Who Pays For Maternity Leave In Australia?

Planning parental leave is a big milestone for your employee and your business. It’s also a moment when practical questions come up fast - especially “who pays?”, “is super required?”, and “how do we process this correctly?”

In Australia, “maternity leave” is generally referred to as parental leave. There are three moving parts to understand: the minimum unpaid leave under the National Employment Standards (NES), the Commonwealth’s Parental Leave Pay (PLP) scheme, and any paid parental leave you choose to offer as an employer.

Below, we’ll unpack what counts as parental leave, who pays for what, how super and accruals work, and the simple steps you can follow to manage leave fairly and compliantly. Our goal is to give you clear, plain‑English answers so you can support your people and keep your business running smoothly.

What Counts As Maternity (Parental) Leave In Australia?

Under the Fair Work Act’s National Employment Standards, eligible employees can take parental leave when a child is born or adopted. The leave framework covers birth parents, partners and adoptive parents.

Unpaid Parental Leave (NES Minimum)

• Eligible employees can take up to 12 months of unpaid parental leave with job protection (they’re entitled to return to their pre‑leave role or an equivalent position).
• They can request an additional 12 months (up to 24 months total). Employers must genuinely consider the request, and can only refuse on reasonable business grounds. If refusing, you need to respond in writing and set out the reasons.
• Casual employees may also qualify if they’ve been working on a regular and systematic basis and meet other criteria.

Government-Funded Parental Leave Pay (PLP)

• PLP is a Commonwealth payment administered by Services Australia, separate from NES unpaid leave.
• It is paid at a rate based on the national minimum wage for a set number of weeks (with the scheme expanding over time).
• Today, Services Australia generally pays PLP directly to the employee. In limited cases, it may still be paid via the employer as a paymaster, but that’s less common than it used to be.

Employer-Provided Paid Parental Leave

• Many employers choose to offer paid parental leave as a workplace benefit. This is not mandated by the NES - it’s an optional, contractual or policy entitlement.
• Where offered, it’s usually documented in the relevant Employment Contract, an enterprise agreement or a clear Parental Leave Policy.

Think of these as three layers: NES unpaid leave, government PLP, and any employer‑funded paid leave. Understanding which layer you’re dealing with is the key to answering “who pays?” correctly.

So, Who Actually Pays For Maternity Leave?

It depends which “layer” you’re talking about.

1) Parental Leave Pay (PLP) - Funded By The Commonwealth

• PLP is a government benefit funded by the Commonwealth. Employers do not fund this payment.
• Services Australia now typically pays PLP directly to the employee. In some cases (and where practical), it may still flow through the employer as a paymaster, but this is no longer the default.

2) Employer-Provided Paid Parental Leave - Funded By The Employer

• If your business offers paid parental leave as a benefit, those payments are your cost.
• Your policy should clearly state whether employer payments are in addition to PLP or offset/top‑up arrangements (for example, topping up the difference between PLP and the employee’s usual pay).

3) Unpaid Parental Leave - Unpaid (But Paid Entitlements Can Be Used)

• Unpaid parental leave is time off without salary, with job protection.
• Employees may choose to use paid entitlements (such as annual leave or long service leave) by agreement during this period. If they do, the employer pays those standard entitlements as normal.

In practice, confusion often arises when these layers overlap. The best solution is to explain in writing which payments apply, who funds them, and how they interact. Clear communication upfront avoids headaches later.

Do Employers Have To Offer Paid Parental Leave?

No. The NES does not require employers to offer their own paid parental leave benefit. The legal minimum is unpaid parental leave (subject to eligibility), and eligible employees may also receive government PLP from Services Australia.

However, many employers do offer a paid benefit to attract and retain great people. If you decide to do this, document it in plain English and apply it consistently.

How To Document Your Offering

• Set out the benefit in a clear Parental Leave Policy that aligns with the NES and your business goals.
• Mirror key terms in the relevant Employment Contract so eligibility, payment amounts, timing and any interaction with PLP are unambiguous.
• Keep your approach consistent with your broader workplace policy framework.

Common Design Choices For Employer-Funded Leave

• Top‑up: You pay the difference between PLP and the employee’s usual pay for a fixed period.
• Full‑pay weeks: You offer a set number of weeks at full pay (some employers also contribute super - more on super below).
• Eligibility rules: Often linked to a minimum period of service or employment type.
• Flexibility options: Splitting paid weeks or supporting a phased, part‑time return to work.

There’s no one‑size‑fits‑all. Build something sustainable, equitable and easy to administer.

Superannuation, Public Holidays, Accruals And Tax: What Should Employers Know?

The details matter. Before you process payments, make sure you’re across how super, public holidays, accruals and tax interact with parental leave.

Superannuation

• Superannuation is generally not payable on unpaid parental leave or on government PLP under the Superannuation Guarantee (SG).
• Most employer‑funded paid parental leave is not considered ordinary time earnings for SG purposes. However, check the current ATO guidance and your agreements/policies, as treatment can depend on how your benefit is structured.
• Some employers choose to contribute super voluntarily as part of a more generous benefit - if you do, spell it out in your policy and payroll setup.

Tip: Get tailored accounting advice on SG treatment before you roll out a new paid parental leave benefit. A short chat with your accountant now can prevent rework later.

