Parental Leave Pay

Budget Review 2015–16 Index

Luke Buckmaster

One of the most contentious measures in the Budget is the decision to remove the ability for most individuals who receive paid parental leave from their employers to also access the Australian Government’s Parental Leave Pay (PLP) scheme. The measure would apply from 1 July 2016 and is expected to save the Government $967.7 million over four years from 2015–16.[1] Savings from the scheme—$617.1 million in PLP payments by 2018–19—are reduced by taxation foregone on those payments of $250.0 million (net: $367.1 million).[2] The Government has budgeted for $900,000 over four years in extra expenditure by the Administrative Appeals Tribunal, presumably to deal with disputes over PLP scheme eligibility.[3]

In 2009, the Productivity Commission estimated that around half of employed mothers were eligible for paid maternity leave as part of arrangements negotiated with their employers.[4] The measure will cost those affected who may have taken the maximum PLP entitlement over $11,500.[5] According to the Government, ‘in cases where individuals get less generous parental leave entitlements from their employer, the Government will top up the amount paid to be equal to the full amount available under the existing scheme’.[6]

Objectives of PLP

In proposing its government PLP scheme (later adopted by the Rudd Government), the Productivity Commission suggested that it could help achieve a range of commonly agreed objectives, including:

  • generating child and maternal health benefits by increasing the time parents take away from work
  • promoting the idea that parents can take time out from work for family reasons
  • countering work participation disincentives for new parents posed by the tax/welfare system and
  • increasing retention rates for business, with reduced training and recruitment costs.[7]

Current PLP scheme

The current national PLP scheme, introduced by the Rudd Government in 2010, is paid to working parents of children born or adopted from 1 January 2011.[8] To be eligible, persons must be primary carers and have incomes of $150,000 or less. They must also have worked at least one day a week for at least ten of the 13 months before the birth or adoption of the child.

Those eligible are paid for 18 weeks at the National Minimum Wage (currently $641.05 per week before tax). While PLP is paid from general taxation revenue, it is generally paid through the recipient’s employer. PLP is taxable income and does not include superannuation contributions. From January 2013, Dad and Partner Pay (DAPP), a separate two-week payment, paid at the National Minimum Wage, was made available to working fathers or partners.

In 2013–14, there were 144,255 recipients of PLP, and 72,975 fathers and other partners who took the full two weeks of DAPP.[9] In 2014–15, PLP was expected to cost $1.9 billion and DAPP $94 million.[10]

It appears likely that the measure introduced in this Budget will involve changes to provisions in the Paid Parental Leave Act 2010 relating to eligibility for PLP, such that those with access to employer paid parental (or maternity) leave paid above NMW would be prevented from accessing the government scheme.[11]

Rationale for change

The Government says that the savings from the measure are intended to be used ‘to repair the Budget and fund policy priorities’.[12]

Its justification for the change has focused on the idea that the practice of accessing both employer-funded and government-funded parental leave amounts to ‘double dipping’ (that is, drawing income from two sources).Media reports have also recorded government ministers using (or agreeing with) terms such as ‘rort’, ‘fraud’ and ‘scam’ in connection with the practice.[13] The ‘double-dipping’ measure was included in the Budget Overview’s featured ‘actions to strengthen the integrity of our welfare system’, along with measures aimed at detecting, investigating and deterring suspected welfare fraud and non-compliance.[14] The Government has also justified the change in terms of the need to address the issue of ‘double-dipping’ public servants (though the measure is intended to apply to all employees, not just those who are government employees).[15]

Comment

In designing the PLP scheme, the Productivity Commission had envisaged that it would be possible to use it as part of an overall package to supplement an existing employer entitlement. It suggested that doing so would increase opportunities to extend leave and meet some or all of the objectives associated with PLP outlined above.[16] This is highlighted by the Fair Work Ombudsman who lists ‘topping up’ an employee’s pay during the period of government-funded PLP to their full rate of pay as an option for employers wishing to offer a best-practice parental leave scheme.[17] It also appears that the Government was intending to allow private employers to offer ‘top-ups’ to the far more generous PLP scheme (26 weeks paid at full income replacement up to a cap) it proposed at the 2010 and 2013 elections but which has since been set aside.[18]

On the other hand, removing the possibility of ‘double dipping’ could be seen as consistent with an underlying principle of Australia’s welfare system that government support be targeted at those most in need.[19] This approach focuses on retaining incentives for private provision, with government payments seen more as a safety net. Indeed, these principles were the source for much of the opposition to the Government’s former PLP proposal. In this sense, the removal of ‘double dipping’ effectively redefines government paid parental leave as mainly a safety net scheme, marking a substantial change from the Government’s previous emphasis on PLP as a workplace entitlement.

