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Seeing red over parental leave


21 June 2010

It's becoming harder and harder to understand the motivations of the Rudd government. Amongst many issues, they've deliberately alienated miners and seem determined to upset self-employed people over tax issues.

The latest instalment is the new paid parental leave scheme that passed parliament last week. Australian unions have described it as a historic win for women, and it is.

In essence the federal government will pay the primary carer (man or woman) of a newly born or adopted child, the minium weekly wage (currently around $545) for 18 weeks.

Where the scheme goes haywire is in the complexity of administration intentionally created. Logic would have said that the simplest administration would be for the appropriate government agency (Centrelink) to directly pay the worker on leave. But no! Centrelink will pay the employer, who will then pay the worker.

This double handling of money is going to create unnecessary red tape and compliance problems particularly for small business. It's resulted in strong criticism from the major small business representative bodies who made their objections well known when the scheme was being developed.

Even the bureaucrats who'll administer the scheme are also predicting problems. Early this year I attended small business consultative forums where the public servants were desperate to know how to fix anticipated problems with small business.

As sure as the sun rises every morning, there will be some small business people who'll mess up. Some will go broke or close down while the parent is on leave. Some may be dishonest or incompetent and fail to pass on full payments. In short, money will go missing and Centrelink will have difficult audit trails to chase. Future news headlines are almost predictable, 'Small businesses rip-off parents!'

The response will have to be a Centrelink big brother approach to employers to minimise payment problems. That spells more red tape.

It's so unnecessary. To receive payments an eligible parent has to register with Centrelink. In setting up the new systems Centrelink will pay parents directly for the first six months of so of the scheme. This will then be partly shut down so that payments will go through the employer. But the direct payment system will also have to be maintained. To the government's credit the scheme is available to Australia's 2.1 million self-employed people. Being both the employer and employee at the same time, self-employed people will be paid direct.

The outcome is that two systems will operate. One will be direct payment to self-employed parents, the other of indirect payments to parents through employers.

This second system of administrative compliance and red tape complexity is a deliberate move by the Rudd government. In the process of passing the legislation, the Abbott opposition sided with small business and amended the legislation in the Senate to require direct payment by Centrelink to the parent. The government rejected the amendment in the House of Representatives returning the bill to Senate where it was finally passed.

This is what's so odd. Why would the Rudd government purposefully create additional red tape? It's not consistent with other initiatives such as creating a one-stop, national process for business name registration. They are moving forward on some micro-economic reforms but inventing a problem in another area. Almost bizarrely this risks annoying, even antagonising, parts of the important small business political constituency.

Most likely what it does show is that just under the surface of the constructed image of a modern, business pragmatic ALP, is old Labor. It seems that when any individual takes on the legal tag of 'employer' onerous obligations must be imposed even when this defies common sense.

This is the mantra that seems too often to drive Australian unions. Employers must have obligations imposed upon them by government irrespective of the complexity it creates. Paid parental leave is billed by Australian unions as a win by them and so their view of obligation imposition on employers must, it appears, prevail. If there's another sensible explanation the government has failed to provide it.

Paid parental leave is important. Parents need sustained, early connection with their children. And national policies that encourage increased birth rates have good, long-term economic benefits. The scheme makes sense. The administration of the scheme makes no sense.


From the Business Spectator, June 2010.

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