Parental Leave Pay in Australia: What You Need to Know About Entitlement and Payment Obligations

Employment Law - Employer Perspective
7 minute read

Becoming a parent is often a joyous occasion and taking leave is one of those things that becomes necessary in order to care for a newborn. Many Australian employees are entitled to claim parental leave pay under the provisions found in the Paid Parental Leave Act 2010 (Cth)(the PPL Act) upon the fulfilment of the eligibility rules.

What is the maximum parental pay leave amount a person can receive?

The maximum entitlement for parental leave pay is 18 weeks at the federal minimum wage, which currently stands at $589.30 per week (April, 2012).

It’s important to be aware that the federal minimum wage is applicable to all employees, irrespective of how many hours the person has worked prior to taking leave or the amount they were paid on a per hour basis before taking leave. Furthermore, the amount is the same even if the person was engaged in casual, part-time, or full-time employment, or the person was self-employed.

What are the sources of payment during the leave period?

For the most part, the source of payment during the parental leave period will come from the employer or the Family Assistance Office (FAO).

We should highlight that employers can also create a fund allowing employees the ability to access entitlements such as long service or annual leave which works in conjunction with the paid parental leave scheme.

How is an employee able to receive parental leave pay?

Under Part 3-5 of the PPL Act, if an employer determination is made, the onus is then on the employer to pass on the parental leave pay instalments from the FAO to the employee.

When making a determination, the employee must meet the required conditions as set out in Part 3-5, s 101 of the PPL Act – and generally speaking, if an employee has worked on a continuous basis for at least 12 months for the same employer prior to taking parental leave, the employee will be considered to have met the required conditions.

What happens if there has been no determination made?

In instances where no employer determination has been made, or an employer has opted against voluntarily taking up the ‘paymaster’ role and passing the parental leave pay instalments to the employee from the FAO, then under Part 3-3 of the PPL Act, the obligation will then fall to the FAO who will then directly make the necessary payments.

What if an employer fails to make any parental leave payments?

If a situation arises where an employer fails to make parental leave payments to an employee, the FAO will then assume responsibility in making the parental leave payments if the dispute has been referred to the Fair Work Ombudsman (FWO).

If an employer wishes to have the employer determination reviewed: What happens then?

An employer who does not agree with an employer determination decision can apply for an internal review under s 207(3) of the PPL Act, and the application must be done in writing and completed within 14 days of the FAO’s written notice of a determination. When requesting a review, an employer can seek a review under the following circumstances:

  • the employee has not been, or will not have been employed for the 12 month period
  • prior to the expected birth date of their child;
  • the employee will not be employed during the paid parental leave period;
  • the employee has applied for less than eight weeks of paid parental leave; or
  • the employee is not based in Australia.

After an application for review by an employer before the paid parental leave period – and at least 28 days have lapsed – then under s 84(3) of the PPL Act, the FAO will pay all of the instalments to the employee until there is a resolution to the review.

What happens if the employer determination has been revoked?

If the employer determination has been revoked (for example due to the intervention of the FWO) after it has come into force, and the employer has failed to pay part, or all of the instalments, then the FAO must pay the outstanding amounts owed.

However, the FAO is not required to pay any amounts which have already been recovered by the employee.

How are parental leave payments made?

Section 64 of the PPL Act states that the pay instalments must be made on the normal pay cycle, so if an employee is paid on the 1st of every month; then the parental pay leave instalments will also be paid on the same cycle.

Upon the receiving of the funding amount and the making of the necessary deductions in relation to the PAYG tax by the employer, the payments to the employee must be made on the normal pay day and the payment method must be made by one, or a combination of the following:

  • cash;
  • cheque, money order, postal order or similar type order; or
  • electronic fund transfer (EFT) to a credit account that is held by the employee.

When does parental leave pay stop?

Once an employee receives their full entitlement, an employer is no longer obliged to make any further payments. Additionally, payments can also cease under the following circumstances:

  • an employee has returned to work;
  • an employee has decided not to return to work; or
  • a secondary claim has been made.

How is the payment obligations enforced?

The compliance and enforcement provisions can be found in Part 4-2 of the PPL Act, and an employer may be deemed to have breached the civil penalty provision if they have:

  • made a deduction that is unlawful in regards to the parental leave instalment;
  • failed to respond to an employer determination notice by way of an acceptance notice or application for review within 14 days of receiving notice;
  • failed to pay an instalment that is both payable or correctly funded;
  • failed to pay an instalment via an acceptable payment method;
  • failed to notify the FAO once a notifiable event has occurred;
  • failed to provide a person with a record of payment; or
  • failed to keep records in regards to parental leave payments.

If any of the aforementioned breaches has occurred (except for the last two), an employer may face a maximum penalty of $6,600, or $33,000 for a corporation.

If there is an alleged breach of the civil penalty provision, an action can be brought before either the Federal Court or the Federal Magistrates Court. Alternatively, a Fair Work Inspector or the FAO can issue either a compliance or infringement notice as a substitute of taking a matter to court.

We should note that the FAO can refer a matter to the FWO if there is a belief that unlawful deductions have been made, or there has been a failure to pay the required instalment, or the payment of an instalment has been made via an unauthorised method. If such any of the actions have occurred, the FAO is then required to inform both the employer and employee in writing of the action.

Upon the conclusion of an investigation, the FWO must notify the FAO of the decision and under ss 157(2), 159(2) of the PPL, either a notice of compliance, or infringement must be provided outlining the alleged contraventions, and the consequences of a failure to comply with the notice if the FWO holds a reasonable belief that one or more of the obligations have not been met by the employer.

If a compliance notice has been provided, then the required actions must be taken, along with evidence to demonstrate the acts as outlined has been met within 14 days of notice. Alternatively, if a notice of infringement has been made within 12 months of the alleged contravention, or upon the expiration of the compliance notice, then notice must be provided to the person of the penalty payable, and must be paid within 28 days. Failure to pay the penalty within the time period may lead to the initiating of further action in either the Federal Court or the Federal Magistrates Court, which may result in a more substantial penalty issued to the employer.