How Paid Parental Leave Functions: A Comprehensive Employer's Guide

Paid parental leave is one of those topics every Australian employer will face sooner or later. It’s great for retaining talent and building a supportive culture, but it can feel complex if you’re not familiar with your obligations.

In this guide, we’ll break down how Australia’s Paid Parental Leave (PPL) scheme works, what your responsibilities are as an employer, and the practical steps to manage leave requests confidently and fairly.

We’ll also cover how PPL interacts with other forms of leave, superannuation and payroll, along with the key documents and workplace policies you should have in place so everything runs smoothly from day one.

What Is Paid Parental Leave In Australia?

Australia’s government-funded Paid Parental Leave scheme provides eligible new parents with income support paid at (approximately) the national minimum wage for a set period. It aims to help families care for a newborn or newly adopted child and to promote workforce participation.

Government-Funded PPL vs Employer-Funded Leave

• Government-funded PPL: Paid by Services Australia at the national minimum wage for a set number of weeks (see the staged increases below). In many cases, employers administer the payments through payroll once Services Australia instructs you to do so.
• Employer-funded parental leave: Many employers also offer their own paid parental leave entitlements (for example, full pay for several weeks or months) as a company benefit. This is separate from the government scheme and sits in your internal policies or enterprise agreement.

How Long Is PPL And What’s Changing?

The scheme has been expanded and made more flexible. As at the time of writing, PPL is moving in stages:

• 20 weeks (100 days) from 1 July 2023
• 22 weeks from 1 July 2024
• 24 weeks from 1 July 2025
• 26 weeks from 1 July 2026

PPL can be taken flexibly in days or blocks within two years of the child’s birth or adoption, which helps parents transition back to work gradually. Some weeks are reserved to encourage both parents to take leave (often called “use it or lose it” weeks). Always check the latest Services Australia guidance when scheduling leave - the rules can be updated over time.

Who Is Eligible And How Do Entitlements Work?

There are two layers to think about: government PPL eligibility and the employee’s entitlement to unpaid parental leave under the National Employment Standards (NES).

Unpaid Parental Leave Under The NES

Most employees who have worked for you for at least 12 months before their child’s expected date of birth (or placement for adoption) are entitled to up to 12 months’ unpaid parental leave under the Fair Work Act’s NES, with a right to request an additional 12 months (up to 24 months total). This NES entitlement exists regardless of whether the employee receives government-funded PPL or your own paid leave top-up.

Government-Funded PPL Eligibility (High Level)

Government-funded PPL has its own eligibility tests, which typically include residency requirements, an income test, and a work test. Employees apply to Services Australia, and if approved, Services Australia will either pay the employee directly or instruct you (the employer) to pay it through your payroll system (you’re then reimbursed).

As an employer, you don’t decide whether an employee is eligible for government PPL. However, you will need to administer payments and keep records if Services Australia asks you to be the paymaster.

Notice And Evidence Requirements

Employees taking unpaid parental leave usually need to provide written notice at least 10 weeks before the expected start date, and confirm details at least 4 weeks prior. You can request evidence (for example, a medical certificate) to confirm the expected date of birth or adoption. Set this out clearly in your Parental Leave Policy to avoid confusion.

Keeping In Touch And Flexible Days

Employees can perform limited “keeping in touch” (KIT) days while on parental leave to stay connected with your team, attend training, or ease their return. KIT days are subject to limits and cannot be used too soon after birth or placement. In addition, the newer “flexible PPL” days allow families to spread government-funded payments over time, supporting part-time returns or staggered transitions back to work.

Your Role As An Employer: Funding, Payroll And Compliance

Your obligations will be slightly different depending on whether you’re administering government-funded PPL or paying an employer-funded benefit. Below are the core issues to get right.

Administering Government-Funded PPL

• Registration: If Services Australia instructs you to administer PPL, you’ll need to register for the appropriate business services (e.g. via Centrelink Business Hub) so you can receive funds and report correctly.
• Pay cycles: You must pay instalments according to your normal pay cycle and usual method of payment, with standard payslips and PAYG withholding.
• Reimbursement: Services Australia reimburses you once you have paid the employee. Keep clear records and reconcile promptly.
• Records: Maintain accurate payroll records, payslips and evidence of amounts and dates. Good records make audits and questions easy to manage.

Tax, Superannuation And Leave Accrual

• PAYG tax: Government-funded PPL is taxable income. Withhold PAYG and show it on the employee’s income statement.
• Superannuation: Government PPL is generally not ordinary time earnings (OTE), so superannuation is not required on those amounts. Your own employer-funded parental leave may or may not attract super, depending on your policy, any applicable award or enterprise agreement.
• Leave accrual: While on unpaid parental leave, employees generally don’t accrue paid leave (e.g. annual leave). If you provide your own paid parental leave, accrual rules will follow your policy/industrial instrument - set this out clearly to avoid disputes.

Interaction With Other Leave And Public Holidays

Employees may wish to combine paid leave (like annual leave or long service leave, if eligible) with unpaid parental leave or government PPL to extend their time on income. Public holidays that fall during a period of paid annual leave are generally treated as public holidays (not deducted from annual leave), but this doesn’t change government PPL. Make sure your processes, payroll and policy wording align.

Return To Work And Protection From Adverse Action

Under the Fair Work Act, an employee on parental leave is entitled to return to their pre-parental leave position. If that position no longer exists, they must be offered an available position nearest in status and pay.

