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. 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). 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.
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. The measure
will cost those affected who may have taken the maximum PLP entitlement over
$11,500. 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’.
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.
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. 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.
In 2014–15, PLP was expected to cost $1.9 billion and DAPP $94 million.
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.
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’.
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. 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. 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
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. 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.
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.
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. 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.
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 ...
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
Australian Government, Budget
Measures: budget paper no. 2: 2015–16, p. 168.
Productivity Commission (PC), Paid
parental leave: support for parents with newborn children, Report, 47,
PC, Canberra, 28 February 2009, pp. XV–XVI.
18 weeks multiplied by the current rate of payment of $641.05 (see later
section on the current PLP scheme for details).
Australian Government, ‘Welfare
integrity measures’, Budget 2015:
fairness in tax and benefits, 12 May 2015.
PC, op. cit., p. XIV.
Department of Human Services (DHS), ‘Parental
Leave Pay’, DHS website, 2015.
Department of Social Services (DSS), Annual
report 2013–14, pp. 39-40.
Australian Government, Portfolio
budgets statements 2015–16: budget related paper no. 1.15A: Social Services
Portfolio, p. 98.
Leave Act 2010 (Cth).
measures: budget paper no. 2: 2015–16, op. cit.
G Chan, ‘Business
chief: employers must keep paid parental leave despite “scam” claim’, The
Guardian, (Australian edition, online), 15 May 2015.
integrity measures’, op. cit.
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.
PC, op. cit., pp. XX–XI.
Fair Work Ombudsman (FWO), Best
practice guide: parental leave, FWO, 2013, p. 4.
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.
L Buckmaster, ‘Comparing
the Paid Parental Leave schemes’, Briefing book: key issues for the 44th
Parliament, Parliamentary Library, Canberra, 2013.
L Taylor, ‘Employers
and unions unite to try to force changes to paid parental leave plan’, The
Guardian, (Australian edition online), 20 May 2015.
L Taylor, ‘Liberal
MP Sharman Stone attacks paid parental leave policy’, The Guardian, (Australian
edition, online), 21 May 2015.
All online articles accessed May 2015.
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