggy bank objective is most associated with
universalist and/or encompassing, rather than targeted, welfare
systems. Universalism refers to ‘services and benefits
available to everyone as a right, or at least to whole categories
of people for example, the ‘aged’’.[28] The term,
‘encompassing’, is used to describe welfare approaches
that combine universal access with earnings-related benefits (that
is, not only do the non-poor participate but this participation is
at a level intended to more or less replaces the recipient’s
previous income).
The difference between Australia’s welfare state
objectives and those of other western countries is reflected in
differences in the design features of these systems.
Australia’s social welfare programs are provided on a flat
rate basis and funded from general taxation, rather than from
contributions from workers (as in most other OECD countries). The
Australian system of income support differs from those in most
other welfare states in that it is not based around social
insurance, whereby, for example, the old, unemployed and sick are
protected by earnings related income replacement schemes. Further,
Australia is unique among Western countries for the extent to which
its social welfare programs are means tested. Consequently,
Australian welfare benefits are generally lower than in other
welfare states.[29]
The international context outlined above, helps to explain many
of the tensions, contradictions and controversies surrounding the
debate about PPL in Australia. Broadly speaking, PPL fits more
directly within the piggy bank approach to welfare in that it is
concerned with redistribution across the life cycle (income
protection at a time when a parent is unable to work), rather than
redistribution from those on high incomes to those on low incomes.
As such, an important task for policy makers has been to develop a
model of PPL that fits within the existing Australian welfare
system framework—or, where it does not, to provide a
rationale for any exceptions to the general rule.[30]
The Bill was been referred to the Senate Community Affairs
Legislation Committee for inquiry and report by 3 June 2010. The
Bill was considered with the Exposure Draft of the Bill (referred
to the Senate on 18 March 2010) and the Committee reported on the
two references conjointly. Evidence provided in relation to the
Exposure Draft was considered and taken into account for both of
the inquiries. Details of the inquiry are at
http://www.aph.gov.au/senate/committee/clac_ctte/paid_parental_leave/index.htm
As noted above, the Opposition’s proposed alternative PPL
scheme is for 26 weeks, in contrast to the 18 weeks proposed by the
Government. The Australian Greens have also proposed a 26 week
scheme.[31]
A scheme of this duration would be consistent with the
Productivity Commission’s finding that:
- the evidence is most compelling that there are child health and
wellbeing benefits from exclusive parental care in the first six
months of life and
- leave period for maternal recovery after birth should generally
be longer than 12 weeks and could potentially be up to six
months.[32]
However, the Commission also argued that there were considerable
financial constraints on schemes of six months and longer:
Some participants proposed paid leave of six
months to one year. However, while there would probably be some
gross benefits from longer leave periods, they entail a substantial
increase in the financial burden on those funding the scheme or
displace other expenditures by government, including spending on
other facets of child welfare and health. Each additional week of
leave would cost taxpayers around a net $50 million after taking
account of increased income tax receipts and reduced income-tested
welfare payments (and $115 million for each additional week
before clawback of such offsets). At some point, the
incremental gross benefits would not be worth the additional costs
of forgone spending in other areas such as higher quality child
care or a better health system.
Accordingly, the role for government should be
in that period where the evidence of gains is most
apparent.[33]
Nevertheless, one avenue to extend the 18 weeks PPL scheme, as
noted by the Productivity Commission and reinforced by the
Government, is to combine employer-based PPL schemes with the
Government’s incoming legislative scheme.
Under this combined arrangement it may be possible for the
primary care giver to access more than 18 weeks PPL, derived from
the proposed legislative scheme and from employers in the form of
PPL provisions in enterprise agreements or HR/employer policy. A
potential problem facing this strategy is the actual wording of PPL
provisions in thousands of agreements or employer policy manuals.
Some of these have, for example, made the final week or
fortnight’s PPL payment conditional on the resumption of
duties. Other PPL schemes provide different eligibility criteria to
the Government’s planned model, such as making PPL accessible
once an employee has 2 year’s service, in contrast to the
Government’s planned 10 month service criteria.
Some contributors to the PPL debate have argued that the
Government’s scheme should be extended to include mothers not
in the paid workforce.[34] While mothers in this category will continue to have
access to the Baby Bonus and Family Tax Benefit B (subject to means
test), this will be around $2000 less than the benefit available to
mothers in the paid workforce. Note also that while PPL is to be
means tested on the mother’s income, the Baby Bonus and
Family Tax Benefit B are means tested on family income.
