Taxpayers to fund 18 weeks of parental leave – but there’s a catch for SMEs

A new report says the Federal Government should scrap the $5000 baby bonus and pay new parents 18 weeks of parental leave each.

A new report says the Federal Government should scrap the $5000 baby bonus and pay new parents 18 weeks of parental leave each.

The “Paid Parental Leave” interim report from the Productivity Commission recommends a tax-payer funded plan to pay a primary care giver the minimum wage rate while on leave.

The report, commissioned by the Rudd Government earlier this year, also says businesses would act as “paymasters” by administering the payments and paying superannuation contributions for the period of leave taken.

Fathers would be able to use two weeks of taxpayer funded paternity leave, while they could use the 18-week leave if the mother returns to work early.

The report says the overall cost would amount to $1.3 billion per year, although once the scrapping of the baby bonus is taken into account the net cost would be $530 million.

“Such a plan would… increase retention rates for business, with reduced costs for training and recruitment,” the report says.

But Richard Evans, CEO of the Australian Retailers Association, says while the maternity scheme is good for society, it may disadvantage businesses.

“Overall, we’re very supportive of it, we’re fairly happy with the way they go about this and consider things. But their findings were a little bit disappointing – 18 weeks is a little bit generous.

“In particular, with their recommendation businesses become a paymaster, we’re concerned about the compliance costs in recovering funds from the Government.”

Under the proposed scheme, businesses would fund the parental leave payments and then be reimbursed by the Government.

“Retailers have smaller cashflows, and some retailers will be disadvantaged. The recovery of costs will become a competitive issue between those who can afford it and those who can’t.”

His concern is echoed by Australian Industry Group chief Heather Ridout, who says the Commission needs to consider how much the scheme will add to businesses costs.

“In delivering its model for paid maternity leave, the Productivity Commission has shown leadership on a most important public policy issue,” she says.

“However, the proposed scheme would entail some costs for employers. For example, through the payment of superannuation contributions while employees are absent on parental leave. The impact on these costs requires careful consideration.”

Women who have worked for an employer for more than 12 months, and more than 10 hours a week, will be eligible. The report also adds self-employed, contractors and casual employees can claim the payments.

Prime Minister Kevin Rudd, speaking before the report’s release, said the Government intends to deliver some sort of paid maternity scheme.

“So we are still some ways off resolving the final policy detail, but what I am saying to you loud and clear today is that this Australian Government believes the time has come to bite the bullet on this and we intend to do so,” Rudd said yesterday.

“For the Australian economy of the future we are going to have stay-at-home mums who we will be supporting with the baby bonus and also mums who are in the paid workforce who we will be supporting with paid maternity leave.”

Australia and the United States are the only two countries in the developed world which do not offer some form of paid maternity leave.

The final report is due in February.

Related stories:

• Support builds for Government-funded paid maternity leave, but employers still worried
• Pressure mounts for retailers to follow Woolworths on paid maternity leave