Chapter 2Experiences and impacts of the Commonwealth Paid Parental Leave Scheme
Overview
2.1The committee heard overwhelming support for the Commonwealth Paid Parental Leave (PPL) scheme, as well as general acknowledgement of the role that PPL has played in maintaining and increasing women's workforce participation, including in small business settings.
2.2However, there were mixed views about the role small business employers should play in administering Parental Leave Pay (PLP) payments. Thisappeared to reflect:
conflicting opinions about the role that employer-administered payments play in maintaining workplace connections during periods of parental leave; and
differing views about the extent and fairness of the administrative burden on small business of making PPL payments.
2.3The remainder of this chapter explores these issues in greater detail. However, it should be noted that the inquiry did not attract any submissions from employees who have received PPL payments. Therefore, apart from references made to parents' views by other inquiry participants, the report does not directly address employee perspectives on the operation of the Commonwealth PPL scheme.
Support for the Commonwealth PPL scheme and its impact on women's workforce participation
2.4Multiple participants, including the Tasmanian Government, Capital Chemist, the Council of Small Business Organisations Australia (COSBOA), and the Australian Chamber of Commerce and Industry (ACCI), expressed support for the Commonwealth PPL scheme. For example, Mr Scott Harris of the Pharmacy Guild of Australia (Pharmacy Guild) stated that 'we like the scheme. From the guild's point of view the scheme is very beneficial'. Mr Kent Johns of the National Electrical and Communications Association (NECA) went further and described the broad support for the PPL policy across its member organisations:
I think the policy itself is an excellent policy. It's a policy that our members fully support. It retains our workers and our apprentices, and it promotes the industry well.
2.5Participants also highlighted the role that the Commonwealth PPL scheme has played in increasing women's workforce participation. For example, Impact Economics and Policy (Impact Economics) pointed to the results of its research which 'highlighted the pivotal role … paid parental leave has played in increasing labour force participation of women with children aged 0–4', with the Commonwealth PPL scheme estimated to have increased the number of women in the workforce by 74 500 in 2021–22.
2.6The importance of PPL to women's participation in small business settings was also acknowledged. Dr Angela Jackson of Impact Economics described the difference the Commonwealth PPL scheme had made to the retention of women in small business employment:
Before the scheme was introduced, only 10 per cent of women in small business had access to paid leave. After, it's become universal for women who have employment in small business. We can see amongst those women an increase in retention of around six per cent.
2.7In addition to emphasising the 'strong correlation' between PPL and workforce retention, COSBOA also described PLP as 'pivotal' to increasing women's participation in 'micro markets and small businesses as entrepreneurs, owners and employees'.[6]
2.8To this end, COSBOA recommended additional investment in the Commonwealth PPL scheme to 'encourage female entrepreneurship and enhance women's ability to establish and/or seek employment within the small business space'.[7]
2.9However, Mr Daniel Hodges from the Motor Trades Association of Australia (MTAA) gave evidence that the employer role in administering the Commonwealth PPL payments was contrary to the aims of the program:
... rather than acting as an incentive to boost female workforce participation, the requirement to act as administrative intermediary can be a significant disincentive for smaller businesses.
Maintaining workplace connections
2.10The link between ongoing workplace connection and parents' workforce participation was noted by participants. For example, Chief Executive Women (CEW) pointed to a 'wealth of research' showing the importance of ongoing workplace connections to the 'long-term economic security and workforce participation of new parents, in particular women'.[9]
2.11A similar point was made by Impact Economics, which pointed to research showing that PPL policies that maintain the employer-employee connection result in women being more likely to return to work after having children.[10]
2.12However, there were conflicting views on whether employer-administered PPL payments were a significant factor in maintaining these connections.
The contribution of employer-administered PPL payments to maintaining workplace connections
2.13A number of participants, including The Parenthood and the Australian Council of Trade Unions (ACTU), noted that employer-administrated payments were a deliberate design feature of the Commonwealth PPL scheme, aimed at maintaining an ongoing connection between employers and employees during periods of parental leave.
2.14For some participants, this design feature was critical to maintaining workplace connections. For instance, CEW argued that 'employer administration of the Government PPL scheme is critical to ensure parents continued connection to their employer and the workforce'.[12] The CEW also cited a study from Southern California, which found that the timing of an employee's return to work was 'significantly impacted' by access to employer administered parental leave and that 'employers play a pivotal role in supporting a feeling of job security and economic empowerment during and after maternity leave'.[13]
2.15At the individual level, MsJessica Rudd, Chief Executive Officer of The Parenthood, described the importance of employer-administered PPL for new parents:
… you go from being an employed person with a lanyard and a routine to suddenly having this experience at home, usually as a mum, on the front line, of caring for this small person ...
