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How Does Paid Parental Leave Work?

Published January 07, 2020 (last updated June 18, 2020) Author: Employsure
Woman In Glasses Holding Baby In Pink Onesie While Typing At Laptop

Becoming a parent can be overwhelming and demanding, so it’s no surprise that the last things on the mind of many new parents is their job.  As an employer, however, it should be on the top of yours. Specifically, how does the paid parental leave system work? How much is allowed, and who pays what?

This article will help you better understand paid parental leave as an employer.

Paid parental leave scheme for employers

The Parental Paid Leave scheme offers government support through Centrelink payments and is not funded by you, the employer. It is designed to financially assist eligible parents to care for their newborn or recently adopted child. The scheme also helps you, as an employer, to retain your skilled staff by enabling mothers to remain connected to work and their careers even as they take time out to give birth (or adopt a child).

Who is eligible?

As an employer, the government will provide Parental Leave Pay to an eligible employee who:

  • has worked with you for at least 12 months prior to the expected date of birth or adoption date of a child
  • has a newborn or recently adopted child
  • will be an employee for the Paid Parental Leave period
  • is an Australian-based employee, and
  • is expected to receive at least eight weeks of Parental Leave Pay.

Importantly you, as the employer, do not have a role in deciding if an employee is eligible to make a claim for Parental Leave Pay. Centrelink will determine that, based on the relevant information. If the decision is that the employee is eligible to receive Parental Paid Leave, then Centrelink will transfer the payable funding amounts to you to provide the pay to your employee.

What’s more, you won’t have to make any additional superannuation contributions or pay additional payroll tax for the employee receiving Parental Paid Leave.

When to pay your employee – and how much?

It’s pretty simple. The Parental Leave Pay is paid to your employee on their normal pay cycle. For example, if you usually pay fortnightly in arrears, then the Parental Leave Pay will also be paid fortnightly in arrears.

The Parental Paid Leave cannot be provided in one lump payment, and nor can your employee take it at half pay.

From 1 July 2019, the rate of Parental Leave Pay is $740.60 per week, before tax.

Everyone receives Parental Leave Pay at this rate, regardless of their regular earnings or hours worked per week.

How is paid parental leave calculated?

Parental Leave Pay is based on the weekly rate of the national minimum wage and is payable for up to 18 weeks to the primary carer. As noted, Parental Paid Leave is a set payment from Centrelink, regardless of how many hours the employee worked per week, or what their salary/wage was.

Does paid parental leave go on payment summary?

You must include Parental Leave Pay in the total amount on your employee’s annual or part year payment summary. It doesn’t need to be separately identified from other amounts. However, you should also keep records of the payment advice that Centrelink provides whenever Parental Leave funds are transferred to you.

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Frequently Asked Questions

  • Who is entitled to paid parental leave?

    An employee who has worked with you for at least 12 months prior to the expected date of birth or adoption date of a child and will continue to be an employee for the Paid Parental Leave period. The employee must also be Australian-based, and be expected to receive at least eight weeks of Parental Leave Pay.

  • Can casual employees get paid parental leave?

    Short answer: yes.

    The longer answer is that a casual employee who has worked with you on a regular and systematic basis for at least 12 months immediately prior to the birth of the child(considered someone who is likely to have been employed during their Paid Parental Leave period) could be eligible for Parental Leave Pay if they are the primary carer of a newborn or recently adopted child. The casual employee must also meet Australian residency requirements, have an individual adjusted taxable income of $150,000 or less in the financial year before the date of birth or adoption, and are on leave or not working from the time they become the child’s primary carer until the end of their Paid Parental Leave period.

    The casual employee must also meet the work test, meaning they have to had worked at least 295 days (approximately 10 months) of the last 392 days (approximately 13 months) before the birth or adoption of their child, and worked at least 330 hours in that 10-month period (equating to just over a day a week).

  • Can employees work while on paid parental leave?

    No. Once they return to work, they are no longer eligible to receive Parental Paid Leave.

  • Is annual leave accrued on paid parental leave?

    Annual leave and sick leave do not accrue whilst on unpaid parental leave with you. These also don’t accrue when an employee is receiving the Paid Parental Leave scheme through the government.

  • Do employers have to pay maternity leave in Australia?

    Under the Fair Work Act 2009, no. That determination is made by Centrelink. It doesn’t matter if your business is big or small, or how many employees you have; you may be required to participate in the scheme. However, Centrelink will advise you via a letter if they decide that you’re required to provide Parental Leave Pay. If your employee has signed a contract of employment or your business has an enterprise agreement, please check any specific terms within those, as they may provide for more beneficial terms.

  • How much is paid parental leave Australia?

    The current rate of Parental Leave Pay is $740.60 per week, before tax, and is based on the weekly rate of the national minimum wage which increases annually.

  • How many weeks is paid parental leave?

    Up to eighteen (18) weeks, total for the primary care giver of the child. If your business has an enterprise agreement or your employees have a contract of employment, you should check whether there are any further entitlements to payment during this time.

  • Can both parents claim paid parental leave through Centrelink?

    The primary care giver of the child is entitled to up to 18 weeks’ paid parental leave through Centrelink, provided that they meet the eligibility criteria. The father or partner of the primary care giver may also be eligible for up to 2 weeks’ paid Dad or Partner Pay through Centrelink. In total, there could be a total of up to 20 weeks’ paid time through Centrelink.

  • Can fathers get paid parental leave?

    Through Centrelink, new dads or partners (including adopting parents) can get up to two weeks of Dad and Partner Pay, taxed and paid at the rate of the National Minimum Wage. However, Centrelink will pay Dad and Partner Pay directly to your employee – there’s no need for you, as the employer, to be involved.

About Employsure.

Employsure is Australia’s largest workplace relations specialists. We take the complexity out of workplace laws to help small business employers protect their business and their people.

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