May 23, 2022

Budget breakdown – how changes to the paid parental leave scheme will affect small businesses

Does your small business have employees looking to expand their family either via adoption or pregnancy in the coming months/years? If your answer is yes to that, the recently announced 2022-23 Federal Budget presented a change to the paid parental leave scheme that would impact you both.

Paid Parental Leave Scheme

Under the current scheme, a baby’s primary carer can take up to 18 weeks of paid parental leave at the minimum wage, whilst the secondary carer is eligible to take up to two weeks. Any of the eligible two weeks that the secondary carer does not take is lost.

The recently proposed enhanced 20-week scheme under the 2022-23 Federal Budget merges the secondary carer’s leave with the primary carer’s 18 weeks. This increases the government-funded Paid Parental Leave scheme to 20 weeks of leave. This fully flexible leave aims to help working parents make caring decisions that suit their specific circumstances and encourage fathers to take parental leave.

Key Changes

Single parents will receive two additional weeks of paid parental leave added to what they were previously eligible for, and dual-parent households are now able to split the Paid Parental Leave however they like. Due to come into effect no later than 1 March 2023, this leave must be taken within two years of the child’s birth or adoption. 

Presently, women who earn up to $151,350 can access paid leave, but women earning more than the threshold are not entitled to this scheme, even if their partner has lesser or no income. The enhanced 20-week scheme will now broaden the eligibility threshold to include households with income up to $350,000 per annum.

Notably, the proposed scheme still does not include superannuation payments in parental paid leave and the rate of paid parental leave has not increased.

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Considerations for employers

By giving families greater choice and flexibility to self-manage work and care, changes to the paid parental leave scheme will see more parents be considered eligible, and eligible parents able to access more from the scheme. For small businesses, this will see more paid parental leave taken and a shift in how it is taken, potentially adding more pressure to current staffing shortages.

This impact could however be mitigated by the lack of change to the paid parental leave rate. As it has not increased, this may disincentivise the higher income earner from taking leave as the paid time off may see them earn less than if they continued working. Further disincentives for the leave are the lack of superannuation payments which allow parents to continue building their retirement savings while taking time out of the paid workforce, thus making it more attractive for them to return to the workforce sooner.

In conclusion 

Paid parental leave is a topic that can be tricky for employers to understand and navigate. If you to alleviate concerns about what your employees are entitled to or the risks of failing to match standard employee obligations, get in touch with our team of experts today to discuss how you can best manage paid parental leave at your small business!

Filed Under: Business Advisory, Compliance, Management and Strategy, People

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