1. Productivity Commission Paid Parental Leave Draft report October 2008 Presentation Paid Parental Leave Forum Robert Fitzgerald AM Angela MacRae Commissioners

2. Productivity Commission2 Where we are now Around 285 000 babies born in 2007 – 175 000 to women in paid work prior to birth 53% of female employees and 50% of male employees have access to employer-provided paid parental leave * Mothers returning to paid work after childbirth 3 months6 months12 months All mothers11%20%41% Mothers employed prior to birth 15%29%58% *Using adjusted ABS figures

3. Productivity Commission3 Objectives Child and maternal health and wellbeing – the importance of a 6 to 9 months timeframe Labour market attachment – Lifetime perspective Work/life balance and gender equity – The ‘sort of society we would like to live in’

4. Productivity Commission4 Design features follow from objectives Child & maternal welfare Work/life balance & gender equity Labour force attachment Adequate duration & payment More than welfare for most Employment-related measure Includes provisions for both genders Superannuation Employment-based eligibility test Link to National Employment Standards Employers as ‘paymasters’ Additionality Extra weeks at home Stronger attachment to workforce

5. Productivity Commission5 Key features of the Commission’s scheme Duration – 18 weeks parental plus 2 weeks paternity How much? – Minimum wage ($544 per week) regardless of pre-birth income – taxable and included for means tests – No access to baby bonus or FTB(B) while on leave – Super at 9% of minimum wage or actual wage if lower – for subset only

6. Productivity Commission6 Key features of the Commission’s scheme Who pays? – Government funds cash payments – Employers to fund capped super – Employers act as ‘paymasters’ Eligibility – Work for average of 10 hours per week over 12 months before birth (incl. self-employed) – Extra conditions for super Non-eligible parents – Existing entitlements plus paternity leave plus removal of means test on baby bonus

7. Productivity Commission7 From the employee perspective Have you given birth? Have you worked for the last 12 months? For an average of 10 hours a week? With multiple employers? With one employer? $543.78 for 18 weeks plus super plus job return guarantee $543.78 for 18 weeks

8. Productivity Commission8 From the employer perspective Has an employee given birth? Has she worked for you for the last 12 months? For an average of 10 hours a week? Act as paymaster for government Pay super for 18 weeks Job return guarantee

9. Productivity Commission9 Eligibility Employed mothers* Not employed Eligible for statutory paid parental leave 139,000 (79% share of employed) Eligible for super contributions 118,000 (85% share of those eligible for paid parental leave) Insufficient workplace attachment 36,000 (20% share of employed) 176,000 109,000 Mothers of newborn children * Includes self-employed & contractors

10. Productivity Commission10 How much per family? Paid parental leave Paid paternity leave Total $$$ Government contribution9 7881 08810 876 Employer contribution 881 98 979 Total10 6691 18511 854 Maximum payments a a Benefits are all in gross terms (ignoring tax effects and offsets against social transfers) and are for a parental leave period of 18 weeks and paternity leave of 2 weeks

11. Productivity Commission11 Business impacts Super contributions – capped & at 9% – additional eligibility tests – maximum cost 3% of annual salary Many small employers would face no costs in a given year – only face costs when person on leave – average 1.1% of employees would be on maternity leave per year for businesses employing less than 20 people Paymaster function for some employers Costs for business of overall obligations lowered by using – quick reimbursement (maybe PAYG withholding) – existing administrative arrangements – better leave notices They will get retention benefits

12. Productivity Commission12 How much will it cost each year? 0 200 400 600 800 1000 1200 1400 1600 Gross costs less Offsets = Net costs Cost categories $ million Parental leave $1,336m Paternity leave $61m Superannuation contributions $106m Baby bonus savings $670m Tax & other welfare savings $307m Net government contributions $452m Net business contribution $74m Net scheme cost $527m

13. Productivity Commission13 Funding by weeks 0 $200 $400 $600 123456789101112131415161718 Weeks of parental leave Source of financing ($ per week) (a) Includes the net funding of paternity leave and tax deductions for employers' superannuation contributions $543.78 Baby bonus savingsTax & budget savings Additional cash cost to government Net business super contribution Other government contribution (a)

14. Productivity Commission14 Gross costs of two models Commission scheme ‘Top up’ model Government$m1 398 Business$m1061 225 Total costs$m1 5042 623 Business shareShare7%47%

15. Productivity Commission15 A case study of a small business PC schemeTop up model Cost to employer of leave for one employee earning $65 000 $881$13 856 Share of annual wage1.4%21.3% Business gross revenue------- $1 million ------- Net profit before policy change------- $42 000 ------- Net profit after policy change$41 383$32 301 % change in net profit-1.5%-23.0% Business with 4 employees *Based on a business with a gross margin of 6% and a tax rate of 30%

16. Productivity Commission16 This is a draft report, so we will be seeking feedback October: Background appendices on web October: Informal consultations with participants 10 November: Hearings commence 14 November: Closing date for submissions End February: Final report to government For hard copies of the draft report email: parentalleave@pc.gov.au

17. Productivity Commission Paid Parental Leave Draft report Presentation to Melbourne Paid Parental Leave Forum 5 November 2008