The argument is that this unfairly discriminates between stay at
home mothers and those in the paid workforce.
The main argument against the proposition that differential
treatment of mothers not in the paid workforce is unfairly
discriminatory is that PPL is not a form of family assistance but
rather a workplace entitlement similar to paid annual or personal
leave.[35]
One problem with this argument is that, while employers will be
required to disburse payments under the scheme, the model of PPL in
this Bill will function more like a traditional social security
benefit than a workplace entitlement. That is, it will be funded
entirely from general taxation revenue and provided by the
Commonwealth Government. Further, it has no direct relationship
with actual leave available to women in their workplaces in that it
does not provide a statutory entitlement to 18 weeks leave for new
mothers. As such, one commentator has described the scheme as
essentially a higher baby bonus with a work test.[36]
As noted above, the Government’s PPL scheme differs from
most overseas schemes in that it is to be paid at the minimum wage,
rather than at a certain percentage of wage replacement. It also
differs from the Opposition’s scheme which would be paid at
full wage replacement, capped at $150 000.
One rationale for a wage replacement approach is that, if the
main purpose of PPL is to support women during the period in which
they have left work to care for a newborn child, the closer this
support is to full wage replacement, the more effective this
support should be in ensuring a relatively smooth transition
between work, home and back to work again. Further, if PPL is to be
understood as a workplace entitlement, wage replacement is
consistent with the approach to other forms of leave (which are
generally paid at full wage, rather than a specified lower rate
such as minimum wage).
One argument against the wage replacement model is that it is
inconsistent with the general Australian approach to welfare
payments outlined above in which benefits are paid at a flat rate
and targeted to those most in need. This again highlights the
difficulties associated with providing PPL from within the social
welfare system. A system in which statutory PPL was provided
entirely through employers with generous tax concessions may have
made it possible to introduce a scheme with partial or full wage
replacement were such an approach regarded as a priority. This is
because it would have more clearly emphasised the role of PPL as a
workplace entitlement than is possible under the proposed
Government scheme.
The Productivity Commission has highlighted the greater
redistributive effect of a minimum wage based scheme by noting that
such a scheme would provide the most benefit to those on lower
incomes. However, it also suggests that there are important
incentive effects from this, associated with ensuring the most
benefit achieved from the money expended. That is, a wage
replacement scheme would:
... entail support for high-earning
women, who already have strong attachment to the labour force,
often receive privately negotiated paid maternity leave, and
usually have better access to resources to self-finance
leave.[37]
While, on the other hand, a flat rate scheme would ensure
that:
... low-income female employees are better off under a
paid parental leave scheme than they would be on welfare payments,
providing stronger incentives for labour supply by mothers with
weaker attachment to the labour force.[38]
Further, the Productivity Commission argues:
For the lowest income earners, paid parental
leave of 18 weeks would actually exceed their usual annual income.
(A workable scheme must have this consequence for the lowest income
people as otherwise they would simply opt out because of the
incentives posed by the tax and welfare system.)[39]
Nevertheless, some commentators have suggested that the
incentive effects of the Government scheme for low income earners
may not be particularly strong. Family policy commentator, Peter
Apps has argued that there is not a great difference between the
proposed PPL scheme and the Baby Bonus for women at or close to the
minimum wage, as the Government’s proposed PPL scheme
replaces the Baby Bonus but PPL is to be taxed and reduces family
tax benefits whereas the Baby Bonus payment does not affect these
other entitlements:
For these women (on the minimum wage), the net
amount of maternity leave is not much more than the Baby Bonus. If
they can’t afford to take time off now, paid maternity leave
won’t help.[40]
In other words, female employees may find the Baby Bonus an
attractive alternative to the foreshadowed PPL scheme, depending on
their income levels.
A further argument that has been advanced against the full wage
replacement scheme proposed by the Opposition is that it will
undermine existing employers’ schemes. It is likely that
under the Opposition’s scheme, employers would probably seek
to terminate private sector PPL schemes, perhaps replacing these
with other schemes to assist with child-care such as working from
home where feasible and similar arrangements. Businesses would in
effect implement the statutory scheme.[41] Public sector PPL schemes could be
similarly redrafted (with difficulty) to conform to the incoming
legislated scheme, presumably matching the higher quantum of leave
with the employee’s regular rate of pay.
