Paid Parental Leave to be Extended to 26 Weeks by 2026
In an effort to close the gender pay gap, increase women’s workforce participation, and provide families with more flexibility during their children’s formative years, the Paid Parental Leave (PPL) system will be increased from 18 weeks to 26 weeks over the course of the next four years.
There are currently two payments available to families under the Paid Parental Leave Scheme:
- Parental Leave Pay: For primary carer. Eligible employees receive up to 18 weeks of Parental Leave Payment, paid at the National Minimum Wage (as of 1st July 2022, is $812.45 per week).
- Dad and Partner Pay provides eligible working dads or partners (including adopting parents and same-sex couples) with up to two weeks of government-funded pay based on the National Minimum Wage. (as at 1st July 2022 is $812.45 per week).
From 1st July 2023, Parental Leave Pay and Dad and Partner Pay will be combined into a single 20-week payment (an increase from 90 days (18 weeks) to 100 days (20 weeks). Other changes include:
- The introduction of gender-neutral claiming to allow either parent to claim.
- Parents being able to take weeks of Parental Leave Pay at the same time.
- Introducing a family income limit of $350,000 adjusted taxable income in addition to the existing individual income limit of $156,647.
Parents will be able to take Parental Leave Pay in blocks as small as one day at a time, with periods of work in between. This must be within 2 years from the date of birth or adoption.
Any unused portions of Parental Leave Pay days will be lost if not used before a child turns 2. Parents who are single at the time of their claim will be able to access the full 20 weeks.
There are more proposed changes to Parental Leave Pay which are subject to legislation passing. Starting from 1st July 2024, Parental Leave Pay will increase by 2 weeks each year. This is until 1st July 2026, when it will reach 26 weeks.
Paid Parental Leave Changes For Employer Obligations
Although there is no change to any regulatory burden when administering the payment to staff, employers will need to review and evaluate the current payroll and HR systems to ensure they are prepared to accommodate the new rules and entitlements.
As parents will be able to take Government-paid leave in blocks as small as a day at a time, with periods of work in between, this means employers should review their processes and take into account how much notice has to be given before someone takes a day’s leave under the PLP entitlements. Employers will also need to ensure they comply with the new legislation and have processes in place to manage the leave. Employers must inform employees of upcoming changes, including updated organisational policies, procedures, and entitlements.
How to Prepare for Parental Leave Pay
To participate in the Paid Parental Leave scheme, an employer must register their business with Services Australia. An employer does not need to do it until Services Australia contact them about providing Parental Leave Pay to an employee. Prepare by registering early.
An essential step for employers is to register for a PRODA account at servicesaustralia.gov.au/proda. Once an employer has registered an organisation in PRODA, they can register for Business Hub.
The employer does not have a role in deciding if an employee is eligible for Parental Leave Pay. Services Australia will determine that based on the relevant information the employee has provided to them.
How is Paid Parental Leave Paid?
Services Australia will review an employee’s eligibility for the Parental Leave Payment (PLP) when they apply and then notify the employer of their PLP registration and obligation to pay if the employee has chosen to be paid by the employer, otherwise, payments will be made directly to the employee’s nominated bank account.
If your business is passing on Parental Leave Pay to an eligible employee, Services Australia always gives you the funds first. An employer must provide Parental Leave Pay to employees according to their regular pay cycle. For example, if you usually pay them fortnightly in arrears, you must provide their Parental Leave Pay fortnightly in arrears.
There are some circumstances in which Services Australia may pay PLP directly to an eligible employee whose employer does not pay it for them, for example, if an employee has not worked 330 hours in the last 10 months.
If the employer pays – as is the case for most employees – the PLP is included in the Income Statement and reported through STP reporting. If Services Australia pays the employee directly, the payment does not impact the employer’s payroll or accounting. It is considered private income and would be dealt with as part of the individual’s tax return. The Paid Parental Leave Employer Toolkit can help employers prepare for their role in the Paid Parental Leave scheme. To download the latest toolkit, please visit Paid Parental Leave scheme Employer Toolkit
Source: Institute of Certified Bookkeepers