Save Search

Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Fair Work Amendment (Paid Parental Leave) Bill 2009

Bill home page  


Download WordDownload Word


Download PDFDownload PDF

Fair Work Amendment (Paid Parental Leave) Bill 2009



Circulated by authority of Senator Sarah Hanson-Young

 

Explanatory Memorandum

 

GENERAL OUTLINE: Policy Rationale

 

This Bill amends the Fair Work Act 2009 and builds upon the existing provisions for unpaid parental leave, to provide for a system of paid parental leave that will assist all eligible Australian parents who take time off from their employment upon the birth or adoption of a child.

 

The Bill provides for 26 weeks Government-funded paid leave at or around the birth or adoption of a child for all eligible Australian parents, at the level of the federal minimum wage, or if they earn less than this (eg. part-time or casual workers), at their average wage, with a guaranteed income and a right to return to work at the end of it.

 

This Bill aims to provide a system of paid parental leave for Australia’s working parents, meeting a serious gap currently in our system of workplace practices, and brings Australia in line with other OECD countries with the exception of the United States. [1]

 

A universal paid parental leave scheme provided by the Federal Government is a way of supporting parents outside of the social welfare system, by recognising that paid parental leave should be treated as a workplace entitlement.

 

This Bill ensures that labour force participation is recognised and provides a guarantee for women and men to return to the workforce.

 

In February this year, the Productivity Commission handed down its final report and recommendations into the feasibility of introducing a paid parental leave scheme funded by the Government. A recent Auspoll found that that 82% of Australians would prefer to see paid parental leave funded over tax cuts for high income earners, highlighting that Australians are looking to the Government to provide a paid parental leave scheme as a matter of priority. [2]

 

The World Health Organization, the Australian Breastfeeding Association and the Public Health Association all advocate six months paid leave for mothers to be supported through childbirth, recovery from birth, a healthy period of breastfeeding, and bonding.



This position is also supported by a number of unions, including Unions NSW, the Community and Public Sector Union, National Tertiary Education Union, and the Liquor Hospitality and Miscellaneous Union.

 

FINANCIAL IMPACT:

 

It is estimated that the total net cost of Paid Parental Leave scheme is approximately $740 million per annum for Government and approximately $90 million per annum for business, making a net cost of approximately $830 million per annum.

 

It is only possible to provide an estimate of the likely cost of the proposed scheme if it ran over the 2009-10 financial year. There are various factors which cannot be costed, some of which are likely to increase the net cost and others which are likely to reduce it. The costing does not take into account any interactions with other payments, such as Family Tax Benefits, that the introduction of PML could affect.

 

Also, this analysis had not accounted for the way people may react to and possibly change their work patterns and behaviour as a result of the introduction of such a scheme.

 

These numbers are rounded up and so may not always add up to the totals.

 

This costing is based on two types of families.

•        1) the mother is working and the partner may or may not also be working and (single parent families with the mother working. It is assumed for costing purposes that in these families there will be 100 per cent take up of the full 26 weeks paid leave between the parents.

•        2) single income families where only the partner is working and the mother is not. If the working partner meets the work requirements and is prepared to take leave, they will also be eligible for the scheme. However, it is unlikely that many families will take up this option instead of just keeping the $5000 Baby Bonus. This is because they would need to take over 9 weeks of PML at the full rate of minimum wage ($543.78) to be better off than by taking the Baby Bonus. Given that the majority of these working partners will be earning more than the minimum wage, it is unlikely that they would be willing to take a cut in earnings for a significant period of time around the birth of their child. Therefore a take up rate of only two per cent is assumed for these families.



Cost to government - Families with a working mother:



Under this proposal approximately 150 000 families with working mothers will be eligible under the work requirements. However, in about 20,000 of those families the mother is earning income under around $200 per week and in these cases they are better off taking the $5000 Baby Bonus instead of PPL. Therefore this costing is based on 130 000 families and for costing purposes it is assumed there will be a 100 per cent take up rate for the full 26 weeks.  

 

The gross cost of paying PPL to these families is approximately $1.7 billion.

Significant savings are achieved by not paying the Baby Bonus to these families (Baby Bonus savings = 130,000 x $5000 = $650 million).

Further savings of approximately $330 million are arrived at via taxation collected on PPL income.