Currently, all PPL in Australia is funded by employers. As noted
above, there has been a general assumption that, because it is a
workplace entitlement, funding of PPL is the responsibility of
employers. However, the Productivity Commission recommended
against full direct employer financing for their employees under a
national scheme on the grounds that this ‘would pose serious
risks for businesses, especially small ones, that employed higher
proportions of females, and exacerbate discrimination against women
of reproductive age’.[42]
The Commission also examined other models such as
income-contingent loans and pooled funding drawn from a
hypothecated payroll tax but ultimately recommended that a
government-financed scheme ‘has the virtue of simplicity,
spreads the burdens across the whole community, and reduces some of
the risks posed by other models’.[43] The scheme recommended by the
Commission and adopted by the Government funds PPL from general
taxation revenue and offsets from funds not expended on the Baby
Bonus and Family Tax Benefit B. Again, this approach is broadly
consistent with that applying to other welfare payments in
Australia.
The Opposition’s scheme would also be Government funded
but through a 1.7 per cent levy on large businesses, rather than
through general revenue. This probably reflects the need to cover
the very substantial additional cost of the more generous (26
week/wage replacement) scheme than it does a rejection of the
notion of funding through general revenue. According to the Liberal
Party’s PPL policy document:
The Coalition would prefer to fund our Paid
Parental Leave scheme from a Budget surplus, but this is not
possible due to the large debt and deficits run up by the Rudd
Labor Government. Labor’s debt and deficits mean that funding
the Coalition’s Paid Parental Leave scheme through a levy of
up to 1.7 per cent on a small number of larger companies is the
only way for Australia to achieve a decent Paid Parental Leave
scheme in the near future. The next Coalition Government’s
priority will be to repay Labor’s debt. After that we will
set about reducing taxes more generally, making it possible that
the levy would only be temporary.[44]
Nevertheless, a wage replacement scheme funded entirely from
general revenue through the social security system would most
likely raise questions about how such a scheme is consistent with
Australia’s overall welfare framework.
The HRC supports the Bill as ‘a sound first stage of
achieving a beneficial and equitable scheme of paid leave
entitlements for parents in Australia’.[45]
However, the Commission believes that there are gaps in the
proposed scheme that must be addressed—some now and some in
the near future. These include:
- the Commission would like to see the initial scheme of paid
leave independently reviewed after two years in order to measure
the impacts of the new scheme, make any necessary improvements and
to develop and implement a second stage of paid leave measures over
time (the Government proposes a review after three years)
- the Commission would like to see that these reviews are
undertaken not only to measure progress and evaluate the impact of
the scheme against its objectives, but that they are undertaken
with a view to implementing a more substantial package of paid
leave measures over time. Where the scheme is to be extended, this
would include a review of the funding model
- as part of the review, a second stage of paid leave measures
should be assessed to ensure that over time the total scheme
provides for:
- a minimum of two
weeks paid leave for fathers and other supporting parents;
- a full year of
paid parental leave that can be shared between parents, to ensure
that children receive the care they need at this important early
stage
- the year’s
paid leave to include a minimum of four weeks paid leave for
fathers and supporting parents on a ‘use it or lose it’
basis, to enable more men to be involved in caring during the first
year of their child’s life and
- leave paid at the
rate of at least two thirds of the parent’s income, so that
more families can afford to take the leave
- the Commission is disappointed with the Government’s
decision to defer consideration of compulsory superannuation
contributions during the period of PPL until a review of the scheme
is conducted three years after implementation.
The Board of the National Foundation for Australian Women
generally supports the scheme and recommends that the Bill be
passed.[46] It adds
that the scheme be clearly identified and agreed as the basic
building block onto which future improvements will be added over
time as the economy permits. These improvements should include:
- an extension of time to 26 weeks, and the payment of the
compulsory superannuation guarantee
- the position of Parliamentary Secretary for Paid Parental Leave
and Work-Life Balance be created, supported by a dedicated policy
unit;
- the role of the Implementation Working Group be clarified, and
implementation issues be quickly identified and referred, if that
is the planned role.
- concerns relating to eligibility for all women who have been in
the workforce when they become pregnant should be further examined
by the Department. Efforts should be made to simplify processes to
the extent possible.
- there should be future development of an employer funded
system, set firmly in the industrial relations context, payments at
income replacement level made from a pool of income from employers
and government, with a Government contribution ensuring equity for
low income earners.
