Employers are likely to switch generous parental leave payments to other employee benefits when the government ends so-called “double-dipping” next year, a leading employer group has said, throwing doubt on the treasurer’s estimated $1bn in budget savings.
Joe Hockey announced on Sunday that the government would no longer fund paid parental leave for some 34,000 mothers a year whose employer already paid as much, or more, than the taxpayer-funded scheme, which is worth $11,500 to each mother.
But the chief executive of the Australian Chamber of Commerce and Industry, Kate Carnell, said employers were likely to respond by shifting payments to other employee benefits, so their employees would get the taxpayer-funded $11,500 and their existing employer top-up, delivered in a different way.
“It’s hard to see why employers would continue to pay parental leave if it meant the government stopped paying and they were simply footing the bill for the government,” Carnell said. “It seems likely employers and employees would look for other benefits that suited them, if this meant the government still paid the parental leave bill and the employer payments continued to be in addition to it.”
She added that her group had not been consulted on the change. “The reason employers are paying additional leave entitlements now is to give employees additional reasons to work for them.”
Hockey announced the government would save about $1bn over four years by ending what he called “double dipping” – where parents receive both an employer- and taxpayer-funded leave entitlement. But if employers restructure their payments so the government has to continue to fund parental leave, those savings won’t be realised.
The government estimates that about 50% of mothers, or 90,000 each year, will be unaffected when the rules take effect because they have no employer-provided entitlement.
Another 27%, about 45,000 each year will have their employer provided leave entitlement topped up to the current taxpayer-funded level of 18 weeks at the minimum wage, or about $11,500.
About 20%, or about 34,000 mothers, will only receive their employer entitlements because they are the same, or more generous, than the publicly funded rate.
“At the moment people can claim parental leave payments from both the government and their employers so they are effectively double dipping,” Hockey told Channel Nine on Sunday. “We’re going to stop that. You can’t double dip, you can’t get both parental leave pay from your employer and from taxpayers. That represents a saving of nearly $1bn in the budget and I think most Australians would know that is unfair.”
The prime minister, Tony Abbott, explained that “if you’ve got a generous employer provided scheme, that’s what you should get. If you don’t have any employer provided scheme, you’ve got the government’s scheme – which has been in place now for several years – and if the employer provided scheme doesn’t give you as much as the government scheme, well then you’ll be topped up.
“Now again, I think this is a fair system and I’d put it to the crossbench in the Senate, to the Labor party, if you are serious about fairness, you should support this change.”
Jenny Macklin, Labor’s families spokeswoman, said it was a big shift from the now abandoned “signature” paid parental leave policy championed by Abbott, which was to have offered mothers six months of their existing wage, capped at $75,000 (later revised down to $50,000).
“Isn’t it extraordinary, this government on paid parental leave,” she said. “For two elections, Tony Abbott said to the Australian people that he wanted a gold-plated paid parental leave scheme that would have seen parents get $75,000 or $50,000, depending on which version you believe.
“He was then forced to dump that paid parental leave scheme and now we hear they’ve got another proposal for paid parental leave. The one thing I think parents know, from Tony Abbott and Joe Hockey, is that you would never believe anything they say about paid parental leave.”
Head of the Australian Council of Trade Unions (ACTU) Ged Kearney on Monday described the announcement as “outrageous”.
“It is simply a lie to say that it is double-dipping, because double-dipping means you go back to the same source twice,” Kearney told Hlcarpenter.com Australia. “This is stealing wages that women have negotiated in good faith with their employers over and above the paid parental leave scheme.”