Paid Parental Leave: Employer Paymaster vs Services Australia Direct Payment

Paid Parental Leave framework

The Paid Parental Leave scheme Australia Paid Parental Leave scheme Australia: complete guide is governed by the Paid Parental Leave Act 2010 (Cth). It is funded by the Australian Government and administered through Services Australia. Parental Leave Pay is provided to eligible parents to support them in taking time off work to care for a newborn or newly adopted child.

The scheme was restructured from 1 July 2023, providing a single, shared pool of weeks for parents caring for a child born or adopted from that date. The number of weeks available increases annually. From 1 July 2024, the entitlement increases by 2 weeks per year, culminating in 26 weeks available by 1 July 2026.

From 1 July 2025, Parental Leave Pay will also attract a Superannuation Contribution payment of 12%, paid by the Australian Taxation Office (ATO) to the parent’s nominated superannuation fund. Paid Parental Leave scheme Australia: complete guide

Employer paymaster role (pre 1 July 2023)

Prior to 1 July 2023, employers generally fulfilled the role of paymaster for Parental Leave Pay (PPL) when an employee met the eligibility requirement of 12 months continuous service. This meant employers received advance funds from Services Australia and distributed these payments to the employee through their regular payroll processes. National Employment Standards: 11 entitlements deep dive

The employer’s role as paymaster involved standard payroll obligations. Tax was withheld from the PPL payments and reported to the Australian Taxation Office via Single Touch Payroll, treating the payments as regular salary. To participate in this arrangement, employers were required to register for the PPL scheme within Business Hub.

The mandatory employer paymaster model was designed to simplify administration for employees and maintain a clear connection between the employee and their employer during the period of parental leave.

Changes from 1 July 2023

From 1 July 2023, the standard method of Parental Leave Pay (PLP) delivery has changed. For children born or adopted from this date, Services Australia will directly pay PLP to the employee. This shift aims to reduce the administrative burden on employers, especially small businesses. Paid family and domestic violence leave: 10 days entitlement

The employer paymaster option remains available, but it now requires explicit agreement from both the employer and the employee – it is an opt-in arrangement. If an employer acts as the paymaster, they will only deliver the initial block of flexible PLP. Any subsequent blocks taken under a flexible arrangement will be paid directly by Services Australia.

Employees retain the right to elect to receive PLP payments directly from Services Australia, regardless of whether their employer has opted into the paymaster arrangement.

Employer obligations even when not paymaster

Even when an employer is not the paymaster for Paid Parental Leave (PPL), they still have significant obligations. Employers remain bound by the National Employment Standards unpaid parental leave entitlement, which allows for up to 12 months of unpaid leave, with a right to request a further 12 months. They must also respond to employee requests for unpaid parental leave under sections 70-85 of the Fair Work Act 2009 (Cth). Sex Discrimination Act 1984: overview

Key employer obligations relating to position security, keeping in touch days, and a return to work guarantee continue regardless of whether the employer is the paymaster. These obligations are essential to ensure employees can take parental leave without detriment.

If an employer acts in a discriminatory way because an employee takes parental leave, this breaches the Fair Work Act 2009 general protections and may also breach the Sex Discrimination Act 1984: overview. Employers who have acted as a paymaster for PPL payments must keep records of those payments for a period of 5 years.