The net cost to government of the scheme for these families is $720 million

$1.7 billion (Gross cost) less $650 million (Baby Bonus savings) -less$330 million (tax collected) = $720 million.



Cost to government - Single income families, partner only working:



There will be somewhere between 75,000 and 135,000 of this type of family who may be eligible for PPL. For this costing it is assumed that there are 105,000 eligible families; on average only two per cent of them (2,100 families) take up PPL for the full 26 weeks; and they are all paid the maximum PPL of the minimum wage.

Under this scenario, the gross cost of paying PPL to these families is approximately $30 million.

 

Savings of $11 million are achieved by not paying the Baby Bonus payment to these families. Under this scenario it is assumed that the scheme is tax-neutral for these families. This is because while there may be some extra tax raised, there is also likely to be tax revenue lost if people on higher incomes take the lower paid PPL and thus pay less tax than they otherwise would have.

The net cost to government of the scheme for these families is $19 million.

$30 million (gross cost) less$11 million (Baby Bonus savings) = $19 million.



Cost to government - Total for all families:



The gross cost to government of the scheme for all families is $1.72 billion

less $660 million (Baby Bonus savings) and less $330 million (tax savings) with a total net cost to Government of $740 million per annum.

 

TOTAL NET COST TO GOVERNMENT = $740 million.



 



 

Cost to business:



The cost to business is calculated as the superannuation they are liable to pay. It is estimated that about 85 per cent of mothers and 60 per cent of fathers eligible for PPL are eligible for superannuation, and further savings are available to business via tax deductions.

TOTAL NET COST TO BUSINESS = $90 million.

Cost to economy:



The net cost to the economy is $740 million (cost to government) + $90 million (cost to
business) =

TOTAL NET COST TO ECONOMY $830 million.

 

SOURCES OF DATA AND FURTHER ON CALCULATIONS:

 

The costing is based on:

•        The number of births in 2007 and adoptions in 2007-08. [3]

•        Labour force data of recent mothers from the ABS Pregnancy and Employment Transitions, Australia, Nov 2005 publication.

•        Labour force and eligibility for scheme of fathers taken from estimates from the Productivity Commission, Paid Parental Leave Draft Report.

•        The current Baby Bonus amount of $5000.

•        The current Federal Minimum Wage of $543.78. [4]

•        The income distribution of all females' weekly total cash earnings from ABS, Employee Earnings and Hours May 2006 (Reissue). These figures have been adjusted for wages growth (all female total earnings) between May 2006 and November 2008. [5]

•        The tax savings have been estimated for the 2009-10 year using a Parliamentary Library tax model which includes the Low Income Tax Offset but not the Medicare Levy.

•        A superannuation rate of 9 per cent.

•        Eligibility for superannuation of 85 per cent for women and 60 per cent for men. [6]

•        Business superannuation tax deduction rate of 30 per cent.

 

NOTES ON CLAUSES



Clause 1 - Short title



This clause provides for the Act, when enacted, to be cited as the Fair Work Amendment (Paid Parental Leave) Act 2009.

 

Clause 2 - Commencement

 

This clause provides for the commencement of the Act on the day after it receives Royal Assent.

 

Clause 3 - Objects



This clause states that the objects of this Bill are principally to give effect, or further effect to;

 

(a)        Article 11.2(b), Convention on the Elimination of All Forms of            Discrimination against Women, 1979; and

(b)        the Maternity Protection Convention, which the General Conference of the International Labour Organisation adopted on 30 May 2000 and which is also known as Recommendation No. 183; and

(c)        the World Health Organisation global strategy to ensure sufficient maternity leave is provided to mothers, promoting and supporting exclusive breastfeeding for six months;  

to guarantee 26-weeks government funded paid parental leave to all parents in the workforce whether employed on a full-time, part-time, casual, contractual or self-employed basis.

 

Schedule 1 - Amendments providing for paid parental leave to Fair Work Act 2009

 

Item 1 - Repeal section 70 and substitute with:

 

Subsection (1) identifies that an employee is entitled to 12 months parental leave if the leave is associated with the birth or adoption of a child, or the employee has or will have responsibility to care for the child.

 

Subsection (2) allows an employee who is entitled to 26 weeks paid parental leave, to take the remainder of the 12 months as unpaid leave.

