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

CHAIR —Welcome. You have information on parliamentary privilege and the protection of witnesses. We have your submission. Thank you very much for that. I invite you to make an opening statement, and then we will go to questions.

Mr Smith —Thank you. Ai Group welcomes the opportunity to express its views on the bill. Heather Ridout, our CEO, expresses her apologies. She would have loved to have been here today, but she had other commitments interstate. As we said in our written submission, we believe the Paid Parental Leave scheme reflected in the bill is a sensible approach to an issue that has remained unresolved for too long. We have been very actively involved in the debate about paid parental leave for quite a number of years now and have been supportive of a government funded paid parental leave scheme at the level of the minimum wage.

We believe that the introduction of an appropriately designed scheme, as we believe this one is, will provide many benefits to the community, not least of which is increased participation by women in the workforce. This is a very important issue, increasingly important given Australia’s ageing population and skill and labour shortages. We believe that the approach taken within the bill is a sensible and practical approach and we strongly support the fact that increased costs will not be imposed on employers through changes to parental leave eligibility under the Fair Work NES provisions and the leave accrual provisions of the National Employment Standards.

We also strongly support the fact that employers will not be subjected to increased superannuation, increased workers compensation and we hope, of course, increased payroll tax. We also very much support the fact that this legislation does not attempt to regulate company parental leave schemes and policies.

For several months we were involved in a government consultation process, and the federal government’s views and decisions on these issues took on board concerns that the Australian Industry Group and other industry groups expressed during that consultation process. In its submission, the ACTU has expressed dissatisfaction with some of these views and decisions, but during the consultation process there were many issues and proposals which the ACTU pressed that the government has taken on board. We believe that the outcome of the consultation process was a balanced approach which took on board the interests of all parts of the community, and we urge the committee not to seek to disturb that balance through the recommendations that it makes in its inquiry report.

In our written submission we proposed a few technical but important amendments to the bill to ensure that the payment processes do not operate unfairly for employers. We believe that the issues we have raised could be addressed very simply with a few amendments to the bill. While we recognise that the intention is that the communication flow between the department and employers is intended to be principally in electronic form, we do urge the government and opposition parties to be very mindful of the needs and characteristics of small businesses. These businesses may not have regular contact with the department, there may not be an up-to-date email address and there is the real prospect, of course, of mail delays and email transmission problems due to changing personnel and other reasons, and we think these issues do need to be taken into account. But with those few amendments which we have proposed, we urge the parliament to pass the bill without delay.

Senator ADAMS —You heard me ask the question about the payroll tax. Can you enlighten me any further about that?

Mr Smith —No—I did hear that answer, and we do not disagree with that. As we understand it, there are different arrangements in place in different states. Some of the states, like Victoria, have changed their arrangements in recent times but we believe this issue does need to be addressed and that it will be fairly simply addressed, in our view, with the commitment from the states to make sure that payroll tax is not increased as a result of this scheme.

Senator ADAMS —I was just looking at page 11 of your submission, about education for employers. Would you like to expand on your comments there, please?

Mr Smith —We believe that it will be necessary to educate employers, large and small, about the requirements of this scheme. There are important aspects, of course, that employers need to be aware of—the procedural issues and the objectives of the scheme—but there are also very substantial penalties for not complying with the provisions of this scheme. From the point of view of making sure that the objectives of the scheme are met and that employees have access to the scheme through their workplace and so on, we think that an education program would be very important.

Senator ADAMS —You have probably heard, or read in a number of submissions, that people have put forward their thoughts on the stay-at-home mothers versus those who are working; how this scheme would work as far as they are concerned and with the baby bonus. Could you comment on that? Do you have any issue with it?

Mr Smith —We believe that the issue of stay-at-home mothers is being addressed through the baby bonus. Right throughout our submissions on the make-up of a national Paid Parental Leave scheme, we have consistently argued that the scheme should be for employees and that the issue of people who are not in the workforce should be taken into account, but that is a separate issue. We think that this scheme is appropriately designed. We are aware that the scheme has relatively generous eligibility that extends beyond just employees in the more traditional sense, but we would support the structure that has been proposed here.

