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Paid Parental Leave Bill 2010; Exposure draft of legislation implementing the government's announced paid parental leave scheme

CHAIR —Welcome and thank you for your engagement in the committee process. You are experienced at this and have the information on parliamentary privilege and the protection of witnesses. We have your submission—thank you very much. We invite either or both of you to make some opening comments. We will then go into questions.

Mr Mammone —The Australian Chamber of Commerce and Industry welcomes the opportunity to make submissions on an issue of significance to the Australian community. We thank the committee for accommodating our request to provide evidence by way of telephone this morning. ACCI welcomes the introduction of the government’s Paid Parental Leave scheme, which will provide up to 18 weeks of payments to eligible employees and other workers and which is wholly funded by the community through consolidated revenue. ACCI supports other policy measures and programs that provide assistance in the areas of maternal health, welfare and childhood care. ACCI believes that a statutory paid parental leave scheme is but one part of the overall policy equation. The government should consider equally important measures such as the provision of adequate childcare facilities that are affordable and accessible to all working families. In our view this will be the most significant driver of workforce participation from mothers with younger families.

The government’s scheme appears measured and consistent with what is affordable and necessary for an economy-wide scheme of this nature. Coupled with the significant levels of maternity and paternity leave provided by Australian employers and the additional social support of the family tax system and baby bonus, it compares more than well with international standards. We also recognise that many elements of the Productivity Commission’s Paid Parental Leave scheme, which would have imposed additional costs on business, have been addressed.

The overall design of the scheme appears to be one that was recommended by ACCI during the Productivity Commission inquiry. However, some concerns do remain—namely, the delivery of public funds by employers through their payrolls. ACCI has constructively engaged in this inquiry by recommending some minor changes to the scheme which would, firstly, not delay the commencement of the scheme, secondly, not change the benefits or major objectives of the scheme as identified by the Productivity Commission and the government and, thirdly, not deny one eligible employee their entitlements to government payments.

The ACCI member network represents those businesses, from small to larger firms, that must administer the Paid Parental Leave scheme on behalf of the government. Business is concerned that the requirement for employers to be the agent of the government by acting as the paymaster is an unnecessary and burdensome requirement for employers, particularly small to medium sized firms. The paymaster function will add to the red-tape burden on SMEs which do not have sophisticated HR or payroll capacities. Whilst we believe that the regulatory impact statement underestimates the overall cost to employers, it does recognise some of the additional costs and time associated with the paymaster role.

To reiterate, ACCI does not oppose the Paid Parental Leave scheme in toto, only the method of delivery. ACCI has consistently recommended that the government consider a far simpler and efficient scheme which has operated since 2002 across the Tasman in New Zealand. The New Zealand model, which is outlined at page 12 of the ACCI submission, is a fully funded and administered government scheme. The only requirement for a business is to verify employee details and co-sign one single form. ACCI has reproduced this at attachments ACCI 2. As illustrated by attachment ACCI 1, the possible 27 steps under the government scheme can be reduced to a simple four-step process as occurs in New Zealand. The New Zealand government recently reviewed its system in 2005-06 and found wide support from employers, employees and the community.

The committee should also appreciate that the scheme was recommended by the then Human Rights and Equal Opportunities Commission in 2002, which explicitly rejected the paymaster function because of the cost and additional administrative burden. At page 22 of ACCI’s submission, ACCI’s primary position is that the paymaster function be removed from the scheme and that the Family Assistance Office pay employees directly. This would reduce the complexity and detail of the scheme and would ensure that all employees are paid on time and with minimal delay.

At paragraph 36 of the ACCI submission, we make the point that the New Zealand scheme spans approximately 26 pages of regulation as compared to the 237 pages of the government’s bill, not to mention the additional consequential legislation, rules and regulations yet to be seen by the committee or employers. Alternatively, given that the government will administer the scheme for all employers for six months, from 1 January 2011, our secondary position is that employers should continue to be able to opt into the system. This may appeal to some larger employers that already provide parental leave and wish to synergistically deal with the Family Assistance Office and could also occur when an employer and employee voluntarily agree. If these recommendations are not accepted, a less-than-ideal compromise would be to exempt small and medium sized businesses from administering the scheme. With this option, our preference would be by way of annual turnover, consistent with other legislation such as the Privacy Act.

