Last year when the government first introduced the idea of cutting government funded paid parental leave payments to those who were already eligible for employer funded parental leave the outcry was loud and immediate.
It probably wasn’t helped by an announcement on mothers day calling new mums “double dippers”, as if they’d committed some kind of moral crime. I certainly took issue with the term, given I have been very fortunate to be eligible to claim both employer and government paid parental leave with two out of three of my children.
With an election looming and the policy clearly unpopular, the proposal was dropped. That was until recently, when a new bill was presented to parliament with very similar proposals to the first one (you can read all 47 pages of it here if you so desire).
So, what exactly are the proposed changes to paid parental leave and what do they mean for you?
Changes to Paid Parental Leave
What are mums currently eligible for?
Currently mothers (or fathers if they are the primary care giver) can receive up to 18 weeks of paid parental leave at the federal minimum wage.
To be eligible, mothers must earn under $150,000 a year and meet the work test below
- work 10 of the 13 months before the birth or adoption of your child, and
- work 330 hours in that 10 month period, which is just over 1 day a week, with no more than an 8 week gap between 2 consecutive working days
This equates to around $12,000 before tax based on the current minimum wage. You can read more about the current scheme here.
What are the changes?
The proposed changes mean that mums who receive paid parental leave from their employers cannot claim government paid parental leave for the period they would be eligible for employer leave. Effectively, mothers who would have been eligible for both payments will no longer receive both.
What will mums be eligible for under the proposed changes?
Mums will be eligible for paid parental leave from their employer OR the government, up to a maximum of 18 weeks.
For example, if a mum is eligible for 6 weeks paid parental leave from her employer then she would only be able to claim 12 out of the 18 weeks of government paid parental leave.
The employer leave would be paid at whatever rate was agreed between the employee and employer and the government leave would be paid at federal minimum wage. It isn’t clear what would happen if your employer leave is less than the federal minimum wage, for example if you work part time, but it does imply that the government will “top up” the leave to the level of the minimum wage for 18 weeks total.
Who do the changes affect?
The proposed changes affect mothers who are eligible to receive paid parental leave from their employer and who earn under $150,000 a year. They won’t affect mothers who do not receive any paid leave from their employer.
When would the changes start?
The changes could start as early as January 1, 2017. This means women who are already pregnant may be affected.
Have the changes been approved yet?
No. The changes are still just a proposal at this stage and need to pass through parliament. It does look likely that they will pass, although possibly not with the January start date.
What’s the big deal?
While on the surface the proposal doesn’t seem unfair, especially not to those who wouldn’t receive paid leave from their employer anyway, there are a few major issues.
The first issue is that the proposal could come into effect as early as January 1 2017, meaning women who are already heavily pregnant will now receive less money than they had budgeted for. This can have a huge impact on the family budget and may mean women returning to work well before they had planned or hoped to.
The second issue is that paid parental leave as an employer benefit is often something that women have negotiated for, often at the expense of other employer benefits or pay rises. This is especially true in female dominated professions. Effectively some women will have made financial and other sacrifices in their pay negotiations to include paid parental leave, only to have this become almost meaningless by losing out on other government benefits.
What are your thoughts on the proposed paid parental leave changes? Will you be affected? Do you think they are fair?
More budget advice for families:
- Everything You Need to Know About the Changes to Centrelink FBT Payments
- The 52 Week Saving Challenge – Start Today!
- How to Recover from a Holiday Budget Hangover