Paid Parental Leave scheme - paying my employees

How do I know if my employee is eligible?

The Family Assistance Office will assess whether your employees are eligible for Parental Leave Pay. It is your employee’s responsibility to lodge their claim and be assessed as eligible to receive Parental Leave Pay.

Full-time, part-time, casual, seasonal, contract and self-employed workers may be eligible.

To be eligible for Parental Leave Pay, an employee must:

• be the primary carer of a newborn or recently adopted child, usually the mother
• be an Australian resident
• have met the Paid Parental Leave work test before the birth or adoption occurs
• have received an individual adjusted taxable income of $150 000 or less in the financial year prior to the date of birth, adoption or date of claim, whichever is earlier, and
• be on leave or not working from the time they become the child’s primary carer until the end of their Paid Parental Leave period.

Their child must have been born or adopted from 1 January 2011 to be eligible for Parental Leave Pay.

To meet the Paid Parental Leave work test your employee must have:

• worked at least 10 of the 13 months prior to the birth or adoption of their child, and
• worked for at least 330 hours in that 10 month period (just over one day a week), with no more than an eight week gap between two consecutive working days.

Paid Parental Leave funds

Paid Parental Leave funds will be provided to you before you are required to provide Parental Leave Pay to an employee. There is no obligation to provide Parental Leave Pay to an employee until you have received the required funds from Centrelink.

Paid Parental Leave funds will be electronically transferred to your nominated bank account by Centrelink, before your employee’s usual pay cycle cut-off.

You can receive Paid Parental Leave funds fortnightly throughout the Paid Parental Leave period or you can choose to receive funds in three six-weekly instalments.

As with wages, your employee may not receive their Parental Leave Pay on the day their Paid Parental Leave period starts. It will be paid in the same way as they would receive wages for that day, for example fortnightly in arrears. Because funds may not be provided to you until after your employee’s nominated start date, the first payment may contain an amount of arrears that is an amount to be paid to you employee for a previous pay period.

A notification about the funding amount (either electronic or in another written form) will be provided each time an amount is deposited into your account. If you have multiple employees receiving Parental Leave Pay, the advice will provide details for each employee.

You will not need a separate bank account for Paid Parental Leave funds. You may earn interest on Paid Parental Leave funds. As is normally the case, interest earned in this way will be treated as income for taxation purposes.

How do I provide Parental Leave Pay?

You should provide Parental Leave Pay to your employee in the same way you provide salary or wages.

The only deductions that can be made from your employee’s Parental Leave Pay are:

• PAYG withholdings
• child support, if your employee has a child support liability, and
• deductions that your employee has authorised and that are principally for their benefit.

You are not required to make superannuation contributions in respect of Parental Leave Pay. Parental Leave Pay will need to be identified separately from other amounts that attract a superannuation guarantee liability.

The Paid Parental Leave scheme does not prevent you from making voluntary superannuation contributions in respect of your employee's government funded Parental Leave Pay.

Paid Parental Leave will not be subject to payroll tax or give rise to additional workers compensation premium liabilities.

For more information refer to the How do I provide Parental Leave Pay to eligible employees instructions.

What payment notification do I need to provide to my employee?

You will need to give written notification to your employee of their Parental Leave Pay within one working day of the Parental Leave Pay being provided to them. This can be on their usual pay slip or in a separate notice such as a letter or email.

If your employee receives Parental Leave Pay at the same time as receiving other paid entitlements such as annual or paid maternity leave, you will need to show the gross amount of Parental Leave Pay. You do not have to separately identify the amount of PAYG withholding or the net amount that relates to Parental Leave Pay.

You must include Parental Leave Pay in the total amounts on an employee's annual or part-year payment summary. It does not need to be separately identified on payment summaries

You will not be required to provide any regular reports to Centrelink about your employee's Parental Leave Pay. You will need to include the Paid Parental Leave funds you receive as taxable income for your business. Costs incurred in administering the scheme will be tax deductible.

Can my employee work while receiving Parental Leave Pay?

To be eligible for Parental Leave Pay, your employee must be on leave from the time they become their child’s primary carer, until the end of their Paid Parental Leave period. If your employee returns to work before the end of their Paid Parental Leave period, you need to notify Centrelink because their Parental Leave Pay will stop.
Under the Paid Parental Leave scheme your employee has the option, with your agreement, to Keep in Touch with the workplace. The purpose of the Keeping in Touch provision is to allow an employee to remain connected with the workplace without losing their entitlement to Parental Leave Pay. 

For more information about Keeping in touch provisions, refer to the Questions and answers for employers page.

Will the Paid Parental Leave scheme affect existing leave entitlements?

The Paid Parental Leave scheme is designed to complement existing workplace entitlements. The Paid Parental Leave scheme provides Parental Leave Pay but does not provide a new entitlement to leave. The scheme does not change any of your employee’s existing leave entitlements. Your employee’s Parental Leave Pay is in addition to their employer provided leave entitlements.

The existing minimum entitlement to 12 months unpaid parental leave for long-term employees, in the National Employment Standards under the Fair Work Act 2009, is unchanged. Your long-term employees can also request an additional 12 months unpaid leave on top of this. A long-term employee is someone who has worked for your business for 12 months or more.

Parental Leave Pay will not result in the accrual of any additional leave entitlements for your employee.

If you currently provide paid maternity or parental leave through an industrial agreement, you cannot withdraw that entitlement for the life of that agreement.

For more information about employment entitlements, workplace obligations or the Fair Work Act 2009, visit www.fairwork.gov.au or call 13 13 94.