It's important not to minimise the impact of this experience ... Continued connection to the employer through employer administered PPL means you feel like you're still there at work, and you have that constant link, an umbilical link, between you and your employer.
2.16According to the Department of Social Services, the Department of Employment and Workplace Relations, and Services Australia (departments), the effectiveness of the scheme's design appeared to be supported by the 2010–2014 evaluation, which found that PPL encouraged women to return to the same employer:
This suggests a strengthened link with the employer while on leave and that PPL increased mothers' attachment to their jobs because the paid leave was provided to them through their employers.[15]
2.17Further, the ACTU contended that without the ongoing connection provided by remaining on the payroll, it is more likely that employers could forget about employees on leave or might not comply with their obligations towards those employees:
This makes it more likely that an employer may not consult them about any changes to their role, and may take steps to permanently replace them, abolish their role, or otherwise make changes that will adversely impact that employee. This is even more likely to be the case in small businesses which may not have dedicated human resources staff or experience.[16]
2.18However, claims about the importance of employer payments in maintaining this connection were disputed by a range of employers, who argued that administering PPL payments did not help them in this regard.
2.19For example, the MTAA stated that 81.1per cent of respondents to its member survey felt that delivering Commonwealth PLP via employers did not play an important role in maintaining strong employer-employee relationships. Likewise, the results of an ACCI member survey found that 86.67 per cent of small businesses that had paid PLP did not feel delivery of the payment was important to maintaining a strong relationship with their employees while they were on parental leave.
2.20In addition, Mr Tim Keeffe of Capital Chemist pointed out that an employee's right to return to their position was not affected by whether or not their employer was making PPL payments:
… they have that right to return to their position … Whether or not the employer is administering the payment or it's coming from Services Australia or they're taking unpaid parental leave, they still have that continuation of employment when they're ready to return to work.
2.21Mr Keeffe also stressed that good relationships were 'maintained by good people not necessarily a payment that's provided by whoever's administering their payroll':
… that comes down to our managers and business owners maintaining that contact and being good bosses, before the fact of—a payroll payment doesn't really change it.
2.22A similar view was put forward by Mrs Emmalene Mahar of the Australian Hairdressing Council, who emphasised her belief that 'it's best practice to have a much deeper connection with your employees than just simply administering the payment'. Likewise, Ms Reika Roberts of the Aesthetic Beauty Industry Council spoke of it being 'a sad day' if making a PPL payment was the only connection an employer had with their employee while they were on leave:
From our perspective in the beauty industry, I don't feel that having employers pay the PPL would benefit the communication and the strengthening of ties between the two parties. I think it's a lot deeper than that and there's a lot more to it than that.
2.23The multidimensional nature of employer-employee relationships was also described by Ms Kate Freeman of The Healthy Eating Clinic:
I think that women engaging with their employer and the workforce is multifaceted. It has so many factors at play. I think it is quite an oversimplification for PPL to come from your employer rather than the government. … We have a number of policies around staff taking extended leave that keeps them still in the loop and connected with the business as a whole. That's completely distinct from that payment coming from me, so I don't agree that that keeps women linked.
2.24Mr Matthew Addison of COSBOA concurred and pointed out that 'the connection factor breaks anyway if it is just based on a payment going through' given that paid parental leave is 'only a portion of the leave that a parent or parents may take'.
2.25To this end, Mr Scott Harris of the Pharmacy Guild also highlighted the role of the keeping in touch days play in helping to maintain connections between employers and employee on parental leave.
2.26Further, some participants noted that, rather than enhancing employer‑employee connections, employer-administrated payments can have the opposite effect. For instance, the ACCI observed that the employer role 'risked imposing negative impacts on their relationships with their employees on leave',[26] while the MTAA suggested that the employer role could 'fracture' the relationship due to the tendency for employees to blame employers when things go wrong.[27] Mr Keeffe concurred and explained that:
In an instance where things can go not quite to plan … it can increase frustration and angst between the employer and employee, as [the employer] will centre the burden of their frustrations when it's more of an administrative process from Services Australia that's caused that issue.
2.27Mrs Mahar agreed, saying that 'issues and delays with Commonwealth or myGov administering the payment can cause frustrations for the employee, which they may show towards the employer'.