The Foundation considers that a scheme taking into account these
proposals would be workable, equitable and politically
defensible.
The ACTU supports the Bill but raised the differences in the
proposed PPL scheme’s 10 month service eligibility
requirement compared to the requirement for unpaid parental leave
under the National Employment Standards which is 12 months’
continuous service with the same employer.[47] The difference in eligibility means
there may be a group of employees eligible for paid leave but not
unpaid leave (those employees with more than 10 months service but
less than 12 months service), and with no right to return to work
following their PPL. It proposes that the eligibility for the
National Employment Standards be amended to reflect the PPL work
test or alternatively, that changes be made to ensure that those
parents eligible for PPL would also be entitled to a corresponding
period of unpaid leave.
The ACTU is concerned at the possible interaction of PPL
entitlements provided by the Bill and PPL entitlements derived from
existing workplace PPL schemes (provided by employers through HR
policies or enterprise agreements). It proposes that the Bill
include a statutory object that clearly states that the legislated
scheme is intended to be in addition to all existing employer paid
parental leave entitlements.
The ACTU also contends that in the case of premature arrivals,
the expected date of birth should be the key determinant for
eligibility to the PPL scheme. It also wants the ‘keeping in
touch’ provisions narrowed to avoid new parents being
pressured into attending work to fill staffing gaps. It proposes
that keeping in touch provisions apply only for the purposes of
professional development, training or providing information
relevant to the employee’s work. The ACTU also believes that
the Bill should include an anti-discrimination provision similar to
that in the Fair Work Act to make clear that employers may not
discriminate against employees on the basis of a workplace
right.
The responsibility for lodging an application for PPL under the
proposed scheme falls entirely on the employee, and the ACTU argues
that employers should be obliged to provide information to workers
on accessing the legislated PPL scheme, similar to information
provided in the Fair Work Information Statement. The ACTU proposed
that the Bill refer to the Fair Work Act to provide a link between
the two pieces of legislation to ensure parents and employers were
aware of all their parental leave entitlements and obligations.
The ACTU proposes that the Bill contain an obligation on
employers not to appropriate the PPL money for any other purpose
than paying the PPL, with penalties attached. Employees should have
the right to access their PPL records.
Overall, the ACCI believes that the scheme is reasonable. It
says the scheme appears measured, publicly funded, and consistent
with what is affordable and necessary for an economy-wide scheme of
this nature.[48]
However it is opposed to the requirement on employers to be the
scheme’s paymasters. It also expresses concern at the
inherent administrative red-tape and additional costs that will be
imposed on firms, particularly on small and medium sized firms.
The ACCI argues that existing paid parental leave arrangements
were separate to the proposed paid scheme and a matter for
employers and employees to determine. In light of the incoming
legislated scheme, however, some employers were likely to amend
their existing PPL schemes.[49]
It may well be that some businesses might review and amend
existing arrangements in some circumstances.
It proposes that instead of requiring employers to provide the
payments to employees, they be allowed to opt-in to doing so. This
would effectively extend the existing proposal to delay the
requirement on employers until 1 July 2011. The ACCI argues that
employers should be allowed to opt-in to the system when it suits
their business needs and they are able to ‘synergistically
deal with the Family Assistance Office’.
If that is rejected, then a third alternative suggested by the
ACCI is to provide a ‘small-medium sized employer paymaster
exemption’, based on either annual turnover or fulltime
equivalent employees.
The BCA also claims that existing company arrangements will not
be eliminated after the government-funded scheme begins on January
1 next year.[50] It argues that while some have
argued that by introducing a taxpayer funded scheme, taxpayer
dollars will replace employer dollars, the feedback from BCA
members shows they are seeking to marry their existing schemes with
the new government scheme to ensure benefits for their employees
are maximised.
The BCA notes that there is widespread acknowledgement of the
need to boost participation in the workforce from currently
underrepresented groups in the working age populations. One of the
largest such groups is women of child-bearing age. Employers and
governments alike should be seeking to ensure that both work and
family is possible. This scheme is a sensible start and a
development well overdue.
The AiG notes that the Bill does not deal with the interaction
between the PPL scheme and existing paid parental leave schemes and
policies, and argues that the legislation should not venture into
this area.
