Employer-funded paid parental leave in Australia is changing – what the removal of primary and secondary carer labels means for employers

It’s no secret that many workers are also parents or caretakers. In fact, according to the 2023 Indeed Better Work, Better Lives 2.0 Global Study, over half of all Australian employees surveyed indicated that they are the primary or secondary caregiver for children in their home. So, it's great news that Australia’s previously outdated parental leave scheme is finally starting to catch up with the times – and with other OECD countries. How so? Let’s take a closer look.

Towards better gender equality in the Australian labour market

Australia is taking a significant stride towards gender equality with the upcoming changes to its parental leave policy that will come into effect on 1 July 2023. Most notably, this much-anticipated reform does away with the outdated notion of basing leave entitlements on primary and secondary carer labels. Instead, the country will be pursuing a more inclusive and flexible approach with significant implications for Australian employers. The objective: increased diversity and a more level playing field in the Australian workplace.

As an employer, you therefore need to be familiar with both government and employer-funded paid parental leave (PPL) and make sure you have all your ducks in a row to avoid legal repercussions. But, importantly, offering your staff generous employer-funded parental leave beyond government entitlements can set you apart from other employers in your industry and give you a real competitive edge when it comes to attracting talent.

What are the upcoming parental leave changes?

Traditionally, the Australian parental leave scheme distinguished between primary and secondary caregivers, with mothers typically considered the primary and fathers the secondary caregiver. This meant that working mums were entitled to up to 18 weeks of maternity leave, with only two weeks of PPL for fathers.

In 2023, these traditional gender roles are more than outdated, so the government’s changes to its parental leave program are hotly anticipated. Specifically, these changes are:

• Merger of Parental Leave Pay (PLP) and Dad and Partner Pay (DAPP): From July, primary and secondary labels will no longer be used, and all new parents are entitled to share up to 20 weeks of PPL between them.
• Higher income threshold: The eligibility income threshold of $151,350 is raised to $156,647 for each parent and a $350,000 family income limit, opening the scheme up to some 3,000 new parents.
• More flexible work and care arrangements: PPL can be used until a child turns 2. According to Services Australia, parents can share their PPL […] and even take days off at the same time.
• Both parents are encouraged to use PPL: Part of PPL will be reserved for each parent to use, and any unused full or partial PPL will be lost if not used before the child’s second birthday. This is meant to encourage both parents to access the payment.

Go beyond what’s required

Importantly, many employers in today’s market are choosing to offer their staff company-funded parental leave beyond the government-funded option. According to the Australian Workplace Gender Equality Agency, top employers offer as much as 26 weeks of gender-neutral paid parental leave. This means if you can afford to give your staff this option, you will significantly boost your employer brand and are more likely to attract top talent than your competitors with little or no additional employer-funded PPL.

Another huge opportunity to stand out as a reputable employer is by paying superannuation for employees on parental leave. The same Workplace Gender Equality Agency’s report also found that of those employers who offer PPL, 81 per cent continue to pay superannuation during this period. So, you will want to make sure that you are one of them! This will send a clear message that you value your staff and are keen to retain them.

What does this mean for working mothers and fathers in your workforce?

The days of assigning rigid gender roles are long gone. And the removal of primary and secondary carer labels recognises the diversity of modern working families, and the fact that in many families both parents play crucial roles in raising their children. With the changes we’re seeing in parental pay options this year, working women are no longer forced to choose between their careers or staying home for 18 weeks to care for their child. Now, instead of perpetuating gender inequality and stereotypes, fathers can take this time off instead, or parents can choose to split their time at home equally.

This progressive shift reflects a growing understanding of the importance of parental involvement and the desire to create a fairer society overall. Plus, studies – for example, in The Lancet Public Health Journal – have shown that equal PPL enables both parents to stay connected to the labour market through job protection while supporting a more equitable work-life balance in the family. So, the benefits for employees are clear, but you’ll be pleased to hear it’s good news for employers, too!  

How does equal maternity and paternity leave benefit employers?

Removing primary and secondary carer labels and extending parental leave can positively affect your organisation in several ways.

Greater gender diversity:

By dismantling traditional gender roles, the new label-free parental pay scheme encourages greater gender equality in the Australian workplace. It promotes an environment where both male and female workers can take time off to care for their children without needing to worry about career setbacks or discrimination. Ideally, this will mean that men are just as likely to take parental leave as women, with no disproportionate number of female workers staying home to care for their children. This new inclusivity will allow you to harness the full potential of all employees, which is especially important if you’ve made gender diversity part of your leadership strategy in 2023.

Better talent retention:

It is clear that, traditionally, women have faced greater challenges when it came to maintaining their career trajectories due to the unequal burden of childcare responsibilities compared to their male peers. The newly equalised PPL allows women to share any required time off with their respective partner. For you as an employer, this means that you are more likely to retain top female workers who may have otherwise chosen to stay at home, especially if your organisation does not offer additional employer-funded leave.

Positive employer reputation:

Organisations that take progressive steps towards gender equality and promote equal maternity and paternity leave are sure to enjoy a very positive brand image. You will be known as an employer who offers a great work-life balance and a family-friendly workplace. This can be a powerful recruitment tool when it comes to recruiting in a rapidly changing hiring landscape.

Better employee engagement and productivity:

When your workers feel valued and supported, they’re more likely to enjoy coming to work and be more productive. Providing equal parental leave opportunities sends a clear message that you prioritise your staff’s well-being and care about them and their families. Such a positive environment typically leads to higher levels of job satisfaction, better mental health and less stress, and ultimately stronger employee loyalty and increased productivity.

Label-free paid parental leave looks like the way forward

In a nutshell, if you care for the working parents in your company and go the extra mile to support them, both they and your business may reap the benefits in the long term. Your workers get to enjoy precious family time; no matter their gender – and you will enhance your reputation and record better results. A win-win situation.