2.28ACCI shared responses from its members regarding the impact of small businesses' role in administering the payments on employer-employee relations, including:
"If anything, it can cause tension with employees chasing us for money. It's much better to have us removed from the payments completely to remove any chance of misunderstanding."
"Staff get very frustrated at the delay/timing of receiving the payment and they blame the business even though we haven't received the funds from the government."
"It does force you to contact them to work out the complex system of payments, approvals, forms etc. But this isn't a valuable conversation for the business to have with the individual. Rather this is confusing and often frustrating for the individual who doesn't need this added administrative problem when already facing challenges of a newborn child."
"If there is already a strong relationship between employee and employer, paying their parental leave will not make this any stronger, it would more than likely cause the employer frustration at having to administer a government initiative."
The administrative burden of the Commonwealth PPL scheme for small business employers
2.29The committee heard competing views about the extent and fairness of the administrative burden on small business of making PPL payments.
2.30For example, the United Workers' Union expressed the view that employers 'ought to have a role in the system for the benefits they receive'. A similar view was put forward by the ACTU, which stated that the benefits for employers—such as an ongoing connection with employees on parental leave—'outweighs any burden that may be associated with the administering of PPL payments by employers'.
2.31Further, The Parenthood cited research from San Francisco, which found that 'the impact of implementing paid parental leave was similar across smaller and larger businesses; smaller employers did not report greater challenges nor more negative impacts than larger counterparts'. It also noted research showing that 'parental leave take-up is not associated with any measurable effects on firm output, labour costs, profitability, or survival'.[33]
2.32However, it was not clear that this research is comparable to the Australian context. According to the research cited, San Francisco's Paid Parental Leave Ordinance 'is not financed by payroll taxes but instead is an unfunded mandate, with each employer required to self-finance the supplemental compensation for their own leave‑taking employees'.
2.33As such, the San Francisco scheme is a completely different scheme from the one examined in this inquiry—namely, the administration by employers of a government‑funded payment. It is unsurprising, then, that the San Francisco research found that 'smaller employers did not report greater challenges nor more negative impacts than larger counterparts', as they were not receiving and passing on a government payment and were not required to deal with any government agency in making the payments. Further, this policy operates only at the level of San Francisco County and provides for only six weeks of leave, whereas Australia's policy is nationwide and provides for twenty weeks of leave.
2.34In relation to the Australian PPL scheme, Mr Matt Flavel, Deputy Secretary with the Department of Social Services (DSS) pointed out that a 'carve out' already existed for situations where employers might face 'a higher-than-average burden'.
2.35In addition, the departments stated that 'neither the Department of Social Services, nor Services Australia, have received significant feedback surrounding the employer role under the current scheme'.[36]
2.36This appeared to be reflected in the 2010–2014 evaluation of the Commonwealth PPL scheme which found, based on survey data from public sector employers and private sector organisations including small businesses (2–19 employees), medium-sized businesses (20–199 employees) and large businesses (200+ employees), that:
75 per cent of employers agreed or strongly agreed it was easy to register for the PPL scheme;
81 per cent agreed or strongly agreed that organising payments was easy;
81 per cent agreed or strongly agreed with the statement that the PPL scheme has been easy to implement in their organisation.[37]
2.37The evaluation also found that the 'costs to employers of implementing PPL have generally been very minimal, both in terms of time and money'. However,the evaluation did find that 'some employers reported experiencing some difficulties in implementing and administering the scheme'.[38]
2.38Indeed, according to the 2010–2014 evaluation, small businesses (private sector employers with 2–19 employees) reported that administering PPL payments to at least one employee required 15.1 staff hours on average, with a median time of 5 hours. Doing so resulted in an average dollar cost of $1930 with a median cost of $300.
2.39One small private sector employer stated that 'It was just a real headache to set up. I feel that it was actually a really negative thing for both our business and on the life of that young girl that took advantage of it'.
2.40Another private sector employer indicated the uniqueness of a small business' experience with the scheme compared to larger businesses:
It's putting this burden on a business. Now, you know, a big business, they just have to set up a system, I suppose, and it's all automatically done by pressing a button. But you know, we're a small business, so there's learning about it, which we all have to do anyway, but it would have been so much easier if they had just said, look, this is like a social security payment that we're paying to the recipient.
2.41However, evidence provided to the committee also highlighted the age of the PPL evaluation—which was conducted between 2010 and 2014—and the lack of current data and research relating to the impact of PPL administration on small businesses, current levels of discrimination against parents in the workplace, as well as the role of employer-administered PPL payments in maintaining workplace connections. The evidence also suggested limitations on DSS' ability to disaggregate its PPL-related administrative data by business size.