Senator HANSON-YOUNG —Can you expand on the feelings on superannuation. That is an issue that has been commented on in various other submissions and by witnesses today. If this scheme is a workplace entitlement then surely superannuation should be included.

Mr Smith —This issue was looked at in quite a lot of detail in the Productivity Commission inquiry and the recommendation was made from that inquiry. We recognise that this would be a significant cost impost on business if they were required to pay superannuation during the period of parental leave. It would also result in the costs associated with the employment of people on parental leave increasing. One of the longstanding debates about this issue has been to make sure that there are not additional costs associated with employing women on maternity leave and so on. We think the government’s decision in this area, not to impose that impost on business, is correct. We think it is an issue that could be reviewed in a few years time when the scheme is reviewed. We do not envisage that our view will change at that point in time, but it is an issue that should be considered. On the issue of superannuation, it is a very substantial cost already for industry, and with the recent announcements those costs are going to increase. We think the scheme has the balance right at this point in time. But the superannuation issue is one decision that has been made, along with many others, that we think at this time is appropriate.

Senator HANSON-YOUNG —Those organisations that already have their own paid parental or maternity scheme, of course, pay superannuation.

Mr Smith —Yes.

Senator HANSON-YOUNG —So what is the difference?

Mr Smith —Those companies are providing that benefit as part of a company policy or perhaps an enterprise agreement. That is something that has been left to be sorted out at the enterprise level. This is a government funded scheme and this is the same sort of issue as others like accrual during periods of parental leave—accrual of sick leave or annual leave. Issues of superannuation payments and accruals during parental leave have been around for a long time, since superannuation came into the system and we have had paid maternity leave. These things are currently dealt with in a certain way and we do not see a need for a change to the safety net at this point in time.

Senator HANSON-YOUNG —So it is not that superannuation is to be included per se; it is that business should not have to cover it. Is the concern that, if superannuation is to be included, it should come out of the government coffers as well?

Mr Smith —It is a decision for the government as to whether or not it wishes to fund superannuation for the period. We do think that the scheme needs to be soundly costed and so on. No doubt the government has considered that issue and come to a view at this point in time that the appropriate financial model for the scheme is the one that exists.

Senator HANSON-YOUNG —You have pointed out that, under this scheme, it is not just that it does not include superannuation; it does not include those accruals of other types of leave as you would have under a business funded scheme. How can it be claimed then that this is a workplace entitlement?

Mr Smith —I should qualify my comments there. The issue of accrual of leave under company schemes is an issue that varies from scheme to scheme. Usually a company is not under any obligation to do that and some do recognise accruals and some do not. A lot of companies do not but many companies would pay superannuation on it. This is a government funded scheme. We support the way that it does not interact directly with the National Employment Standards because, once you try to achieve that direct interaction, it leads to all sorts of problematic consequences. Take the issue of eligibility, for example: we would strongly oppose the idea of the eligibility in the National Employment Standards becoming as wide as the eligibility in this scheme. Then there are all those issues of accruals and other areas that I have mentioned. So it is a much simpler approach from our point of view to keep the two separate.

Senator HANSON-YOUNG —I turn now to that link or lack of link between the provisions of the Fair Work Act and the National Employment Standards. In your submission I read that you believe it is a good scheme because it does not interact with schemes that companies and businesses already offer. How can we be assured that businesses are not going to change their own schemes now, based on the fact that the government is going to foot at least the minimum wage for 18 weeks, if there is no interaction there?

Mr Smith —The interaction, if one was to be developed, would be extremely difficult to design. We think this is a very well-designed proposal because all the employers I have spoken to, for example, seem to be of the view that the design of this scheme means that they will not need to make any changes at all to their schemes. A lot of employers have schemes that provide four, eight, 12 or 14 weeks of paid parental leave at the level of the base wage. The view of the employers that we have spoken to about this seems to be that they will just keep offering that. The employee will have the opportunity to either take that payment at the same time as the employer’s payment, which to us would not be particularly logical or, more likely, would have the government payment once the company’s payment stopped. We use the example in our submission that someone that has the benefit of eight weeks of paid parental leave could take that and then the government’s 18 weeks after that which would give them six months of pay.

Senator HANSON-YOUNG —But there is nothing to ensure that, is there? There is no indication in this legislation that that has to happen. The government is just trusting that business and companies are going to do the right thing.

