Single parents and fathers are now eligible for longer paid parental leave after the government proposed an “enhanced” 20-week scheme in the Federal Budget 2022.
Announced yesterday, the existing two-week Dad and Partner Pay scheme will be merged with the 18 weeks Paid Parental Leave (PPL) through a $346.1 million investment. Single parents will see two more weeks of paid leave while two-parent households can split the PPL according to their choice. It must be taken within two years of the child’s birth or adoption.
This fully flexible leave aims to help working parents make caring decisions that suit their specific circumstances and encourage fathers to take up parental leave.
“Families, not government, are best placed to decide what works for them,” Treasurer Josh Frydenberg noted in his budget announcement.
The enhanced scheme will also broaden the eligibility for PPL to include a household income threshold of $350,000 per year. It will allow over 2,000 more families to access PPL for the first time. Presently, women who earn up to $151,350 can access paid leave, but women earning more than the threshold are not entitled to this scheme, even if their partner has lesser or no income.
Notably, though, the proposed scheme still does not include superannuation payments in parental paid leave.
If elected, the government plans to implement these changes by 1 March 2023.
Dynamic Business asked four experts to comment on the implications of the enhanced scheme.
Professor Marian Baird AO, Professor of Gender and Employment Relations, University of Sydney Business School
What are your thoughts on the enhanced scheme?
“The Budget’s change to the Paid Parental Leave scheme risks entrenching gendered care divisions further, even while trying to be more flexible. The removal of the Dad and Partner Pay Scheme (DaPP) and folding that into the PPL scheme means there is now no way to ‘nudge’ men to take parental leave. It is well established that a reserved leave for fathers (as DaPP was) and paid at a higher rate is the best way to encourage fathers to share in parental leave.
“Further, as the payment is at the national minimum wage level and not at income replacement, and as there is already cost of living pressures on households, it is likely that new fathers will not share the parental leave with their partners because they will lose too much income.”
Many business groups and family advocates suggest six weeks of leave for each parent plus 12 weeks to be split, adding up to 24 weeks rather than 20 weeks. In your opinion, is 20 weeks an appropriate amount of time?
“Twenty weeks is minimal and at the lower end of the international spectrum. Approximately 50 per cent of working women have no employer-provided paid parental leave so they rely on the government scheme, and they are severely limited by just 20 weeks.”
There have been calls to add superannuation to parental leave payments, although this has not been implemented in the Budget. Should it have been?
“Yes, it should have been. The Productivity Commission recommended superannuation be included over ten years ago. It would signal a commitment to women’s financial security over their life course and would also directly improve their superannuation balances.”
Realistically, to what extent will this scheme affect the participation rate of women in the workforce moving forward?
“It may actually have a perverse effect on some women with lower incomes, meaning they will stay out of the workforce for slightly longer and their partners or fathers will reinforce their breadwinner role. For couples where the woman is the higher earner, it may be an incentive for their partners to take leave.”
Dr Parvinder Kler, Associate Professor, Department of Accounting, Finance, and Economics, Griffith University
What are your thoughts on the enhanced scheme?
“Simple answer is: ‘better than nothing.’ The integration makes the leave entitlements look more unified and anything that makes the PPL look more workable is welcome. Other countries, notably Sweden, have it as well, though the partner leave is on a ‘use it or lose it’ basis so cannot be taken up by the main child carer. The fact that it can be accessed by the main child carer does, however, raise the issue of them taking up the entire portion of the leave benefits, and if we want more partners to contribute more to childcare, this may well not be the answer (only time will tell).
“For the adults of a family unit, the key to paid leave entitlements is to maximise family income, and if the primary carer, almost certainly the female, is taking time off, then asking the (highly likely) male partner to share in some of that time on the minimum wage while she is unlikely to quickly return to full-time work (more likely part-time for a while) will not maximise family income.
”However, given the 2 weeks leave can now be used while accessing any employer granted paid parental leave means secondary carers who can access both paid leave provisions can do so. If this proportion is high, then taking this option up can maximise family income.”
Many business groups and family advocates suggest six weeks of leave for each parent plus 12 weeks to be split, adding up to 24 weeks rather than 20 weeks. In your opinion, is 20 weeks an appropriate amount of time?
“Again, any improvement is better than nothing, and 24 weeks is an improvement, though one would suggest, speaking to educational and child experts that it is better if at least one parent can be with their offspring for a substantially longer period of time than this.
