Changes to the Parental Leave Pay Scheme

blog Aug 28, 2023

Understanding changes to the parental leave pay scheme as an employer

If you run a business with staff, keeping up with compliance is one of the most important things to be on top of.

The Parental Leave Pay scheme is a significant pillar of support for families. The recent changes represent a step toward greater flexibility and inclusivity, recognising the diverse dynamics of modern families.

To ensure you stay up to date with current changes to compliance, we’re covering the recent changes to the Parental Leave Pay Scheme. If you have team members who have recently had a child or adopted a child, or you have team members who will be going through that process in the future, the details we cover below will be beneficial.

What is the parental leave pay scheme?

The Parental Leave Pay Scheme can be a bit confusing for the uninitiated, primarily because even though it has the word ‘leave’ in the name, it’s not actually a type of leave. The Parental Leave Pay Scheme is a payment available to people who typically take unpaid leave from work due to a newborn or newly adopted child.

It’s a payment funded by the Australian Government to help families take time away from work to care for a newborn or newly adopted child. The scheme is facilitated by Services Australia, which delivers a range of services and payments on behalf of the government.

The employer typically doesn’t have to pay the Parental Leave Pay Scheme, although this payment often works with Services Australia paying the employer, who in turn pays the employee. But there are no out-of-pocket costs for the employer, which is important to note.

On the other hand, if you’re an employer who offers employer-funded paid parental leave, your employees can also claim the Parental Leave Pay Scheme alongside this, which can significantly benefit families during this period.

While employers often administer the payment, there are no direct costs to you. Eligible employees can receive this payment if they meet income, work, and residency criteria and also need to apply directly through Services Australia to access this payment.

Your employees can also concurrently take annual leave, or another type of approved leave, whilst accessing the Parental Leave Pay Scheme depending on their leave arrangements with your business.

What changes to the Parental Leave Pay Scheme must I be aware of?

According to Fair Work guidelines, effective from 1 July 2023, modifications have been made to the Parental Leave Pay (PPL) scheme, extending the entitlement period from 18 weeks (90 days) to 20 weeks (100 days).

This is the most notable change, allowing this payment to be used more flexibly by birth or adoptive parents, with the approval of the birth mother or primary adoptive parent. The changes enable couples who share parenting responsibilities to jointly access up to 20 weeks of paid parental leave, increasing the entitlement for fathers and partners.

Alternatively, if a parent is single when submitting their claim, they are eligible for the entire 20-week benefit.

This is a departure from the old scheme, which required an initial 12-week or 60-day period to be taken in bulk, with only 30 flexible days after that. With this update, no minimum bulk period needs to be taken all at once anymore.

Parents now have up to 2 years after the birth or adoption to take these days and access this payment jointly.

This also means that parents who previously couldn’t work while receiving this pay can now take some of this leave, return to work, and take further days off within two years. Parents also no longer have to return to work to be eligible for this entitlement.

In addition to this update to the Parental Leave Pay Scheme, there is a new family income limit for claiming this leave which is $350,000 and will be indexed annually from 1 July 2023, and the former Father and Partner Pay entitlement has also been removed.

To recap the updates to the Parental Leave Pay Scheme as of 1 July 2023:

Partnered employees can claim a maximum of 20 weeks’ pay jointly, with each partner taking at least two weeks (some circumstances are exempt from this requirement)
Parents who are single at the time of their claim can access the full 20 weeks themselves
the whole payment flexible so that eligible employees can claim it in multiple blocks for two years after the birth or adoption of a child
the eligibility rules for fathers or partners to claim paid parental leave pay have expanded
$350,000 family income limit (annually indexed from 1 July 2024) has been introduced for claiming paid parental leave pay
the requirement to return to work to be eligible for this entitlement has been removed

What you need to know and do

Whenever there’s a compliance update, it’s important that you and your employees are aware of the changes that affect them.

Here are some simple things you can do to build awareness:

You can refer your employees to Services Australia for more information and to receive advice for their individual circumstances.
Review your internal leave policies, including unpaid parental leave or your employer-funding paid parental leave policy.
Update your leave policies, including return from leave notice requirements, to accommodate any changes arising from this update and ensure a smooth transition for both your business and your team.

If you’re in doubt, in over your head or just don’t have the bandwidth to navigate these changes for you and your team – get expert help.

The benefits of the changes to the Parental Leave Pay Scheme

The recent updates to the Parental Leave Pay Scheme offer greater flexibility and inclusivity, recognising the diverse dynamics of modern families.

Employers and employees can confidently navigate these changes by understanding the essence of the Parental Leave Pay Scheme, grasping the nuances of the revised scheme, and proactively preparing for its implementation. As the work landscape evolves, embracing such changes is pivotal to building a more supportive and inclusive work environment.

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