Mr Smith —It is like some of the arguments that are run about award modernisation—take that as an example—where people, it has been alleged, are going to go around and reduce people’s pay. That just has not happened. Employers value their staff. They offer benefits to attract and retain staff, and in our experience it is not happening, or likely to happen, that employers are going to reduce existing benefits, particularly with a scheme that very neatly dovetails with those benefits. It is not necessary for companies to change any of their existing schemes, because this scheme will fit neatly, as we see it, with all of the common models that a company might offer. Of course, there are contractual-type arrangements in place anyway. It may well be that a scheme is locked into an enterprise agreement or a common-law contract of employment, and therefore, of course, companies cannot just readily change those schemes in the rare circumstances that some might want to.

Senator HANSON-YOUNG —What would be the opinion of the Ai Group if an organisation did decide, ‘Let’s save a bit on our bottom line by taking off that $530 a week that the government is now going to pay to our employees’? What is your opinion about that? What position would you take? Is that acceptable or is that not in good faith?

Mr Smith —It would very much depend on the circumstances but, as I have said, what we will be saying to our members is that with the design of this scheme there is no need for employers to alter their policies and procedures, at least with any of the common models that come to mind to us. If any employers do choose to do that, it is difficult to see what should be done about it; that is their right. But, of course, we talk to employers all day every day, and not one has said to us that they are going to change their schemes—quite the opposite. They have looked at this scheme as they understand it so far, and it seems to fit very neatly on top of the schemes that they have.

Senator FURNER —On that point, Mr Smith, I take it that most of the schemes you spoke about that your members have—the two, four, six or eight weeks or even longer—would be covered in enterprise agreements that those employers or members have with their employees.

Mr Smith —More often than not they are in company policies and common-law contracts of employment, but there are many, many enterprise agreements that include paid maternity leave arrangements, yes.

Senator FURNER —So ultimately you would essentially need to get agreement to amend those provisions.

Mr Smith —That is correct. The parties would not be able to just amend those provisions but, even if it were in a common-law contract of employment through a letter of offer and acceptance, that could not be readily changed. There are companies that just have policies on these issues. As I say, we have spoken to many employers over time, and it just seems that there is no need or intent to change those policies. This scheme, we believe, has been very cleverly designed to make sure it is not going to have that consequence, in our view.

Senator HANSON-YOUNG —I find it difficult to accept that argument just on good faith and to have nothing in the legislation that sends a message or gives any direction when the same groups are saying, ‘We don’t want to have to pay the impost of the administration and there’s no way we can possibly pay the $800 in superannuation.’ The government has really been fooled, in my view, into this false sense of security that it does not have to put anything in the legislation that makes sure that current businesses that have their current paid parental leave schemes in place are not going to try to save on their bottom line once taxpayer dollars are put into the mix. There is nothing in this legislation that prevents businesses from doing that. As you have said, it is their right according to this legislation. Yet they do not want to pay $800 for superannuation.

Mr Smith —But what could conceivably be put in a piece of legislation about that? Companies are reviewing their policies and procedures about all sorts of issues every day of the week. At the moment, there is a huge amount of it going on because of the National Employment Standards modern awards. So you could not put something in saying a company could not review its policies and procedures when best-practice companies and those that want to keep complying with the law do that all the time.

Senator HANSON-YOUNG —There could, of course, be incentives and disincentives, as with many other ways we regulate industry.

Mr Smith —We have a different position from some of the other employer associations on some of these issues, of course. We have not opposed what has been described as the paymaster function. We recognise the intended objective of that and we are supportive of that, but we have raised some issues about the detail. If it turns out, in the review in a few years time, that that has been a major problem then of course we will say, ‘These are the problems; they need to be addressed,’ but we do not envisage a lot of problems. For example, a small business might have an employee go off on maternity leave only once every three or four years. It is not like they are going to have five people off at any one point in time. For a bigger business it will be a very common circumstance, but they are the ones who are more likely to set up the electronic systems with the relevant department and so on. So we are hopeful that this will work well, and if it does not we will be pressing the government to address any problems it caused.