2.42To this end, the departments noted the Australian Government's commitment to an evaluation of the recent changes to the PPL scheme, which will 'provide an opportunity to further examine the impacts of the employer role on businesses and their employees'.[44] However, Mr Flavel told the committee that while 'a good evaluation would obviously look at impacts on those who use it' it would not be 'exclusively about the impact on business or employers'.
Employer experiences of administering PPL payments
2.43While many business and industry participants were supportive of the Commonwealth PPL scheme,[46] the majority also raised concerns about the administrative burden on small businesses.[47] For example, Ms Irma Beganovic of NECA contended that small businesses faced challenges that medium and large businesses did not:
… small business owners do not have dedicated human resources or finance staff. This places the onus on these small business owners, who, in addition to often having to work in the business, also have to work on the business after hours.
2.44Likewise, the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) agreed and argued that the cost of administering the PPL scheme was 'magnified' for small businesses 'as they do not have the existing organisational capability or internal expertise to implement complex processes'.[49] The Australian Retailers Association (ARA) agreed and indicated that this lack of capacity leaves small businesses particularly exposed to administrative burdens associated with payroll and compliance with leave entitlements.[50]
2.45While supportive of retaining employer-paid PPL, Dr Jackson estimated that employers 'might lose four to six hours … with that administrative cost of signing up to Centrelink'.
2.46According to Mr Addison, meeting this administrative burden comes at the expense of either a small business employer's personal life or their business' productivity:
Small-business owners are doing their administration after hours. … Allthese extra hours, this compliance burden that you allude to—where do those five hours come from? It comes from the weekend. It comes from the evening. It hurts their personal lives, or, if they're trying to do it during their work day, it means there is a loss of productivity.
2.47The extent of the administrative burden on small business was captured by at least two participants via surveys of their member organisations. For example, a survey of ACCI members found that 90.7 per cent of small businesses who administered PPL payments reported an increased administrative burden and an increase to their payroll processing time. Similarly, a survey of MTAA members found that of those respondents who had passed on the PPL payment to employees:
90.8 per cent said it added to payroll processing time;
91.8 per cent said it had increased the administrative burden on the business; and
32.1 per cent said it created cashflow problems.
2.48This was reflected in evidence from Ms Freeman, who observed that making PPL payments for one employee 'quadrupled' her payroll processing time each fortnight. Ms Freeman also spoke of added difficulties caused by the differences in timing between her payroll cycle and when payments are made by Services Australia:
The payment cycles didn't match my fortnightly payment cycles. By the time they actually did pay me the money, it was late. There was a lot of calculating to ensure that my employee was paid correctly. They pay on this weird daily rate, but then their cut-offs don't align with my pay cut-offs. So it's a superfiddly process for something that could be simpler.
2.49Mr Keeffe stated that—even for businesses such as Capital Chemist which has four dedicated payroll staff and significant experience administering PPL payments—the additional workload amounted to just under two hours per employee. According to Mr Keeffe, this resulted in 'nearly one full-time-equivalent week administering the Paid Parental Leave scheme to our employees, with no renumeration or fee for service from the government'.
2.50For Mrs Mahar, some of the additional work arose simply from having three parties involved in PPL payroll transactions, any of whom could cause delays to the process:
I do work with a payroll team now thankfully. But that still involves quite a lot of input from me, and, when it comes to a paid parental leave payment, it would involve me personally making contact with Services Australia and then probably needing to make contact with the employee, give them an update and potentially get them to contact Services Australia as well.
2.51Asked about the consequences of the administrative burden of making PPL payments, Mrs Mahar stated that 'you just have to deal with it and find the time in your week, probably at the expense of something else'. Ms Roberts interjected 'mental health', to which Mrs Mahar responded 'spending time with my children'.
2.52Mrs Mahar added 'it's also quite a stressful thing to make sure that you know that you actually have done it correctly and that you can put your hand on your heart and say "I know that I've done this correctly"'.