The AiG argues that the design of the PPL scheme means that no
changes need to be made to company schemes and policies, and AIG
anticipates that employers will not reduce the paid parental leave
benefit which they currently provide.[51]
AiG also details the steps an employee needs to make in order to
receive PPL:
- an eligible employee makes a claim in the approved form,
including providing information about their employer and their
employment (section 56)
- after receiving the claim, if a payability determination or an
initial payability determination is in force and the [Family
Assistance Office] Secretary is satisfied the employer meets the
criteria in the legislation, then the Secretary must make an
employer determination (section 101)
- if this is made, the Secretary must give the employer and the
claimant a written notice advising them of the determination
(section 102)
- within 14 days after the date on the written notice of the
determination, the employer must give the Secretary an acceptance
notice (including bank account details and other required
information) or apply for a review of the employer determination
(sections103 and 104)
- an employer declaration does not come into force until the
employer gives the Secretary an acceptance notice or its bank
account and pay cycle information (section 107)
- after an employer declaration has come into force the employer
must pay the employee the required instalment on each pay day,
provided that the employer has been paid enough by the Secretary to
fund the instalment (section 72)
- employers must keep records in the prescribed form and provide
a record of payment to the employees who are paid instalments
(sections 80 and 81).
Professor Andrew Stewart argues that the title of the Bill is a
misnomer, since the proposed scheme does not confer any entitlement
to paid leave, as that concept would generally be understood.
He further argues that, if the intent of the legislated scheme
is not to relieve an employer of an obligation to make a payment
under an existing industrial instrument—or if employers could
choose to reduce their own financial obligation via the Government
payment—then either course should be spelled out in the
legislation.[52]
Professor Stewart adds that if the intention is that employers
may not offset any money received against existing
obligations it does seem to have the consequence that an employee
could take a period of paid leave funded by their employer and then
insist on receiving the government payment in addition, unless
there is something in the legislation to prevent this as it would
run counter to the stated intention of encouraging the employee to
take extra time off.
As noted above, the Coalition has proposed an alternative scheme
to that of the Government but has indicated that it will allow the
Bill to pass the Senate.[53]
The Australian Greens have criticised the Government’s
scheme on the grounds that:
- ‘it won’t give parents an actual right to leave
from their jobs or guarantee them their job back’
- it should be 26 weeks and
- it should include superannuation.[54]
The Greens have announced that they will move amendments to the
Government’s scheme in the Senate designed to ‘get a
better outcome for parents on this issue’.[55]
Senators Xenophon and Fielding have each indicated that they
support the concept of PPL but will seek to make changes to the
Government’s scheme by amending the Bill in the
Senate.[56] It is
not clear what amendments they will be seeking to make, though
Senator Fielding has made it clear that he favours the inclusion in
the scheme of mothers not in the paid workforce.[57]
According to the Explanatory Memorandum, the PPL scheme will
have a net cost to the Government of $1.042 billion over
five years.
|
2009-10
|
2010-11
|
2011-12
|
2012-13
|
2013-14
|
|
$13.6m
|
$196.7m
|
$269.8m
|
$279.0m
|
$283.3m
|
The Bill provides for the introduction of the Paid Parental
Leave Act 2010.
Clauses 8 to 10 provide that parental leave pay
is payable to a person if the Secretary has made a determination.
The determination can only be made if the person is eligible and
has made a claim.
Claimants can be primary, secondary or tertiary claimants as set
out in clause 54. Primary claimants will usually
be the birth mother or adoptive parent. Secondary claimants will
usually be the partner of the primary claimant who is taking over
care of the child at some point during the 18 weeks of PPL.
Tertiary claimants will be a person who takes over from a secondary
claimant in exceptional circumstances. However both primary and
secondary claimants could also be people who are not the usual
claimants due to exceptional circumstances.
Clause 11 provides that the determination must
specify the period (PPL period) over which the parental leave pay
is payable. The PPL period must be between the day of the
child’s birth and the day before their first birthday. If the
claim by the primary claimant is made before the child is 28 days
old the PPL period may start on the day of the child’s birth
or on a date nominated by the claimant, provided the birth has been
verified. If the claim is made later, the PPL period starts on the
date of the claim or on a date nominated by the claimant, provided
the birth has been verified.
The PPL period ends 125 days after the start of the period or on
the day before the child’s first birthday, depending on which
comes first.
Clause 13 provides that a primary claimant must
be eligible on each day of their PPL period. Consequently the PPL
period may be shorter than the maximum allowed if for example the
primary claimant returned to work.