Whilst the paymaster function remains, the most important issue, identified at page 25 of ACCI’s submission, raises additional matters such as ensuring that this remains a fully funded government scheme for the benefit of the entire community, by ensuring that this is clearly articulated in the legislation. Should business remain the paymaster, there must be adequate compensation to cover these costs in a similar way to that provided under the United Kingdom scheme. Given the breadth of businesses affected and the three-way interaction between the employer, the Family Assistance Office and the employee post birth, there should also be funding provided for an information campaign conducted by employer organisations.

Finally, employers remain committed to continuing to encourage work and family initiatives that suit the specific needs of the business and employees—including voluntary paid parental leave benefits which will build upon the government scheme. That is our opening statement and we welcome questions from the committee.

CHAIR —Thank you very much, Mr Mammone. Mr Gregory, do you have anything to add?

Mr Gregory —Nothing further at this stage, thank you.

Senator ADAMS —Thank you very much for your submission. I am looking at page 12 of your submission, where it says that the New Zealand scheme is:

Eligible for birth mother or adoptive parent after working for same employer for a qualifying period; …

Could you comment on those guidelines compared to the government’s policy?

Mr Mammone —I do not have the New Zealand scheme in front of me but I recall that in terms of the eligibility work test it is fairly consistent. I believe the government scheme may be a little bit more generous in terms of who may be entitled to it; therefore, it may cover more employees than the New Zealand scheme does.

Senator ADAMS —The New Zealand one is currently paid up to 14 weeks, and that has just been increased from 12 weeks in 2004. It also says, on page 13, that the New Zealand scheme:

Paid up to 14 weeks (this was increased from 12 weeks in 2004) from the start of the employee’s leave and ends upon the employee returning to work, resigns or comes to the end of their fixed term contract. The payments also end if the employee is dismissed, made redundant, the pregnancy ends other than by the delivery of a child, the employee no longer cares for the child, or upon the death of the employee or child; …

I am thinking about someone who perhaps had a stillbirth—at, say, 36 weeks gestation—the child is not living when it is born. How do you feel about that? Do you believe that that woman is entitled to leave, despite the fact that the baby is deceased? I am looking at the mental health aspect of this.

Mr Gregory —Our position in terms of the detail. When we make reference to the New Zealand scheme it is only in terms of the administration of that scheme that we are making that comparison. As Mr Mammone indicated in our opening comments and as our submissions have indicated, we are supportive of the government’s proposals in regard to what they are intending by way of a paid parental leave scheme. We are supportive of the detail of that scheme. It is simply that we make reference to the scheme that exists in New Zealand by way of the means by which that scheme is administered. We are not making comparisons about the level of benefits provided in either case, the Australian government’s current scheme as we understand it is more generous in terms of the benefits delivered and the eligibility than the scheme that currently exists in New Zealand.

Senator ADAMS —Thank you. As far as the government scheme of 18 weeks, do you consider the 26 weeks as proposed by the coalition would be more adequate for the paid parental leave scheme?

Mr Mammone —Our position is that any proposal has to be fully costed and funded. As we understand it, the opposition’s proposed parental leave scheme would be an unfair impost, in our view, on larger firms, which would be double taxed, as businesses already contribute substantially to Commonwealth revenue through ordinary taxation. We have looked at the funding of the government’s paid parental leave scheme and it appears to be affordable. It is on that basis that we do not oppose the design of the scheme. But we do not support the impost that would be imposed on larger firms of providing the 26 weeks, as the opposition proposes.

Senator HANSON-YOUNG —One of the things I picked up on in your submission is your reference to information from the ACTU—I guess it is from the ACTU website—that goes to this issue of expanding the scheme. Who do you believe is responsible for ensuring that, if the scheme is implemented as it is—and many people have argued to this committee that it is not good enough and does not provide the length of time a mother, in particular, needs, even in order to just breastfeed her baby to the World Health Organisation standard, or whether it is to include superannuation—how improvements that people are saying are needed will be implemented? Is it the role of government to go through that process and commit to that or would you prefer to see, as the ACTU have suggested this morning, that we just leave it to the industrial relations bargaining process and it becomes part of market forces?

Mr Gregory —Our position on this is in regard to the scheme that we are talking about at the moment—and that is that this is a responsibility for government. As we have already pointed out, we believe that this is an entirely legitimate area for government to be getting involved in—making policy decisions about the nature of the scheme that should exist and indeed in terms of how that scheme should be amended in the future. There is a review process built into the current proposal. It seems to us to be entirely appropriate as well to consider the operation of the scheme in its initial two-year phase and then to be making further decisions and giving further consideration to the nature of the scheme based upon that particular experience. In that context we would say that all of the issues that you are referring to are entirely appropriate for further consideration and for further decision making by government. We would naturally look forward to the opportunity of feeding into those deliberations to those considerations at an appropriate time.