Challenges transacting with Services Australia
2.53The committee heard that difficulties and delays experienced while navigating the online PPL process with Services Australia represented a significant part of the administrative burden on small businesses. For example, according to Capital Chemist and the MTAA, the administrative burden on small businesses arose from:
the time required to log onto the Business Hub, download documentation separately for each business/employee, verify that funds have been received from Services Australia, then manually process the pay run;[61]
the time required to arrange payroll staff access to businesses in Provider Digital Access (PRODA) and to resolve issues with Services Australia;[62] and
the time required to access and assess the necessary information, provide required direction to payroll staff, make any necessary changes to payroll software (including through obtaining professional assistance), and then conduct a reconciliation exercise at the end of the process.[63]
2.54Ms Roberts told the committee of the difficulties one of her members had experienced, in particular the long wait times when seeking assistance by phone:
She spent hours on the phone. Sometimes when someone goes on maternity leave you're looking at six to nine months out, and not all business owners can remember their passwords or have password accounts that have everything. One member spent a lot of time on the phone with Centrelink, being locked out of the portal and having to jump through hoops to get set up again with new passwords. She said it takes hours.
2.55Figures provided by Mr Tony Piazza, General Manager, Services Australia, indicated that in 2022–23 it had taken, on average, around 30 minutes for a business to receive assistance with PPL payments via the Services Australia employer support line. This involved an average wait time of just under 12 minutes and an average call handling time of just over 18 minutes. However,MrPiazza also stated that the percentage of calls answered within 15 minutes was only 68.7 per cent, with approximately one fifth of calls (4890) being abandoned.
2.56Difficulties interacting with PRODA appeared to be a recurring theme in evidence provided to the committee. For example, Ms Freeman described the PRODA portal as 'painful', while Ms Roberts observed that it was 'quite complicated to navigate'.
2.57Mr Keeffe also highlighted the 'significant complexity surrounding PRODA and the Business Hub and accessing business administration services through that portal'. Mr Keeffe also noted that changes to employers' business structures could exacerbate these challenges. To this end, he described how it had recently taken an employer 'four hours, in conjunction with increasingly senior Services Australian staff, to accurately identify the business and the owners within the PPL system to enable one payment to commence'.
2.58As well as difficulties with PRODA, the MTAA referred to anecdotal reports of 'underpayments, overpayments, delays, record keeping and payroll issues' as well as difficulties for smaller businesses whose payroll systems do not easily allow payments to be made to employees without automatic accrual of paid leave entitlements.[69] The MTAA, Pharmacy Guild and COSBOA also referred to the 2010–2014 evaluation of the Commonwealth PPL scheme which found that employees were more likely to receive incorrect payments when those payments were made by an employer (as opposed to Services Australia).[70]
2.59As an example, Mr Daniel Hodges of the MTAA conveyed the experience of an employer who was 'directed by Services Australia to recover an overpayment of approximately $5000 from a by-then former employee'. This followed a change in the employee's circumstances, which led to PPL payments being made by both the employer and Services Australia for approximately six weeks. While the employee had notified Services Australia of the change, neither the employee nor Services Australia had alerted the employer:
As neither the employee, nor Services Australia, notified the employer of this change, the employer continued to automatically make payment through their payroll system ... The employee was asked to rectify the overpayment … and subsequently resigned without doing so. The response from Services Australia was to advise the small business employer to commence its own debt recovery action.
The merits and costs of an opt-in or opt-out model
2.60The committee heard mixed views about introducing an opt-in or opt‑out model for small business employers, with some participants arguing strongly against such a move. For example, Impact Economics cautioned that:
Any move to exempt small businesses from the current arrangements would weaken the relationship between employers and workers on leave, and undermine the success of paid maternity leave in lifting female participation.[73]
2.61Similarly, the ACTU contended that an opt in/out model would 'likely sever the important ongoing employment connection', which the experience of its affiliates suggested was 'key to maintaining the employment relationship'.[74]
2.62Further, participants such as Ms Pauline Vamos of CEW suggested that an opt‑in/out model would transfer the entire administrative burden onto parents, which could 'lead to a reduced uptake of PPL and impact the ability of small businesses to attract and retain female employees who really value this benefit'.
2.63Ms Rudd echoed the need for continued workplace connections and reflected that 'the last thing that we want to do' is require new parents to go 'back to Centrelink for yet another thing when, ultimately, being able to go to the employer makes it so much easier for them'.
2.64A similar view was expressed by Ms Sasha Peldova-McClelland of the ACTU, who told the committee that it was harder for workers to access support from Services Australia than from their employer:
It is a lot more difficult to contact Services Australia to rectify any issues, and it takes a lot more time and navigation of a complex system than simply being able to raise it with their employer—someone they know. If there were to be an opt-in or opt-out model, this would place further demands on Services Australia, which would be to the detriment of workers accessing parental leave.
