Employers won't foot bill for maternity leave

Government should meet costs of maternity leave pay, the Productivity Commission reports

By Queensland Business Review

Working mothers will receive 18 weeks maternity leave under a Productivity Commission recommendation that would see the Federal Government pick up the bill.

The Commission's interim report Paid Parental Leave: Support for Parents with Newborn Children calls for primary carers to be paid at the adult minimum wage of $544 a week for the period of leave.

The scheme would only be eligible to women with more than 12 months service of 10 or more hours a week. Along with full and part time employees, casual, self-employed and contract workers would be included.

Fathers or other eligible partners would also be entitled to a two week, non-accruable period of leave.

The net and gross costs of the scheme for taxpayers are expected to be $450 million and $1.4 gross per annum respectively.

Businesses would however be required to cover the employee’s super contributions at 9 percent of the minimum wage during the period of leave. This would cost a total of around $74 million a year once the tax deductibility of superannuation is factored in.

Australian Industry Group Chief Executive Heather Ridout says the impact of these costs requires "careful consideration".

All up, working mothers would receive a total of $11,851 over the four-and-a-half-month period under the scheme.

Businesses would also be lumped with the responsibility of ‘paymaster’ for the scheme – essentially requiring businesses to bear the upfront cost and claim it back.

Australian Chamber of Commerce and Industry Chief Executive Peter Anderson says it is "excessive and unnecessary" for the Productivity Commission to expect employers would be able to find $450 million to finance these payments.

This would also see employers incur significant strain on their cash-flow levels and higher levels of payroll tax and other administrative costs, Anderson says..

"Employers are already concerned at being the tax collector for government on issues like the GST, and they will not respond well to being the paymaster of government social payments. There will no doubt be calls for government to fully compensate industry for the cost of becoming a government paymaster," he says.

The Australian Retailers Association agrees, with Executive Director Richard Evans warning any failure to provide appropriate reimbursement for small businesses "could be crippling for SME retailers".

"SME retailers are already suffering the collapse of consumer confidence from the effects of interest rate rises, petrol prices and marginal and inflationary pressures and should not have to wear any financial burden as a result of a tax-payer funded parental leave scheme. The Government needs to very clear about compensation and reimbursement for employers," Evans says.

Employers will also face significantly higher costs for replacement staff, according to Anderson, who points to Productivity Commission figures which conclude parents will be away from work for an extra nine weeks on average as back-up.

"ACCI and business support a government-funded scheme of 14 weeks provided that it is affordable to the budget and does not increase employer costs."

Anderson warns it is unlikely the proposed scheme would receive the widespread industry and small business support "proposals of this type need" if changes are not made.

Unions also want changes, with Australian Council of Trade Unions President Sharan Burrow criticising the Commission for not requiring employers to "top up" the government contribution so women have their income fully replaced while on leave.

She also wants an equivalent scheme to be made available to "stay at home" mothers, and recipients to be able to access some of their leave prior to the birth.

Anderson says employers are concerned at such claims and has called on the government to, at the very least, "ensure that its new industrial relations tribunal, Fair Work Australia, will not be able to arbitrate disputes on these matters".

There are estimated to be around 140,000 mothers and 225,000 fathers eligible under the proposed scheme.

At last count 45 percent of Australian women had access to paid parental leave through their employer, with that figure increasing to around 60 percent for full-time workers.

Mothers ineligible for paid parental leave would receive baby bonus and other social security benefits.

The 40,000 working women who fail to meet eligibility criteria would also be entitled to such welfare benefits.

Those working mothers receiving the weekly payments provided under the scheme would however waive their right to any of the above benefits and would also be required to pay tax on their earnings.

According to Productivity Commissioner Robert Fitzgerald, this is on account of the new scheme being a "workplace entitlement… not a welfare measure".

In reaction to the draft Prime Minister Kevin Rudd says it's time Australia "bit the bullet" on the issue.

"We’ve had 12 years of neglect on this... we intend to get on with the job and we will get the policy setting right once we work our way through the detail of this report," he says.

While the Prime Minister is open to ideas, the Business Council of Australia says the government should turn its attention to boosting workforce participation by widening the fringe benefits tax exemption for employer-provided childcare once the parental leave situation is fine-tuned.

The Commission is now seeking responses to its draft before submitting its final report to the Australian Government in late February 2009.

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