Senator HANSON-YOUNG —How do you see the relationship between those businesses that already have their own schemes in place—many of them, in fact, are far more generous than what the government is putting forward—and this scheme? How do you see them linking together? How would you like to see that streamlined for businesses if they wish to continue to offer their employees above and beyond what the government scheme is offering? How do you see that working and becoming a smooth process?

Mr Gregory —The first thing to say is that there are obviously a significant number of organisations that already provide some form or other of paid parental leave entitlements. We say, ‘Good on them for doing so.’ It is entirely appropriate for them to be making decisions about the type of working arrangements that are best suited to the needs of their particular business and their employees. The considerations that we are talking about at the moment in terms of a national paid parental leave scheme are an entirely different set of considerations. As I have said, it is something that should be left appropriately to consideration and decision making by government.

In terms of the interaction, it will simply be a case that those businesses that already provide some form of paid parental leave entitlement will now be considering the nature of those benefits in the context of the scheme that is being introduced by the government. Whether that warrants any change to those individual business schemes, as I say, will be a matter for considerations that will take place often between both the business and its employees. Many of those businesses will obviously continue to offer their existing level of benefit and will provide the additional government entitlements over and above that. In some other cases, it may well be that the existing benefits now provided by businesses will be reviewed and might be amended in some way to better fit in with the national scheme that is now being implemented.

Senator HANSON-YOUNG —One of the key reasons that the government has not included superannuation in their current proposal is because of cost to the government, yet there is the advantage that businesses would, of course, get out of a national paid parental leave scheme—being able to keep your employees attached to the workforce, to keep that relationship going and not to have to keep on reinventing the wheel always with re-skilling, retraining and all of the on-costs that come with that. Do you see that if government were to cover the rest of the cost for the actual paid leave, why superannuation should not be something that businesses pick up?

Mr Gregory —In the context of this scheme, I think we would say a couple of things. The government has introduced this scheme on the basis of commitments from the Prime Minister and other relevant ministers that they will not support a scheme that imposes additional financial burdens or complexity on small business in particular. And, in terms of the way in which this scheme is being structured, it is not a scheme that is based upon payments from the employer. In that context, we do not believe that it is appropriate to impose a superannuation obligation upon the employer.

If the government wants to make some additional decisions about providing further funding from government that is an entirely different consideration, but we do not believe in the context of all of the circumstances that I have outlined—the government’s initial commitments and the way in which the scheme has been structured—that it is appropriate to then impose superannuation obligations upon employers with regard to those payments.

Mr Mammone —I will just add to what Mr Gregory has said. ACCI was very constructive during the Productivity Commission inquiries by providing extensive written submissions and by appearing in support of those submissions. In our second written submission, we mentioned that the 18 weeks could be readjusted to factor in the government providing for superannuation payments. At the time, we considered that perhaps 16 weeks at the minimum wage with a superannuation component of nine per cent would equate roughly to the 18-week proposal. It is not that we are against superannuation being paid by the government through this community funded scheme, but that is something which we did put on the table for the Productivity Commission to consider.

Senator HANSON-YOUNG —I want to pick up on the arguments that you are putting around the way that the current scheme is being proposed by the government and that it seems if we were to then include superannuation it would be a little out of kilter with the rest of the scheme. Are you suggesting that the way this scheme has been put together is less of a workplace entitlement and more of a social welfare payment? Is that your argument as to why superannuation should not be included?

Mr Gregory —That is essentially correct. We would see these payments as there to provide a very important support for families at a critical stage in their lives. It is essentially a family support payment rather than a payment that would normally be attributed to an employee entitlement.

Senator HANSON-YOUNG —How do you think that fits with the inconsistencies in the Fair Work Act around the unpaid parental leave provisions? Do you find it strange that we are not linking the two?