There are questions about the extent to which this measure will effectively address the issue of ‘double dipping’ (or indeed achieve the proposed savings). For example, employer groups and unions have indicated that the Government’s plan may not eradicate ‘double dipping’ by those in private employment because many employers would offer their current benefits in different ways (for example, return-to-work bonuses), in order to enable their employees to continue to access the government scheme.[20]  

According to government backbencher (formerly the Coalition’s Shadow Minister on the Status of Women), Sharman Stone, the measure will address the issue of some women receiving support who do not need it at the expense of many who do:

Clearly we are in a terrible dilemma because we have the worst of all worlds – it was extraordinary that some higher-paid women, particularly public servants, were able to access a generous employer-provided scheme and also collect $11,500, but for low-income earners it was not at all unreasonable for them to add to the minimalist national scheme to get a few more weeks at home with their newborn if that was all their struggling small business employer could afford ...[21]

Sharman Stone, who describes the current system as ‘cheap and mean’, has argued that the Coalition should attempt to negotiate a deal with the Opposition to find a way to offer more generous PLP benefits to low-income women.[22]



[1].          Australian Government, Budget Measures: budget paper no. 2: 2015–16, p. 168.

[2].          Ibid.

[3].          Ibid.

[4].          Productivity Commission (PC), Paid parental leave: support for parents with newborn children, Report, 47, PC, Canberra, 28 February 2009, pp. XV–XVI.

[5].          18 weeks multiplied by the current rate of payment of $641.05 (see later section on the current PLP scheme for details).

[6].          Australian Government, ‘Welfare integrity measures’, Budget 2015: fairness in tax and benefits, 12 May 2015.

[7].          PC, op. cit., p. XIV.

[8].          Department of Human Services (DHS), ‘Parental Leave Pay’, DHS website, 2015.

[9].          Department of Social Services (DSS), Annual report 2013–14, pp. 39-40.

[10].       Australian Government, Portfolio budgets statements 2015–16: budget related paper no. 1.15A: Social Services Portfolio, p. 98.

[11].       Paid Parental Leave Act 2010 (Cth).

[12].       Budget measures: budget paper no. 2: 2015–16, op. cit.

[13].       G Chan, ‘Business chief: employers must keep paid parental leave despite “scam” claim’, The Guardian, (Australian edition, online), 15      May 2015.

[14].       ‘Welfare integrity measures’, op. cit.

[15].       T Abbott, ‘Answer to Question without Notice: Paid Parental Leave’, [Questioner: B Shorten], House of Representatives, Debates, 12 May 2015; ‘Labor risks overreach on fairness attack’, The Sydney Morning Herald, 15 May 2015; S Benson, ‘Labor fakes outrage over PPL scheme that it invented to give union mates a cosy rort’, The Daily Telegraph, 14 May 2015. Nationals Senator, John Williams, suggested that the measure was a positive thing because it would remove the incentive for women to work in the public sector, thereby improving the situation for private employers. J Williams, ‘Speech: Questions without Notice: Take Note of Answers: Answers to Questions’, Senate, Debates, 14 May 2015.

[16].       PC, op. cit., pp. XX–XI.

[17].       Fair Work Ombudsman (FWO), Best practice guide: parental leave, FWO, 2013, p. 4.

[18].       Liberal Party of Australia and the Nationals, The Coalition’s real action plan for paid parental leave, Coalition policy document, Election 2010; Liberal Party of Australia and the Nationals, The Coalition’s policy for paid parental leave, Coalition policy document, Election 2013; A Summers, ‘Paid parental leave: A most difficult pregnancy’, Sydney Morning Herald, ’ The Australian Financial Review, 25 January 2014.

[19].       L Buckmaster, ‘Comparing the Paid Parental Leave schemes’, Briefing book: key issues for the 44th Parliament, Parliamentary Library, Canberra, 2013.

[20]. L Taylor, ‘Employers and unions unite to try to force changes to paid parental leave plan’, The Guardian, (Australian edition online), 20 May 2015.

[21]. L Taylor, ‘Liberal MP Sharman Stone attacks paid parental leave policy’, The Guardian, (Australian edition, online), 21 May 2015.

[22]. Ibid.

 

All online articles accessed May 2015. 

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