Paid Parental Leave Scheme
The scheme is an Australian Government funded initiative. It provides for a legal entitlement of 18 weeks paid parental leave at the minimum wage rate (from 1 July 2019 = $19.4894 per hour or $740.60 per week based on a 38 hour week). This applies to all employees who are:
- Australian based, and have
- Serviced a period of 12 months' continuous service prior to the scheme's commencement date.
Parental Leave is paid in addition to any entitlement the employee may already have as a result of an existing employment contract. Employees with more than one workplace can only claim payments from one employer. Payments will be made to the employer and passed on to the employee. The payments can be made to the employer in two ways:
- In accordance with the employee’s pay cycle; or
- As three instalments.
A claim must be lodged with the Family Assistance Office by parents, from 3 months prior to the birth or adoption date of the child up to the 1st birthday of the child. The Family Assistance Office will advise the employer of any claim lodged by an employee and will request additional information from the employer including:
- Employer’s bank account details; and
- Employee’s pay cycle.
To speed up the process when employees lodge a claim, employers can choose to “Opt in” early and supply details direct to the Family Assistance Office.
Payments are taxable however superannuation, payroll tax and workers compensation levies will not be incurred. The payment is part of the employee’s standard gross yearly earnings and will not appear separately on the ATO Payment Summary. Paid Parental Leave does not attract accrual of Annual Leave and Sick Leave however Long Service Leave accrual may vary depending on the State legislation and Award conditions, award based leave entitlements paid at the same time remain unaffected. For taxing purposes during the payment period, if an employee receives other leave payments the amounts will be combined.
Payments will be made to the employer in advance and distributed by the employer to the employee in arrears. Employers will be provided with a notification stating the start date, amount and the end date of payments. The payments cannot exceed 18 weeks and must not begin prior to the birth of the child. They can, however, start any time up to 34 weeks after the birth of the child. Payments can be salary sacrificed by employees and are transferrable to a partner if the employee returns to work and the partner remains at home with the child.
Employees cannot work whilst receiving payments, however, they are permitted up to 10 days of workplace contact to “keep in touch”. This can be for 1 or more hours each day. If an employee returns to work, payments must cease and the Family Assistance Office should be contacted to arrange a refund from the appropriate party.
Further details can be found at www.familyassist.gov.au
The Paid Parental Leave Payment is different to Dad and Partner Pay. Dad and Partner Pay also fall under the Australian Government Paid Parental Leave Scheme, however, this payment is wholly administrated by the Australian Government. No payments need to be made through payroll and your employee must be on unpaid leave while receiving the Dad and Partner Payment from the Australian Government. Further information on Dad and Partner Pay can be found at http://www.humanservices.gov.au/customer/services/centrelink/dad-and-partner-pay
Processing within Sage WageEasy
Parental Leave is not a leave entitlement, but rather complements any obligation an employer may have to their employee under their existing industrial instrument. Due to the specific treatment of payment calculations in relation to tax, superannuation, leave accruals, payroll tax and WorkCover levy, two setup options are available in Sage WageEasy. You should select the option that best suits your overall practices. The following items should be considered before selecting your options:
- If the employee is normally linked to a pre-defined timesheet, you should remove this link from Employment >Timesheet;
- If the employee has any standard allowances that are normally paid as part of their work (eg Uniform Allowance) these may not need to be paid whilst the employee is receiving Paid Parental Leave, so make these inactive at Payments > Allowance;
- Check with the employee to see if any regular disbursements or tax adjustments need to be applied to the payment;
- As these payments are excluded from calculations relating to liability for payroll tax and WorkCover levies ensure that the necessary changes are made to your existing practices;
- Payments made as Paid Parental Leave are excluded from superannuation entitlements;
Employees do not accrue Annual Leave and Sick Leave however Long Service Leave accrual may vary depending on the State legislation and Award conditions whilst receiving Paid Parental Leave;
- If these payments need to be posted to a specific account in your General Ledger system, make sure this is taken into account in your setup within Sage WageEasy.
- Confirm if payments are to appear against the employee’s default departments for transfer to the general ledger and display on Departmental reports.
Option 1 - Allowance
Setup an allowance in Sage WageEasy that is taxed and does not include superannuation:
Link this payment in the employee file under Payments > Allowances:
This will be displayed on the payslip as follows:
Other considerations when using this option:
If the employee is only receiving the Paid Parental Leave payment (i.e. is not concurrently receiving any other leave entitlements) consideration should be given to halting the accrual of annual, sick leave entitlements, Long Service Leave accrual may vary depending on the State legislation and Award conditions. This can be achieved by placing the employee on a newly created Maternity/Paternity Leave award.
- As allowances are reported separately in Sage WageEasy’s General Ledger export, ensure these are identified and set up accordingly.
- If you use any existing user defined reports or templates to calculate payroll tax and/or your WorkCover levy you may need to make amendments to these reports.
- Setup a limit within the employee’s file to cap payments at ($13,330.80) 18 * $740.60. However, take into consideration this value may increase (in line with adjustments to the minimum wage) if the employee is receiving payments post 1 July 2020.
- Set a reminder within the employee file to appear on the To Do List to notify you of the final payment date.
Option 2 – Leave
Setup a new award from Awards > Add and add a Parental leave type within this new award. It is important to move those employees who are receiving Parental leave onto a newly created award otherwise Parental Leave will be paid to all employees on the existing award.
NB: An existing award can be copied as part of the new award setup process
Once the new award is created, add a new leave type for Parental Leave
Setup the accrual to be per pay:
Set maximum accrued hours to 684 (38 * 18 weeks), and activate the ‘Leave accrues during periods of Leave without Pay’ option:
Set to pay accrued leave out each pay:
This will be displayed on the payslips as follows:
When using this method, you need to create and link the employee to a new pay rate of $19.4894 per hour within the employee file under Employment > Department Pay Rate:
Other considerations when using this option:
If the employee is only receiving the Paid Parental Leave payment (i.e. is not concurrently receiving any other leave entitlements) consideration should be given to halting the accrual of annual, sick leave entitlements, Long Service Leave accrual may vary depending on the State legislation and Award conditions. This can be achieved by placing the employee on a newly created Maternity Leave award.
- Each leave type is setup separately for inclusion in Sage WageEasy’s General Ledger journal export, so ensure you have set up the GL codes appropriately.
- If you use any existing user-defined reports or templates to calculate payroll tax and/or your WorkCover levy you may need to make amendments to these reports.
- Set a reminder within the employee file to appear on the To Do List to notify of final payment date.
Under the Paid Parental Leave scheme, Australian employers are required to make payments to all eligible employees. It is important for employers to consider how best to administer the payments. To avoid payment delays, consider registering details early with the Family Assistance Office and consider applying for an AusKey so you can use electronic media for processing and receiving payments and information from the Family Assistance Office.