Mr Mammone —We did urge the Productivity Commission and the government to consider the Paid Parental Leave scheme to act in a way that would be harmonious with the National Employment Standards because obviously there would be inconsistencies if someone was or was not entitled under the unpaid parental leave provisions to then be entitled to the paid parental leave payment but have employers act as the paymaster. We have been conscious of trying to marry the two. But in this scheme, the government has said that this is a community benefit that should be funded by the community as a whole through consolidated revenue. The payments are to be delivered by the Family Assistance Office, and in some cases to the employers, and that is why in our submission we have tried to identify the major goals and objectives of the Paid Parental Leave scheme—we have identified them at paragraph 47 of our submission—and then try to extract the policy rationale for involving employers as the paymaster. In this case we just do not see that there is sufficient rationale for imposing this red-tape burden particularly on smaller firms. And it seems to be inconsistent with other areas where the government has tried to relieve small business from additional red tape, such as superannuation clearinghouse measures, industrial relations severance payments and unfair dismissals. So that is where we are coming from in terms of how we see this operate.

Senator FURNER —We have just heard from you with regard to a number of your members that have paid parental leave provisions already. Are you able to identify the number of members that you might have in your organisation who would have those provisions? You might want to take that on notice if you cannot provide it now.

Mr Mammone —The issue of employers providing voluntary parental leave, whether it is a formal policy or part of their enterprise bargaining negotiations, the ACCI member network—many different industry organisations are members of ACCI. They feed back to us through our formal committee structures that in various organisations—small, medium and large—there are different types of parental leave benefits. It is probably not going to be something that we would be able to provide on notice.

Senator FURNER —In respect of your members or businesses who have taxable income over $5 million, are you able to identify how many of those there may be?

Mr Gregory —Again, that would be very difficult. The estimates are that there would be about 3,200 businesses in total that would fall into that category. Our membership is diverse. It extends across industry sectors; it extends from large, medium to small businesses. I would imagine that there would be a very significant proportion of the total number that would be members of the ACCI network. Right at the moment, it would be impossible to give you a precise indication of just how many of that 3,200 would be involved.

Senator FURNER —That is something to work from anyway. What would those businesses say about the opposition’s position on a paid parental leave provision that places an enormous impost on them of $2.7 billion to provide paid parental leave for not only their business, but also the rest of businesses in our society?

Mr Gregory —As Mr Mammone has already indicated, our position, which is based upon the feedback from our member organisations and their members, is that they are not supportive of a scheme that is based upon a levy or a tax upon business, particularly one that is based on imposing that obligation on a limited number of business organisations.

Senator FURNER —But what sort of business decisions would they have to make should that scheme be imposed upon them? Would they shut up business and move overseas? Would they reconsider looking at employment of female workers? I am asking those sorts of the questions, whether those decisions would be part of their business if that scheme was imposed upon them.

Mr Gregory —I can honestly say that we have not got to that stage in our discussions with organisations or their members. The proposal that they are looking at from the coalition is simply a proposal only. I do not believe there would be businesses that have given it the level of consideration that you are referring to, although we have always been concerned to ensure that any scheme introduced does not have adverse impacts upon any sector of the Australian workforce.

Senator FURNER —In respect to the bill’s keeping-in-touch proposal for 10 days during the leave, how do you foresee that operating for an employee? What sort of work will they be performing on those 10 days of keeping in touch with the business?

Mr Gregory —That is very difficult to give a considered response to in terms of an across-the-board position. There will be a whole range of reasons, ranging from perhaps more light-hearted social occasions as to why people might want to keep in touch with the business, to perhaps keeping in touch when there are significant changes or things happening within an organisation that it is worthwhile bringing people up-to-date with. So there will be whole range of things that would fall into that category, from things that are more social in nature to things that are important in terms of changes taking place within an organisation.

Mr Mammone —And I might add that regardless of whether the keep-in-touch provision is a legislative requirement, although we note it is by consent, employers and employees already voluntarily and sensibly discuss return to work. We understand that many employers arrange for the employee to keep in touch in many ways, whether it is through electronic communication on the internet or email et cetera or face-to-face by calling into the office now and again during unpaid parental leave. We do not oppose the keep-in-touch provision per se, although we have not seen any amendments proposed to the fair work legislation, but we think the keeping in touch provision assists with the retention and workplace attachment issues, more so than the paymaster function, which we do not think adds any improved benefit for workplace attachment or workforce attachment, recalling that the Productivity Commission found that they were more concerned about workforce attachment and not the workplace per se.

Senator FURNER —I have a question with regard to whether your members have entered into negotiations or agreements with employees to provide provisions for income protection insurance as part of their entitlements. Would you be familiar with those arrangements at all?

Mr Mammone —There are many employers who provide all sorts of benefits to employees as part of their negotiations, and whether that is through formal bargaining that results in a collective enterprise agreement, or individual bargaining in terms of contracts and policies, we are aware that many employers provide for payments into health insurance and other insurance policies and we imagine employers will continue to do so if it is within their interests and the interests of their employees.