Clauses 14 to 17 provide for situations where
secondary and tertiary claims are made.
Clause 18 provides that PPL is not payable if
the birth of a child has not been verified. In most cases this
would involve registration of the birth with the relevant State or
Territory authority.
Clause 20 provides that in the case of a
multiple birth PPL can only be paid once.
Clause 31(2) provides that a person is eligible
for PPL on a day if:
- they satisfies the work test, and
- they satisfy the income test, and
- they satisfy the residency test, and
- they are the primary carer of the child, and
- they have not returned to work, and
- neither they, their partner nor a former partner was entitled
to a baby bonus for the child.
Clause 31(3) provides that a person is also
eligible for PPL if the child was stillborn and they were otherwise
eligible for PPL.
Clause 31(4) provides that a person is eligible
for PPL if:
- they satisfies the work test, and
- they satisfy the income test, and
- they satisfy the residency test, and
- they satisfy the conditions prescribed by the PPL rules made by
the Minister under section 298.
The PPL rules allows for eligibility criteria to be made to
provide for exceptional circumstances.
Clause 32 sets out the method for working out
whether a person satisfies the work test.
Step 1 is to work out the person’s ‘work test
period’ under clause 33. It is the 392 days
immediately before the day the child is born. The day the child was
expected to be born can be used if it is born later than that day
or if the primary claim is made before the expected date of birth.
For secondary claimants the period is 392 days before the person
became the primary carer of the child.
Step 2 is to work out the number of days in the work test period
that the person has performed ‘qualifying work’ as
defined in Clause 34. Qualifying work is at least
one hour of work or paid leave on a day. Clause 35
sets out what is paid work. It is broadly defined to include
self-employment, and ‘work for another entity for
remuneration or other financial benefit’. The PPL rules will
prescribe what qualifies as paid work and paid leave in more
detail.
Step 3 is to work out whether any days in the work test period
that were not work days fall within a ‘permissible
break’ as defined in Clause 36. A
permissible break between two qualifying work days can be from one
to 56 days long.
Step 4 is to work out if there is a ‘qualifying
period’ of 295 consecutive days within the work test period
that consists of days on which qualifying work was performed or are
permissible breaks.
Step 5 is to work out whether there were 330 hours of work in
the qualifying period.
The work test is satisfied if all these steps are met.
The Income Test
Clauses 37 to 41 set out the income test. The
adjusted taxable income of the person claiming PPL must be below a
PPL income limit of $150 000 per annum. The definition of
adjusted taxable income for this income test is the same as it is
for the Family Tax Benefit and other family assistance income
tests. It includes:
- taxable income,
- the value of any adjusted fringe benefits,
- target foreign income (including tax exempt foreign employment
income),
- total net investment loss,
- tax free pension or benefit and ,
- reportable superannuation contributions.
It excludes 100 per cent of the individual's child maintenance
expenditure.
The income year to be tested is that which ended before the
earlier of the date of claim or the date of the birth of the child
(or the date that a secondary claimant became the primary carer of
the child).
Clauses 42 to 44 provide for the indexation of
the PPL income limit on 1 July each year in line with movements in
the Consumer Price Index (CPI).
Clauses 45 and 46 provide for eligibility to be
limited to people who are Australian residents, special category
visa holders (usually New Zealand citizens) and holders of visas
that allow qualification for Special Benefit (those for
humanitarian and safe haven purposes).
If a person has been absent for over three years from Australia
that would not be eligible.
Clause 47 provides for the primary carer of a
child to be the person who has care of the child and meets the
child’s physical needs more than anyone else during the
period that they are claiming PPL.
Clause 48 provides that a person has returned
to work if they perform one hour of paid work unless it is:
- one of up to ten ‘keeping in touch’ days allowed to
person who is not self-employed, or
- is for the purposes of overseeing a business or an occasional
administrative task for a business where the person is
self-employed.
Clauses 63 and 64 deal with the payment of PPL
in instalments by employers or the Family Assistance Office (FAO).
PPL must be paid in instalments which should be paid on the
person’s usual payday if paid by an employer. If paid by the
FAO instalments will be fortnightly.
Clause 65 specifies the amount of instalments.
Instalments would be the total of the daily national minimum wage
amounts for each weekday during the instalment period that are also
PPL days (those days that are within the person’s PPL period
of eligibility). The daily amount should be 7.6 times the hourly
rate of the national minimum wage in operation on each day.