Senator HANSON-YOUNG —On that point, would you agree with what was put forward by the Human Rights Commission—that the review needs to be more specific in terms of time frames and it needs to be a legislative review so that we do not just promise we will get there and that does not happen? That review of course is dealing only with superannuation at this stage; that is the way it is drafted. And there is the paternity leave aspect.

Mr Smith —We do not think the review necessarily needs to be directed at specific aspects. It should be a general review of the scheme. The scheme has got many different aspects to it. If it is proving to be problematic or unfair to employees or employers, of course those issues will arise.

Senator HANSON-YOUNG —If that were the case, it would mean we would need to broaden the scope of the review from how it is currently drafted.

Mr Smith —I would have to take that question on notice. The way that we would see such a review is that it should be a general review of the scheme.

Senator HANSON-YOUNG —Thank you.

Senator FURNER —Mr Smith, would you be familiar with how many members or businesses within your organisation provide paid parental leave at present?

Mr Smith —We have never done a detailed analysis of it. Our membership is very broad, and this issue has been looked at in great detail in the public statistics and research reports, and we do not perceive that those publicly available statistics would be any different for our membership than they are generally within the community. We have large companies, small companies et cetera.

Senator FURNER —Okay. Would you be familiar with how many of your members have a taxable income beyond $5 million?

Mr Smith —Yes, there would be a significant number of companies. I could not give you the figure, but it would be very substantial.

Senator FURNER —Can you give me a ballpark figure, then—a range of numbers?

Mr Smith —I would have to take it on notice. I could not answer off the top of my head. It would be very substantial. The Australian Industry Group has a very large number of large organisations as members, from many, many sectors.

Senator FURNER —What has been their reaction in terms of the opposition’s suggestion, even as late as last night, of a modest levy of $2.7 billion being imposed on them to fund paid parental leave?

Mr Smith —We have been very public in our opposition to the opposition’s proposal. We have not seen detailed propositions, but as it has been announced we are concerned about the very substantial cost of the proposal. It would be vastly more costly than this scheme. Also, there is the fact that it is to be funded by a levy on larger businesses—we have been very public in our opposition to that. We have discussed the issue within our councils, which are comprised of the chief executives of member companies, and we are very strongly opposed to that proposal.

Senator FURNER —Have they been discussing contingency plans as a result of what they would do if the scheme were implemented?

Mr Smith —No, there has not been that level of detailed consideration. I think the businesses would be very much hoping that our representations and those of other industry groups might ensure that that scheme was not implemented should the opposition win government.

Senator FURNER —Finally, how do you see the keeping-in-touch provisions—the 10 days—operating? What sort of work would be conducted during that period of time?

Mr Smith —We support those provisions. We think it is a sensible proposal. In fact, it was the Australian Industry Group which reached agreement with the ACTU on keeping-in-touch provisions during the family provisions test case a few years ago. Those keeping-in-touch provisions flowed into the model award clauses. So we agree with the concept of it. In terms of what activities might be carried out, we would think it is more in the realm of attending meetings and perhaps events that are a little more social but are held at the workplace. It is very difficult to draw a hard and fast rule with it, but we think, unlike the ACTU’s submission and arguments, there is an appropriate level of protection there because it is a proposal that is only implemented if the two parties agree. We do not think there is any risk that the arrangements will be abused.

Senator FURNER —Thank you.

CHAIR —Mr Smith, I would just like to get on the record the issue you raise in your submission about the time period—the seven-day, 14-day issue. It is quite a central part of your submission. Could you give us some information on that for the record.

Mr Smith —The thing that we are particularly concerned about—and it may be just a drafting oversight—is that it seems to us that the date on the notice is the date that the notice is prepared within the department and the employer is exposed to a $33,000 penalty if within 14 days of the date of that notice they do not either accept the directive that has been put out by the department or seek a review. So we think that this will operate unfairly. If an employer has preregistered and the electronic communication comes through to the HR manager, it may well work as it is intended. But, with a small business, where the department does not have an email address and a letter has to be posted out from the department, it could easily get there towards the end of the 14-day period. As I have said, a small business typically will not have people off on maternity leave all the time, so this might be a completely new facility. As much as you would hope that regulators and courts would be reasonable with that sort of thing, it is an extremely hefty penalty of $33,000 for failing to send the form back within that period.

CHAIR —And you have recommended 21 days.