Senator FURNER —Relying on my experience in a previous career, where negotiations occurred it became part of the entitlements. The payment was made by the employer, and the employer was reimbursed by the insurance company through the scheme; therefore, the employer was acting in a paymaster arrangement similar to what you have expressed concerns over. I am still trying to understand what issues you may have with this paymaster role.

Mr Mammone —I have been in industrial relations for quite some time and I cannot recall any cases—not to say that there are none, but I am not familiar with any—where that would happen, in the sense of the employer acting as some sort paymaster on behalf of the insurance company. Certainly, employers provide money to third-party funds, which is similar to superannuation. Our concern is that we cannot identify any other area of policy or regulation whereby the business assumes the role of an agent for the government, and we are concerned that this may signal the beginning of the employer acting as an agent for the government for a whole range of other payments in the future. In the area of superannuation co-contributions, for example—we referred to it in our submission—there is no analogous situation, whether it is taxation collection or something of that kind, that requires the employer to pass public moneys to private individuals.

Senator FURNER —Okay. You may wish to check that with the Chamber of Commerce and Industry Queensland, because I am familiar with those arrangements being in place, certainly a few years ago. Things may have changed, but that was the case in my experience: employers were acting as paymasters for income protection insurance on behalf of their employees.

CHAIR —Thank you. Senator Adams, you have another question?

Senator ADAMS —I do, thank you. Could you tell me if employers who are currently paying parental leave to employees are liable for payroll tax.

Mr Mammone —We outlined to the Productivity Commission that we were concerned that employers would be liable for workers compensation and payroll tax. From our research at the time—this may have changed—we were under the impression that in Victoria, New South Wales, Tasmania and South Australia there was an exemption for up to 14 weeks of pay, and in other states and territories, such as the Northern Territory and Western Australia, there was no such exemption that we could locate. We understand that the government is in discussions with the state and territory governments to look at addressing that issue. It remains a concern that payroll tax at the moment is not exempt from the paid parental leave payments under the government’s bill.

Senator ADAMS —Right. I also want to check a statement. I am not quite sure when you were discussing superannuation, but did you say that you would cut the payments back to 16 weeks so the super could be paid? Is that what was said?

Mr Mammone —No. I was referring to one of our written submissions to the Productivity Commission inquiry which followed the Productivity Commission’s draft report. We recommended to the Productivity Commission that it could consider adjusting the 18-week payments to another minimum that would also allow the government to pay superannuation on those payments, and we roughly calculated that 16 weeks worth of payments plus the nine per cent superannuation on those payments—all payable by the government—would approximate the 18-week scheme.

Senator ADAMS —Thank you very much for that clarification.

CHAIR —We are wrapping up, but I have one more question. It is about the costings of the impost on employers with the payroll task—being a paymaster, as you have put it in your submission. The Productivity Commission did consider that and put out some costings as part of the modelling that they did. Did you have a look at that and see whether that was something that you understood and accepted or rejected?

Mr Mammone —We did look at that and that formed part of the government’s regulatory impact statement, which was predominantly based on the Productivity Commission recommended scheme. We have mentioned, at paragraph 30 of our written submission, that the government estimates a number of costs to small and larger firms. But we believe that it is an underestimate of those cost impacts in the way that those costs have been calculated and estimated. We give one example, at paragraph 32, where we say that the RIS assumes that six per cent of small businesses would pay $300 for professional advice and that six per cent of small businesses would purchase software updates at a cost of $100 each. We believe that significantly underestimates the cost of both the advice and the software updates as well as the number of businesses affected. We believe that, regardless of whether there is one employee, 10 employees or 100 employees that are eligible under the scheme, the business has the same cost to obtain advice and update payroll software et cetera.

CHAIR —Have you done any costings yourself through your organisation?

Mr Mammone —ACCI members have endeavoured to look at the cost impacts on an industry basis as well as for specific sized firms. I believe that some of our members that will be providing either written or oral evidence to this inquiry may provide some of those estimates. But within the time that we have had available we just have not been able to get some detailed cost impacts on businesses, particularly the smaller firms. But they do say that there will be a cost impact and the RIS gives an underestimate.

CHAIR —Is there anything that you wish to add?

Mr Mammone —No, Senator. Thank you very much for your time

CHAIR —And thank you very much for your cooperation.

Mr Gregory —Thanks for the opportunity.

[11.57 am]