Public Holidays

• During unpaid parental leave, employees are generally not entitled to separate payment for public holidays that fall within the unpaid period.
• If an employee is on paid leave instead (for example, annual leave by agreement), standard public holiday rules apply - the public holiday is paid and does not reduce the annual leave balance.

Accrual Of Leave

• Unpaid parental leave does not usually accrue annual leave or personal/carer’s leave because accrual is based on ordinary hours of work.
• When an employee uses paid entitlements during a parental leave period, those entitlements accrue as they normally would for that paid leave.

Tax, Salary Sacrifice And Other Benefits

• Government PLP is administered by Services Australia and taxed according to their settings. Where you pay any employer‑funded amounts, apply normal payroll tax treatment consistent with ATO rules.
• Consider how salary sacrificing, allowances, bonuses and other benefits interact with your parental leave arrangements. If you apply offsets (for example, reducing employer‑funded payments by PLP received), document this clearly in your policy or contract.

Because tax and super rules are technical and change from time to time, it’s sensible to confirm the settings with your accountant before you set a precedent.

How To Manage Parental Leave In Your Business (Step-By-Step)

A supportive, compliant approach comes down to early planning, clear paperwork and accurate payroll. Here’s a simple framework you can follow.

1) Confirm Entitlements And Timing Early

• Ask the employee to give written notice and evidence in line with the NES and your policy (for example, expected birth/adoption date and proposed leave dates).
• Clarify eligibility for government PLP, whether Services Australia will pay them directly, and whether any employer‑funded benefit will apply.

2) Put The Paperwork In Order

• Make sure their Employment Contract aligns with your parental leave policy and any enterprise agreement.
• Adopt a clear, plain‑English Parental Leave Policy covering eligibility, payments, superannuation, accruals, keeping‑in‑touch days and return‑to‑work arrangements.
• Send a short confirmation letter that outlines the leave dates, how payments will flow, and any check‑ins during leave.

3) Plan For Continuity

• Organise a practical handover and identify coverage for critical tasks.
• Set expectations around reasonable “keeping in touch” days during leave (if the employee agrees) so they don’t feel out of the loop.

4) Process Payments Correctly

• Confirm whether PLP will be paid directly to the employee by Services Australia (most common) or via your payroll in rare cases where paymaster arrangements apply.
• If you’re offering employer‑funded paid parental leave, set up the right payroll codes and document your super and tax treatment decisions.
• Map out any periods of paid entitlements, mixed paid/unpaid arrangements or leave without pay so payslips and accruals are accurate.

5) Support A Safe, Smooth Return

• Confirm return‑to‑work dates early. If the employee requests flexible work on their return, consider it in good faith and respond in writing.
• Provide any training refreshers and updates to systems or processes that changed during their absence so they can hit the ground running.

If you’re unsure about eligibility, documentation or payroll treatment, a quick chat with an employment lawyer can save time and ensure you’re consistent across the team.

Common Questions About Who Pays (Quick Answers)

Can we require employees to use annual leave first?

No. You can’t compel an employee to use paid annual leave instead of taking unpaid parental leave. They may elect to use paid entitlements by agreement.

Do casuals get parental leave?

Casuals with regular and systematic service who meet eligibility criteria can access unpaid parental leave and may be eligible for PLP under the Commonwealth scheme.

Can an employee “cash out” government PLP?

No. PLP is paid according to Services Australia’s rules at the applicable rate for the applicable weeks - it isn’t something the employer can cash out or vary.

Can we refuse an extension beyond 12 months?

You must consider a request for up to an extra 12 months. You can only refuse on reasonable business grounds, and you need to confirm the refusal in writing with reasons.

Does parental leave attract superannuation?

Unpaid parental leave and government PLP generally do not attract SG. Most employer‑funded paid parental leave is also not OTE for SG, but confirm the treatment with your accountant and ensure your policy is clear.

What should we put in our policy?

Set out eligibility, the amount and timing of any employer‑funded payments, how payments interact with PLP, whether you contribute super, how public holidays and accruals are treated, keeping‑in‑touch arrangements, and the return‑to‑work process. Linking the policy with each Employment Contract keeps everything consistent.

Key Takeaways

• In Australia, “maternity leave” usually involves three layers: NES unpaid parental leave, government‑funded Parental Leave Pay, and any employer‑funded paid parental leave you choose to offer.
• PLP is funded by the Commonwealth and is now commonly paid directly by Services Australia. Employer‑funded paid parental leave is your cost and should be set out in a clear Parental Leave Policy.
• Unpaid parental leave is job‑protected time off without salary. Employees can agree to use paid entitlements (like annual leave) during this period, which you fund as normal.
• Superannuation is generally not payable on unpaid parental leave or PLP, and most employer‑funded parental leave is not OTE - but confirm tax and super settings with your accountant and document your approach.
• You must consider requests to extend leave up to 24 months and can only refuse on reasonable business grounds, with written reasons.
• Get the paperwork right: align each Employment Contract with your policy, plan payroll settings in advance, and use straightforward documentation to confirm dates and payments.
• If you’re unsure about eligibility, policy drafting or payroll treatment, speaking with an employment lawyer can help you implement a fair, compliant system.

If you’d like a consultation on setting up parental leave correctly in your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.