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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.
1
Although the United States do not have a national paid parental leave scheme, it should be noted that
more than 50% of wo men are entitled to statutory paid matern ity leave, as leg islated by state
administrations.
2
`Attitudes to Maternity Leave in Australia" Auspoll 09 April 2009
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
3
. ABS, Births Australia 2007 (3301.0) and AIHW, Adoptions Australia 2007-08
4
. Fair Pay Co mmission, 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 Co mmission, Paid Parental Leave Draft Report, Attachment E, p. 1
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 l eave,
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 continuo us 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 sal ary
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 Austral ia
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.