Mr Smith —Yes, 21 days in line with where we got to with some of the industrial legislation—and a halving of the penalty to make it consistent with some of the other provisions, like in the Fair Work Act, for similar sorts of things.

CHAIR —So that link with the Fair Work Act but not the other?

Mr Smith —No—just because it was a practical way of dealing with the same sort of issue.

Senator ADAMS —In one of your answers to Senator Furner you stated that the number of companies that would be affected by the coalition’s scheme were substantial. Are you aware of just how many companies that is?

Mr Smith —Not off the top of my head. We did do some analysis on this, but I do not have those figures.

Senator ADAMS —It was 750,000 companies and, out of that, there was 3,200 who would actually be affected. I was just wondering how many of those actually belong to your organisation?

Mr Smith —We have very substantial memberships from sectors such as manufacturing in all its types, construction, the ICT industry and the transport industry in a very diverse way, with aviation, rail et cetera. There are many different major sectors within our organisation, and the large and significant organisations in all of those sectors tend to be members of Ai Group. So a significant percentage of those companies would be our members. As I have said, we have considered the opposition’s scheme and we are very much opposed to it. We think this scheme, that is reflected in this bill, is an appropriate scheme. It is consistent with the propositions that we have put forward over the last eight years or so in various inquiries.

Senator ADAMS —The actual difference in the coalition’s proposal and the government’s proposal is the 26 weeks compared to the 18 weeks to 20. We had the human rights commissioner here giving evidence earlier that under the human rights guidelines the optimum time is 26 weeks. Have you got anything to say about how your industry feels about that length of time?

Mr Smith —This was an issue that was exhaustively analysed during the Productivity Commission’s inquiry and, as a result of that inquiry, 18 weeks was recommended. I think that is the best answer to this issue. The Human Rights and Equal Opportunity Commission put its submissions to that inquiry—as we did and as the ACTU did. After all of that analysis and a draft report, an 18-week publicly funded scheme was recommended. We think that is appropriate.

CHAIR —The only question I have is to do with the link with the NES. I understand and have seen the submissions that you have made to the Productivity Commission about that and they are certainly focused around eligibility and what determines the definition of an employee. One of the clear concerns is the right to return to work and to a job. I am just wondering whether there has been any discussion about that. Under the NES with the unpaid scheme it is unpaid but your job will be there to return to. Under this scheme of paid parental leave that kind of security is not in the act. Do you have any comment about that?

Mr Smith —I do not think that issue needs to be dealt with in this legislation. The Fair Work Act as well as federal and state discrimination legislation is there. In the Fair Work Act it is not just the NES—we have got the general protections. There is a raft of protection in other legislation for people who have caring responsibilities and are treated in a discriminatory or unfair way. So we do not think that issue needs to be addressed here.

For all the things that we have raised over time in the consultations with government and in the various inquiries about this interaction, it starts to get very messy once you try to make the Fair Work legislation consistent with this because it will not fit. The eligibility is quite different. There is the issue of what is paid leave. We are not envisaging any problems, but that is an issue that should be looked at, as to whether any problems have resulted, in that review.

CHAIR —The other point is the costings that have been claimed by some other employer groups about the costs to employers for being the payroll managers. I know AiG has been very strong in saying that it is an option that is real—that the link with the pay and the work is one that you support. But some of the other groups have said that there would be considerable impost on employers. Has your organisation done any costings about what would be the impost on employers to be paying their staff this paid parental leave?

Mr Smith —Not specifically. We are going back to that inquiry, eight or so years ago, that HREOC had. We proposed to that inquiry that it should be a government funded scheme but employers should have the option of receiving the payment and passing it on because we have believed all along that this will reinforce the link with the workplace. That is the reason that we are supportive of the arrangements, but we will be monitoring it ourselves—we hope that everyone else will be as well—and if it does prove to be problematic and excessively onerous for employers, we would hope the government would be open to changing it. We are certainly not opposing it.

CHAIR —That would be another aspect of the review?

Mr Smith —Yes, it should be an issue in the review.

CHAIR —Thank you very much for your evidence and your attendance. There are a couple of things that people asked you to take on notice, so the secretariat will follow up with you on that.

Mr Smith —Thank you.

[12.35 pm]