Clauses 66 to 70 deal with deductions from
instalments. The following deductions are permitted:
- A deduction authorised by the person,
- PAYG income tax withholdings,
- Child Support, and
- Deductions from secondary claimant instalments to repay primary
claimant debts to the Commonwealth.
Clauses 72 to 74 specify that employers must
pay instalments if an employer determination is in force and the
employer has been paid enough by the FAO to fund the
instalment.
Clauses 80 to 82 set out the obligations of
employers with regard to recordkeeping, information provision to
employees receiving PPL and notification of change of circumstances
to the FAO.
Clauses 86 to 89 set out the situations where
the FAO would pay instalments. They are:
- No employer determination has been made,
- The employer determination is under review,
- The employer determination has been revoked, or
- The Secretary has referred a contravention by an employer
relating to payment of instalments to the Fair work Ombudsman.
Clause 99 provides that a period of unpaid
leave should not be considered paid leave just because PPL is being
paid. This ensures that entitlements such as annual leave or
redundancy rights do not accrue unless the person is receiving paid
leave.
Clauses 100 to 115 set out the mechanics of
making employer determinations.
Chapter 4, clauses 116 to 157 deals with
various measures relating to compliance and enforcement of the
proposed Act. Protection of information and confidentiality are
dealt with, and it will be an offence for a person to obtain
protected information if that person is not authorised to obtain
that information (clause 129).
The Secretary can refer matters to the Fair Work Ombudsman for
investigation if the Secretary has reason to believe that an
employer has not complied with certain provisions (clause
143), and the Fair Work Ombudsman can commence proceedings
if a person has contravened clause 70 (unauthorised deductions from
instalments) or Part 3-2 (payment of instalments by an employer).
(clause 141).
Chapter 4 also provides the mechanisms for recovery of debts due
to overpayment or mispayment, and for the writing off and waiver of
debts.
Chapter 5 is the review of decisions Part of
the Bill, and provides for internal review of decisions initially,
and then for the Social Security Appeals Tribunal to have
jurisdiction for review of certain decisions. It sets out the
procedures to be followed by the Tribunal. Appeals can be
made to the Federal Court on a question of law or questions of law
can be referred to the Federal Court (clause
259). The Administrative Appeals Tribunal can review
certain decisions of the Social Security Appeals Tribunal
(clauses 260-269).
Clause 275 sets out how the provisions of the
proposed Act are to be read in the case of adoption. In general
references to date of birth are to be read as references to date of
placement of the child with adoptive parents. The child must also
be under the age of 16 years as at the date of adoption.
Clauses 298 and 299 provide the Minister with
the authority to make the PPL rules by legislative instrument. The
PPL rules will mainly cover unusual and exceptional circumstances
not specifically catered for in the main act so that people do not
miss out on entitlement to PPL unnecessarily. The PPL rules will
also cover minor administrative matters.
Concluding comments
This Bill proposes to establish Australia’s first national
PPL scheme. Currently, while the Australian Government provides
some assistance for the costs associated with newborn or adopted
children, it is one of only two OECD countries without a specific
PPL scheme.
There has been significant debate about certain aspects of the
scheme, including:
- the duration of leave—for example, the Opposition and the
Australian Greens have argued that the scheme should be 26 weeks,
rather than 18 weeks
- eligibility—for example, Senator Fielding has argued that
the scheme should include mothers not in the paid workforce
- the value of the benefit—for example, the Opposition has
argued for a wage replacement scheme, in contrast to the
Government’s proposal to pay at the level of the minimum
wage
- the question of how the scheme should be funded—for
example, the Opposition has proposed a 1.7 per cent levy on large
businesses, in contrast to the Government’s proposal to fund
from general tax revenue.
Further, significant interest groups and other
commentators have highlighted the lack of clarity about the
interaction of the PPL scheme in this Bill with existing employer
provided parental leave entitlements (both paid and unpaid).
While the Opposition has proposed an alternative scheme, it has
indicated that it will allow the Bill to pass the Senate.
Members, Senators and Parliamentary staff can obtain further
information from the Parliamentary Library on (02) 6277 2500.
Steve O'Neill, Di Spooner, Luke Buckmaster and Dale
Daniels
15 June 2010
Bills Digest Service
Parliamentary Library
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