The notorious PPLS ‘double dipping’ explained

Photography / George Ruiz

Photography / George Ruiz

Double dipping on paid parental leave - what a furore its caused over the last week.

In its budget, released last Tuesday evening, the Government announced that it intends to change the way paid parental leave works for employees across Australia. The changes will prevent employees accepting parental leave payments from both their employer and the Government at the same time (known as ‘double-dipping’).

The current Government scheme entitles employees to 18 weeks pay at the federal minimum wage (at the moment that’s a total of about $11,500) and simultaneously receive the benefit of any other PPLS that their employer might offer. If the Government’s proposed changes become law, employees will be entitled to PPLS payments or payments from their employer, but not both.

These changes will impact businesses in a range of ways so we have put together a quick summary of a few things for you to think about while we continue to watch this space.

Combined employer and Government payments

Businesses may have arrangements with employees to top-up their income from the minimum wage offered under the current PPLS so that when employees take paid parental leave, they don’t suffer a reduction in their earnings. Under the proposed changes, as we currently understand them, this type of arrangement will no longer be allowed. Employees will either have to take the Government entitlement and nothing from their employer, or their employer will have to pay the whole amount, which must exceed the Government entitlement for employees to access it.

If a business has a scheme like this or similar, it will need to think about how it wants to deal with paid parental leave arrangements in the future and what is viable for the business.    

Paid parental leave employer incentives

 Offering paid parental leave is a great incentive to bring new employees to a business and to retain valuable employees when they decide to start a family. However, without the ability to offer paid parental leave for fear of impacting on an employee’s Government entitlement, a business may have less to work with when incentivising its workforce if these changes become law.

Matters to consider include whether or not the entitlement to the employer scheme is enshrined in an enterprise agreement or contract. Subject to this, packaging the value of employer paid parental leave in a different way, such as a return to work bonus, might be an option but there are other factors that would impact on such a strategy, such as the obligation to pay superannuation on any bonus.

In the meantime, its definitely worthwhile to take some time and consider how a business can maintain current offerings to employees should the changes take effect and impact on their entitlements.

Past and future paid parental leave negotiations

 The current system of paid parental leave allows employers and their employees to negotiate the final version of a parental leave package on the basis that the Government provides for a minimum safety net. In many cases the result of negotiations might be that an employee foregoes some of  their employer funded entitlements for other benefits, knowing that they can receive a combination of employer and Government entitlements when the time comes to take paid parental leave.

Under the proposed changes, employees won’t be able to take advantage of both sets of entitlements and may have negotiated away a more generous employer entitlement based on the assumption that the current system would continue for the life of their agreement.

The impact on these types of negotiated agreements is not yet known, so we will keep a close eye on developments.

As things change around PPLS we will continue our updates. Watch this space. 

If you would like to learn more about we do, contact THE WORKPLACE.

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