2.65However, in response, Mr Addison argued that the burden on parents will remain the same, regardless of who makes the payment:
There seems to be a concept that it can all be administered by the employer. That's just not the way the system is set up or works. The employee must have an account with Services Australia. They must register the pending birth with Services Australia. So that burden already exists on the individuals, and swapping to Services Australia making the payments will not actually increase the burden on the individuals that is already there.
2.66This point was reiterated by the MTAA, which referred to a 2021 report by the Grattan Institute which found that the involvement of employers added unnecessary complexity to the PPL scheme and that 'as applicants must still apply through Centrelink, the benefits involving the employer in a paymaster role appear minimal, and the drawback for employers and applicants are significant'.
2.67Indeed, Ms Leigh Allison from Services Australia gave evidence that there are no additional processes an employee has to go through when applying to receive the Commonwealth PPL payments if they receive them via their employer rather than directly from Services Australia. Asked if, when receiving payments directly from Services Australia, there are any additional steps the employee needs to take following the set-up process, Ms Allison said there were not.
2.68Evidence from employers and industry suggested high levels of support for an opt-in or opt-out model for small businesses. For example, through a feedback process undertaken for this inquiry, NECA found that its members would prefer Services Australia to pay PPL directly to staff members. This position was supported by the results of an MTAA member survey, which found that 96.1percent of respondents would prefer Services Australia to pay PLP directly to employees.
2.69Likewise, responses to ACCI's member survey showed that 'small businesses overwhelming[ly] believe that paid parental leave should be administered by Services Australia', with this view more prevalent among small businesses that have made PLP payments previously (97.33 per cent versus 88.02 per cent). Inaddition, 73 per cent of small business survey respondents expressed a preference for an opt-in, rather than opt-out, model.[84]
2.70The opt-in model received further support from the ARA, Capital Chemist and the Pharmacy Guild, which argued for small businesses to be given the opportunity to opt-in to a 'government-funded PLP scheme, where Services Australia provides the base payment', (and employers are able to supplement the payment if desired). According to the Pharmacy Guild, administration of the PLP by Services Australia would improve the accuracy of payments by removing inadvertent errors caused by the administrative or financial burden on small businesses.[87]
2.71NECA also supported an opt-in/out model, stating that small businesses 'do not have the resources nor experience' to administer PLP payments. NECA argued that an opt-in/out arrangement would 'allow small business to spend more time on growing their business, while it makes no difference to the employee whatsoever'.[88]
2.72Further, Mr Hodges noted that an opt-in model would reflect a 'tiered approach to regulation' for small business, which was an approach supported by research and one that recognised the 'significantly greater impost on smaller sized businesses in trying to deal with regulation'. The ASBFEO made a similar point and submitted that obligations that were 'streamlined and adequately accommodate[d] the unique characteristics of small and family businesses' were the 'key to ameliorating a disproportionate burden on the sector'.
2.73To this end, the ASBFEO advocated for an opt-in model for small businesses (defined as businesses with fewer than 20 employees), which would reduce the regulatory burden on small business while still allowing businesses to administer PLP payments, if desired.[91]
2.74Indeed, Ms Roberts and Mrs Mahar felt that being able to opt in or out was 'a perfect solution' that 'really strike[s] the right balance'. For example, MrsMahar stated she would 'happily get involved if there was a need or circumstances required it' but believed that most people she worked with would opt to have PLP paid directly by Services Australia so they 'have that autonomy and they know exactly where it's at, and, like I say, it's just two people in the communication process rather than three'.
2.75Similarly, Ms Freeman stated that while she would '100 per cent' help an employee who was struggling with accessing the PPL scheme, she would welcome an option that helped to 'remove the burden from businesses of my size' as administering PPL payments is currently 'just one more thing that we have to do that takes us away from generating revenue for our businesses'.
2.76Ms Roberts agreed and argued that in light of reports that 20 per cent of small business owners are suffering from mental health issues, 'anything we can do to decrease the administrative burden would be very helpful'.
2.77Ms Freeman also reflected that an opt-in system would prevent employers being forced to make PPL payments, even in cases where employees would prefer to receive the payment directly from Services Australia:
… when we did it with my first employee we looked at it together. ... Therewas the option that it could be paid straight to her or to me, and we both looked at each other and thought, 'That's silly that you would be the middleman. Why don't we just get it coming straight to me?' and we opted for that. It was then that I received the letter saying that I had to do it and I didn't really have a choice.
2.78This aligned with evidence from Mr Kent Johns of NECA, who stressed that an opt-in model would afford small businesses the opportunity to determine 'what is best for them and their employees, who they know intimately'.