“I much prefer a system where the mother and secondary carer get paid a proportion much closer to their usual wage. Tony Abbott had such an idea when PM, but he wanted it funded by a levy on large companies rather than out of the public purse. But if we want the private sector to willingly indulge in this, we should make it publicly funded. This suggestion, it seems to me, will lead to four of the six weeks given to the secondary carer be unused, assuming the secondary carer is the main income earner.”
There have been calls to add superannuation to parental leave payments, although this has not been implemented in the Budget. Should it have been?
“I cannot see any cons to doing this, and it defies belief that it is still excluded. People who take time off work for childrearing, again almost certainly a female will fall further behind in their retirement planning. Given compound interest, this small amount of super on the minimum wage will result in a larger pay-off retirement time, and take some pressure off publicly funded pension payments.
“This is a no brainer, particularly given the shortfall in retirements savings females have relative to males. Not to mention that they live longer, and thus would need more retirement savings.”
Realistically, to what extent will this scheme affect the participation rate of women in the workforce moving forward?
“Not at all or at best very marginally improve. It is about helping families while one adult contributor is out of the workforce childrearing temporarily; it is not about encouraging those out of the labour force to search for employment. For the latter to occur the scheme must be more closely aligned with greater provisions for childcare, which should also be readily available and be affordable.”
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Dr Evgenia Dechter, Senior Lecturer, School of Economics, UNSW Business School
What are your thoughts on the enhanced scheme?
“Recognising that both parents have similar responsibilities when carrying for children is an important step forward. It will take time for the social norms to change and for fathers to take more leave but providing such option should have a positive impact. It is also great to hear that single parents will receive equal treatment.”
Many business groups and family advocates suggest six weeks of leave for each parent plus 12 weeks to be split, adding up to 24 weeks rather than 20 weeks. In your opinion, is 20 weeks an appropriate amount of time?
“The proposed weeks’ allocation (6+6+12) may work for some families but does not work for others. It might be easier to change social norms by imposing a policy that explicitly prescribes a more equal division of leave. But by giving households the choice we will still achieve a more equal allocation although the change might be slower.
“In terms of the number of weeks, 20 weeks ranks Australia relatively high in terms of parental leave. But childcare is not limited to the first few months, and it is important to balance the investment through the various stages of care and education.”
There have been calls to add superannuation to parental leave payments, although this has not been implemented in the Budget. Should it have been?
“Adding superannuation basically implies higher parental leave payments. It should be examined whether this additional payment to families is better than providing other types of benefits, such as childcare subsidies or investment in education.”
Realistically, to what extent will this scheme affect the participation rate of women in the workforce moving forward?
“While there is no actual increase in the number of weeks of parental leave; the option of more equal allocation of weeks will promote a more equal split of labour force interruptions. Labour force interruptions and lower work experience are the leading reasons for gender wage gap and participation gap. Reducing the difference in work interruptions should have a positive effect on women workforce participation.”
Professor Susan Harris-Rimmer, Director of Griffith University’s Policy Innovation Hub and co-convenor of Griffith Gender Equality Research Network
What are your thoughts on the enhanced scheme?
“This is a good move; dads deserve more than two weeks of parental leave. In 2020-21, fewer than 90,000 dads and partners took their two weeks of entitled leave, accounting for just 30 per cent of births.
“However, unlike Nordic schemes, there is no ‘use it or lose it’ incentive built into the new scheme, superannuation is not paid on PPL, and the overall 20 weeks is not long enough to split. So, there will still be pressure on families for the mother to take the bulk of the leave. This measure needs to be carefully evaluated after 12 months.
“It is also welcome news that the government is also raising the household income threshold to $350,000. This should be a universal measure.”
In your opinion, is 20 weeks an appropriate amount of time? How does it compare to other countries?
“In Sweden, 60 days’ leave is allocated solely to the father on a use-it-or-lose-it basis. If the father didn’t take a month off work, then the couple as a whole would lose a month’s paid leave. These are the kind of reforms that really encourage dads to bond with their babies. Swedish couples get around 16 months (480 days) of paid parental leave when their child is born. That is good for the child, the parents, the community, and ultimately, productivity.”
There have been calls to add superannuation to parental leave payments, although this has not been implemented in the Budget. Should it have been?
“It certainly should have been. Again, the evidence has been clear for years now. Unless the Paid Parental Leave Scheme attracts the Superannuation Guarantee, the attempts to address the gender pay gap are exceptionally difficult.”
Realistically, to what extent will this scheme affect the participation rate of women in the workforce moving forward?
“It will help dads and partners who were already inclined towards taking time with their newborn or adopted child. I can see little chance of this policy change moving the needle on female labour participation unless the super issue is resolved.”
