Business groups reject parental leave proposal

Economists join business in opposition to proposed paid parental leave scheme for small operators

By Queensland Business Review

Economists are joining business in its opposition to the Productivity Commission’s proposed paid parental leave scheme, arguing it is anti-employment and anti-business.

A key plank of the recommendations, released last week, is 18 weeks paid maternity leave. Employers will pay up to 9 percent superannuation for the period as well as acting as paymasters for the scheme, with the Government to reimburse wages.

The draft estimates employers will pay no more than 3 percent of the annual wage of an employer.

The net cost of the scheme for taxpayers is expected to be $450 million, while business well pay $74 million superannuation annually.

Industry groups argue businesses face an "unaffordable" cost under the proposal.

Commerce Queensland President Beatrice Booth says the logistics of acting as paymaster on top of the superannuation cost – estimated at $75 million annually - would burden employers with unnecessary administrative and real dollar costs.

Labour-reliant industries such as retail and hospitality will be hardest hit, particularly as both employ more women than any other sector.

With Kevin Rudd and a number of his ministers indicating preliminary favour for the Productivity Commission model, KPMG middle marker advisory partner Bill Noye says it is important the Government provides SMEs with some form of compromise if it wants such a "necessary" form of social legislation to succeed.

"This is a way of the future. With more and more females in the workforce, business needs to work this issue through," Noye says.

"It’s just that it’s far too expensive.

"Small business is the administrator of every known tax to man they absolutely need funding assistance from the government.

"If we’re to really get some equality in the workforce this is a necessary step."

But unions say businesses are overplaying the issue, claiming only 1 to 2 percent of women will be out of the workforce on parental leave at any given time.

According to Griffith University Economics Professor Ross Guest, the recommendations are ultimately a higher-valued baby bonus that will increase the rate at which tax dollars are "churned" through the welfare system.

Tax churning has reached a point in Australia where an estimated 40 percent of families get more from the Federal Government in handouts than they pay in tax, Guess says.

"They’re getting more, or at least as much, in handouts as they’re paying in tax," Guess says.

So bad has it become that Guess says the economy is missing out on 20 cents for every $1 of tax spent by the Government.

The result, he says, will be a reduction in employment as businesses are slapped with a disincentive to hire more workers and recipients have less motivation to save and invest.

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