Better support for small businesses
2.79While there were diverging views on the introduction of an opt-in/out model for small business, multiple participants suggested that small businesses should be better supported to fulfil their PPL obligations.
2.80For example, rather than changing who administers PLP payments, both the ACTU and CEW proposed that greater assistance be provided for small businesses to help them perform this function.[99] Nevertheless, MsPeldova‑McClelland argued that any burden related to PPL 'should be tackled in a way that doesn't jeopardise that ongoing employment connection and relationship'.
2.81Likewise, Ms Rudd indicated that The Parenthood would 'support a system that gives small businesses support as they adjust to administering PPL,' including adequately resourcing Services Australia and providing training to small businesses. However, Ms Rudd also contended that it would be better to 'go back to the drawing room' to have a look at how to better support business with all the tasks they struggle with—rather than removing one single aspect of the administrative burden.
2.82For Mr Jason Robertson of the ARA, the need for support remained, regardless of the path selected:
… it's critical that small businesses receive adequate support to help them understand and navigate these changes. In particular we need to balance the reasonable expectation of employees against the needs of employers, who require adequate notice to support their workforce planning needs. We need clear, plain English guidance that's easy to implement, particularly for small businesses.
2.83To this end, Mr Robertson described some of the existing online resources as 'good' but also called for the development of sector-specific guidance that could be delivered through a variety of mediums.
2.84Similarly, Mrs Mahar suggested involving small business in the development of more user-friendly resources, as 'currently it is very confusing and the government language used is not something many business owners would be able to decipher'. Mrs Mahar also suggested maximum wait times for Services Australia phone assistance, or the introduction of a booking system to allow small businesses to schedule calls with Services Australia.
2.85Further, COSBOA recommended continued engagement by government with small business representative bodies and associations. COSBOA also encouraged 'adoption of well-researched, best practice policies that adequately address the needs of small business' through engagement with industry associations and peak bodies, consultation via industrial relations and PPL roundtables, as well as 'research into the efficacy and impacts of PPL policy'.[107]
Committee view
2.86The committee would like to thank the organisations and individuals who participated in this inquiry—either by providing written submissions, appearing at the committee's public hearing, or both.
2.87In particular, the committee would like to extend its thanks to the small business owners who made time to appear at the committee's public hearing and provide their insights into the administration of the Commonwealth Paid Parental Leave (PPL) scheme and its impact on small business. The committee values their contributions greatly—it recognises that most small business operators are time poor and any time away from working in, or on, their businesses can impact revenue and productivity.
2.88At the outset, the committee would like to recognise the overwhelming support expressed for the Commonwealth PPL scheme. Almost all participants acknowledged the importance of the scheme and the role it has played in maintaining and increasing women's workforce participation, including in small business settings.
2.89However, while there was consensus about the importance of the Commonwealth PPL scheme, views about its administration were divided. While some participants argued for a continuation of current arrangements, employers and industry associations advocated for small businesses to be exempted from, or at least be given a choice about, administering PPL payments.
2.90Central to the arguments in support of current arrangements was the link between ongoing workplace connections and parents' workforce participation. The committee heard that requiring employers to administer Commonwealth PPL payments was expected to make it more likely that an employee will return to work following a period of parental leave. Proponents for the current arrangements raised concerns that removing the requirement for small business employers to make PPL payment to their employees would sever this connection.
2.91Based on evidence provide to the committee, it is clear that PPL is important to maintaining workplace connections by providing financial support to employees during periods of parental leave. This can be particularly important where an employer is unable to fund paid parental leave themselves.
2.92However, in the committee's view, there is far less evidence about whether those connections are dependent on who makes the PPL payment—particularly in a small business environment. Indeed, the committee heard repeatedly from business owners that connection during periods of parental leave comes down to direct communication with an employee—not a name on a payslip. Someparticipants also pointed to the role of keeping in touch days in helping employees to remain connected to their job.
2.93On balance, therefore, the committee is not convinced that having employers make PPL payments (as opposed to Services Australia) is critical to maintaining workplace connections for small businesses.
2.94There were also differing views toward the administrative burden arising from administration of PPL payments. While some participants argued that the benefits of the scheme outweighed the burden of its administration, employers and industry bodies pointed to the particular challenges faced by small businesses—most of whom do not have dedicated human resources or payroll teams. At least one small business owner spoke of her payroll time 'quadrupling' as a result of having to make the payment to one employee. This included time dealing with complications caused by the disconnect between Services Australia's payment cycle and her business' payment cycle.
