Our company provides a maternity benefit of 12 weeks pay spread over 3 months. An employee has asked if she can extend the duration of the payment to 6 months by taking her salary for each month at half pay. Does this impact leave accrual or any other payments that you can think of?
This is an interesting question, thank you. First of all we will provide a little background to parental leave and the employee entitlements that may apply.
The National Employment Standards (NES) in Part 2-2 of the Fair Work Act 2009 (FW Act) do not provide for paid parental leave but do provide for unpaid parental leave.
Separate to the NES unpaid parental leave, the Federal Government provides a benefit of up to 18 weeks payment at the national minimum wage to eligible parents on the birth or adoption of a child. This benefit is known as the Paid Parental Leave Scheme (PPL). The eligibility criteria for PPL includes, amongst other criteria, that the parent not be working (for example, be on a period of leave such as NES unpaid parental leave) whilst in receipt of the Government benefit. PPL is governed by the Paid Parental Leave Act 2010 and is administered by the Department of Human Services.
Some employers have their own employer-provided paid parental leave in addition or supplementary to the Government’s PPL - generally either in an enterprise agreement or in a company policy (though the ability for an employee to receive both the PPL and their company payment for parental leave will soon disappear based on the 2015/2016 budget notes).
The FW Act allows an employee to accrue annual leave and personal/carer’s leave progressively during a year of service according to the employee’s ordinary hours of work.
If an employee is on a period of unpaid leave, such as NES unpaid parental leave, the period of the unpaid leave does not count towards the employee’s service for the purpose of accruing annual leave or personal carer’s leave, regardless whether the employee is receiving Government provided PPL. In addition the Paid Parental Leave Act 2010 expressly states that a period of unpaid leave is not taken to be a period of paid leave because an employee is receiving Government PPL.
However, if an employee is in receipt of employer-provided paid parental leave in accordance with a term of an enterprise agreement or company policy, the employee is taken to be on a period of ‘paid leave’ in accordance with the FW Act. That is, the period of the ‘paid leave’ is counted as service for the purpose of accruing annual leave or personal carer’s leave.
The question then remains, at what rate does an employee on a period of employer-provide paid parental leave accrue annual leave and personal carer’s leave?
The FW Act requires that annual leave and personal/carer’s leave be accrued with respect to the employee’s ordinary hours of work.
Whether an employee can take employer-provided paid parental leave over double the amount of time at half pay and what the implications of this will be for the accrual of their other entitlements is dependent on the wording of the relevant provisions in the enterprise agreement or company policy.
If the enterprise agreement or company policy is silent on how annual leave or personal/carer’s accrues when employer-provided paid parental leave is taken at half pay, it is our view that annual leave and personal/carer’s leave would accrue based on the employee’s ordinary hours of work for the entire period of the ‘paid leave’. This is because when employer-provided paid parental leave is taken at half the pay for double the period of leave the employee’s ‘ordinary hours of work’ do not change. It should be noted, however, that this is yet to be tested in a court or tribunal.
Based on our view then, where a full time employee takes employer-provided paid parental leave at half pay over 24 weeks, they will accrue annual and personal/carer’s leave based on their full time hours over the whole 24 weeks.
It may be possible to word the employer-provided paid parental leave provisions in such a way to ensure that an employee’s annual and personal/carer’s leave will only accrue at half the rate when the employee is in receipt of paid parental leave at half pay.
The accrual of long service leave over the period of employer-provided paid parental leave may depend on the wording of the relevant long service leave instrument.
Ai Group have expert IR Consultants who can assist with the drafting of policies and enterprise agreements and any other workplace matter. If you require assistance, then please send us an email or contact us on 1300 55 66 77.
Clinton is the Publications Manager at Ai Group. He is responsible for a number of key services including Annotated Modern Awards, Workplace Relations Handbooks and the management of Ai Group’s HR and Health & Safety Resource Centres. Clinton has a Masters in Employment Relations and previously held advisory roles with the Workplace Authority and Fair Work Ombudsman.