 

Item 2 - After section 79 insert Subdivision BA - Paid parental leave

 

79A Entitlement to paid parental leave:

 

Subsection (1) provides that an employee who is entitled to parental leave may take up to 26 weeks of that leave as a paid leave entitlement.

 

Subsection (2) ensures that where the employee’s spouse or de facto partner is also entitled to parental leave under this Division, then the total period of paid parental leave to which the couple is entitled is 26 weeks, which may be shared.

 

Subsection (3) provides that the leave must be taken in a single continuous period.

 

Subsection (4) ensures that an employer may choose to provide an additional ‘top-up’ payment to the employee taking paid parental leave.

 

79B Interaction with other entitlements:

 

Provides that if an eligible employee takes a period of paid parental leave, then neither the employee or the employee’s spouse or de facto partner is entitled to be paid:

(a)    The Baby Bonus, or

(b)    Any other paid maternity, paternity, or parental leave payment under any other Commonwealth, state or territory law.

 

79C Period of paid parental leave:

 

Subsection (1) provides that the period to which an employee is entitled is:

(a)    6 weeks solely for the birth mother as birth related leave, and the remaining 20 weeks to be split between the two parents at their discretion;

(b)    In relation to adoption leave the 26 weeks can be shared between the two eligible parents; and

(c)     Paid parental leave cannot be shared between an employee and the employee’s spouse or de facto partner unless both are entitled to parental leave as defined under subdivision B.

 

 

79D Amount of paid parental leave entitlement:



Subsection (1) ensures that eligible employees, including adoptive parents, will receive the equivalent of the amount of the national minimum wage for up to 26 weeks (currently $543.78, as at October 2008)

 

Subsection (2) requires that the amount of paid parental leave granted to employees will be pro-rata. This ensures that those employees that are not full-time are only eligible for the paid parental leave entitlement in accordance with the hours worked.

 

Subsection (3) allows the employee to request to be paid the parental leave entitlement over 52 weeks, at half the minimum wage, is the employer agrees.

 

 



 

79E Administration of leave entitlement:

 

Subsection (1) ensures that the paid parental leave entitlement is paid by the Commonwealth, to the employer, and then on to the eligible employee, in accordance with:

(a)    the employer’s usual method of paying leave entitlements, or

(b)    if there is another agreement that has been made between the employer and the eligible employee.

 

Subsection (2) provides that paid parental leave is to be treated as a wage salary income for the purposes of taxation, superannuation, and other relevant laws and agreements.

 

79F Application to independent contractors and the self-employed:

 

Subsection (1) requires that the relevant Minister and Treasurer must, as soon as practicable, provide a legislative instrument to provide an equivalent benefit to individuals who are independent contractors or self-employed.

 

Subsection (2) provides that the scheme must provide an entitlement of equal financial benefit; the option of sharing the benefit with the individual’s eligible spouse or de facto partner; and the choice of taking the benefit or a baby bonus payment.

 

79G Appropriation:

 

Provides that any payments by the Commonwealth to fund paid parental leave or equivalent benefits are to be made through money appropriated by the Parliament for that purpose.

 

Item 3 - Transitional:

 

States that until the first national minimum wage order made by Fair Work Australia comes into effect, then subsection 79D(1) has effect if it were modified by omitting “national minimum wage” and substituting “federal minimum wage set from time to time by the Australian Fair Pay Commission.”

 

Schedule 2 - Consequential amendments:



Items 1 - 22  are consequential amendments that provide for two types of parental leave, by omitting “unpaid parental leave” and substituting “parental leave”, providing that both paid and unpaid parental leave are provided for.

 




[1] Although the United States do not have a national paid parental leave scheme, it should be noted that more than 50% of women are entitled to statutory paid maternity leave, as legislated by state administrations.

[2] ‘Attitudes to Maternity Leave in Australia” Auspoll 09 April 2009

[3] .       ABS, Births Australia 2007 (3301.0) and AIHW, Adoptions Australia 2007-08

[4] .       Fair Pay Commission, as at 22/04/2009 (2008 decision)

[5] .       ABS, Employee Earnings and Hours May 2006 (Reissue) (6306.0) and ABS, Average Weekly Earnings Nov 2008 (6302.0), seasonally adjusted

[6] .       Productivity Commission, Paid Parental Leave Draft Report , Attachment E, p. 1