Productivity Commission over-reaches on paid maternity leave: ACCI, ARA

Posted by Isobel Drake on 30th September 2008

The Australian Retailers Association and Australian Chamber of Commerce and Industry have welcomed the Productivity Commission’s recommendation that a paid parental leave scheme would be tax-payer funded but remain concerned about the financial burden of compliance costs to SME (small to medium) retailers.

The plan proposed provides 18-weeks of tax-payer funded leave for working mothers and two-weeks for working fathers. It would also result in an overhaul of the current baby bonus arrangement, with working couples eligible for up to $11,854 (women not in the workforce will still receive the $5000 maternity allowance).

“Unless changes are made, the proposed scheme would be unlikely to receive the widespread industry and small business support that proposals of this type need,” ACCI Chief Executive Peter Anderson advised. “Fortunately, it is a draft report, with some helpful information, and industry has the opportunity to seek changes.”

“ACCI and business support a government-funded scheme of 14 weeks provided that it is affordable to the budget and does not increase employer costs,” Mr Anderson added.

The Productivity Commission has, however, over-reached by imposing significant direct and indirect costs on employers, according to the ACCI. Under the proposed scheme:
• employers have to find $450 million to finance these payments before seeking reimbursement from the government;
• employers incur administrative costs in making these payments through their payrolls;
• employers incur the loss of cash flow before getting reimbursement from government;
• employers incur a direct $75 million hit each year in higher superannuation payments; and
• employers incur higher payroll tax and workers compensation payments if payments are run through payrolls.

“All of these costs flow from the recommendation that employers become the paymaster of the scheme. This is unnecessary,” Mr Anderson claimed. “Employers are already concerned at being the tax collector for government on issues like the GST, and they will not respond well to being the paymaster of government social payments.”

“Although some benefits will flow to business if staff retention rates are increased, employers will face significantly higher costs for replacement staff – given that the Productivity Commission concludes that parents will be away from work for an extra nine weeks on average,” Mr Anderson added.

The ACCI also believe that affordable and accessible child care is the most significant driver of decisions of parents to return to the workforce and suggest paid maternity leave schemes should therefore only represent part of the response.

ARA Executive Director Richard Evans joined with the ACCI in expressing concern about the proposal. “Parents taking time off to care for children is a good thing for society but businesses shouldn’t have to pay – and while retailers will welcome the Productivity Commission’s decision for parental leave to be tax-payer funded – questions about financial burden associated with compulsory administration still remain,” he said.

“Our submission to the Productivity Commission indicated that retailers would support a six-week taxpayer-funded scheme. The draft report goes well beyond this, proposing paid parental leave of 18 weeks but fails to address essential rebates to small business operators for its administration on behalf of the Government. This could be crippling for SME retailers,” Mr Evans suggested. “Retailers will support the concept of paid parental leave that provides employees certainty and security as long as it’s designed in a way that eliminates any cost to employers.”

Prime Minister Kevin Rudd welcomed the proposal but added that it would take time before details of the scheme would be finalised. “We are still some ways off resolving the financial policy detail, but what I am saying to you loud and clear today is that this Australian Government believes the time has come to bite the bullet on this and we intend to do so,” Mr Rudd said.

The ARA will continue to consult with its 400 largest members before making any further submission to the Productivity Commission by the due date of 14 November.