2.95Indeed, the committee heard that that difficulties and delays interacting with Services Australia accounted for a significant part of the burden on small businesses. This included the perceived complexity of interacting with the Business Hub and Provider Digital Access (PRODA), as well as potentially long wait times when seeking assistance by phone. In addition, the committee heard reports of issues with underpayments, overpayments and delays in receiving funds from Services Australia.
2.96As a result, the committee heard significant support from employers and industry for an opt-in PPL administration model for small businesses. Underthis model, Services Australia would be responsible for making PPL payments to all small business employees, unless an employer specifically opted-in to administer the payments themselves.
2.97While some participants raised concerns that an opt-in model for small business will simply transfer the administrative burden to parents, the committee understands that parents already need to engage with Services Australia to receive PPL payments. In this sense, the committee is of the view that moving to an opt-in model for small businesses would not change the existing onus on parents but would help to alleviate the burden on small business. In addition, the committee heard that the current arrangements are preventing some parents from receiving payment directly from Services Australia, even where this is their preferred option.
2.98Accordingly, the committee believes small businesses should be given a choice about administering PPL payments and recommends that the Paid Parental Leave Act 2010 be amended to give effect to an opt-in arrangement for small business.
2.99The committee recommends that the Paid Parental Leave Act 2010 be amended to require the Secretary, as defined by the Act, to pay Parental Leave Pay instalments directly to employees of small businesses (defined as businesses employing fewer than 20 employees) except in cases where a small business opts to pay Parental Leave Pay instalments directly to an employee.
2.100During the inquiry, the committee heard the view that businesses required additional support to comply with their PPL obligations. Suggestions for improved support included sector specific guidance, website information developed in consultation with small business to make it more user friendly, and a booking system to allow small businesses to schedule phone calls with Services Australia staff.
2.101However, a number of participants also highlighted the broader administrative burden on small businesses arising from efforts to ensure compliance with taxation law, as well as employer obligations under the Fair Work Act 2009. Thecommittee notes that small businesses who need assistance in meeting their obligations may need to approach multiple agencies, including Services Australia, the Fair Work Ombudsman, and the Australian Taxation Office.
2.102Given the complex operating environment for small businesses, as well as their lack of in-house capacity and expertise in relation to taxation and employment law, the committee believes there is a need for the Australian Government to improve the supports available for small businesses. In addition, to ensure the support provided is fit for purpose, its design and development should be undertaken in consultation with the small business sector.
2.103The committee recommends that the Australian Government identify and fund improvements to the design and delivery of supports available to small businesses to help them meet their obligations under Commonwealth taxation and employment law.
2.104The committee recommends that the design and delivery of advice for small business should aim to minimise the administrative burden on small businesses by recognising and responding to the particular challenges they face, including time and capacity constraints.
2.105During the inquiry, the committee was frustrated by the lack of contemporary research into the operation and impacts of the Commonwealth PPL scheme on both employers and employees. Many inquiry participants relied on findings from the 2010–2014 evaluation of the Commonwealth PPL scheme, while others undertook very useful—but necessarily limited—member surveys to inform their evidence to the committee.
2.106In addition, the committee's questioning was further hampered by the apparent limitations of Commonwealth PPL datasets, with the Department of Social Services responding on a number of occasions that it did not have data specific to small businesses.
2.107While the committee welcomes the forthcoming evaluation of recent changes to the Commonwealth PPL scheme, it also notes that the evaluation remit will be much broader than the scheme's impact on small business.
2.108Further, the committee notes that it has now been over 20 years since the release of the Productivity Commission's 2009 report, Paid Parental Leave: Support for Parents with Newborn Children—which underpinned the design of the Commonwealth PPL scheme. Since then, the committee understands that the Productivity Commission has not been asked to review the impact or effectiveness of the employer role that it recommended.
2.109In order to ensure that current and future PPL policies are based on the best available evidence, the committee recommends that the Productivity Commission now be directed to undertake this important work.
2.110The committee recommends that the Australian Government task the Productivity Commission with conducting an inquiry into the impact of the Commonwealth Paid Parental Leave scheme on Australian businesses, including a particular focus on small business. The review should include—but not be limited to—an examination of the productivity gains or losses associated with businesses' administration of payments under the Commonwealth Paid Parental Leave scheme.
2.111In the event that the Australian Government does not, within three months of this report, direct the Productivity Commission to undertake the above inquiry, the committee recommends that the Productivity Commission self‑initiate research into the same topic.