It’s unlawful to take adverse action against an employee because they’re pregnant or on parental leave. Keep decisions objective and well-documented. If you need tailored advice on a tricky scenario, speaking with an employment lawyer early is a smart move.

Casuals, Contractors And Small Business Considerations

• Long-term casuals: Casual employees who have been working on a regular and systematic basis for at least 12 months and have a reasonable expectation of continuous work may be eligible for unpaid parental leave under the NES. Government PPL eligibility is assessed by Services Australia separately.
• Contractors: Independent contractors are not employees for parental leave purposes. Make sure you have the right Contractor Agreement in place to accurately reflect the relationship and avoid misclassification issues.
• Small businesses: The NES applies regardless of business size. If you’re uncertain about capacity to cover roles or manage flexible returns, plan early and document agreed arrangements.

Setting A Workplace Policy That Works In Practice

A clear, fair and compliant policy is the key to managing parental leave with confidence. It ensures everyone understands the rules, timeframes and documentation required, and it aligns HR, payroll and managers on a single process.

What To Include In Your Parental Leave Policy

• Eligibility and types of leave: Outline unpaid parental leave under the NES, government PPL and any employer-funded paid parental leave you provide.
• Notice, forms and evidence: Specify how and when employees must notify you (e.g. 10 weeks in writing) and the evidence you may request (medical certificate or adoption paperwork).
• How payments are made: Explain whether Services Australia will pay the employee directly or via your payroll, and how your employer-funded benefit (if any) is processed.
• Accruals and super: State whether paid parental leave from your business attracts super and whether any paid leave accrues other entitlements.
• Communication and KIT days: Explain keeping-in-touch days, how to arrange them, and how you’ll stay in contact during leave.
• Flexible returns: Encourage discussion about part-time or phased returns, and set out how flexible PPL days can be coordinated with roster planning.
• Return-to-work guarantee: Reaffirm the right to return to the same position (or a comparable role) and how role changes will be handled.

Most businesses capture these elements in a dedicated Parental Leave Policy and include a summary in their Staff Handbook for easy reference.

Managing Health Information And Privacy

You may receive sensitive information (for example, a medical certificate). Handle this carefully and store only what you need for compliance. Internal practices aligned with an Employee Privacy Handbook help you lawfully collect, use and secure employee information.

Training Managers And Setting Expectations

Managers should understand the basics of parental leave rights, timelines and your policy. A short briefing and a checklist go a long way. If a unique situation arises, seek advice rather than guessing - it’s quicker and safer in the long run.

Contracts, Policies And Documents To Have In Place

Having the right documents in place sets expectations, reduces risk and helps your team apply the rules consistently.

• Employment Contract: Confirm employment status (full-time, part-time or casual), reference your parental leave policy, and set out notice and evidence requirements in plain English.
• Parental Leave Policy: The central document for eligibility, notice, payments, KIT days, flexible returns, accruals and the return-to-work guarantee.
• Workplace Policy framework: Ensure your broader policies (e.g. flexible work, anti-discrimination, WHS) are consistent with parental leave settings.
• Staff Handbook: A practical, employee-facing summary that points to the full policies and sets out how to make requests.
• Contractor Agreement: If you engage contractors, use a proper Contractor Agreement to clarify that the PPL scheme doesn’t apply to that relationship and avoid sham contracting risks.

Not every business needs every document on day one, but most employers will at least require an Employment Contract and a clear Parental Leave Policy. If you’re updating existing documents, make sure they reflect the staged PPL increases and flexible days model.

Common Scenarios And Practical Tips

1) Employee Requests Leave Earlier Than Expected

Sometimes complications or early births happen. If you receive shorter notice than your policy specifies, balance compliance with empathy. Ask for evidence if appropriate and focus on coverage planning. A fair, documented approach helps avoid disputes.

2) Combining PPL With Annual Or Long Service Leave

Employees may ask to use paid annual leave or long service leave together with parental leave. Clarify how you’ll process the combination in payroll, what happens with public holidays, and whether it affects accruals. Spell this out in your policy to keep decisions consistent.

3) Requests For Flexible Work On Return

Under the NES, certain employees have a right to request flexible working arrangements (e.g. part-time work). You must respond in writing within the required timeframe and can only refuse on reasonable business grounds. Keep the discussion collaborative and solution-focused.

4) Paying Superannuation On Employer-Funded Leave

Some employers choose to pay superannuation on their own paid parental leave benefit (even if not strictly required). This can be a powerful retention tool. If you adopt this approach, document it clearly in your policy and budget for it consistently.

5) Replacing An Employee On Leave

If you engage a temporary replacement, use a fixed-term agreement with clear end dates tied to the parental leave period and any potential extension. Ensure you don’t inadvertently create ongoing employment rights by leaving dates open-ended. If in doubt, get quick guidance from an employment lawyer.

Implementation Checklist For Employers

• Confirm your approach to employer-funded paid parental leave (if any) and document it.
• Adopt or update a Parental Leave Policy to reflect the current PPL settings, flexible days and notice requirements.
• Reference the policy in every new Employment Contract and summarise it in your Staff Handbook.
• Train managers on the basics: NES entitlements, protected leave, KIT days, return-to-work guarantees and your internal process.
• Align payroll settings for PPL, including PAYG treatment and any superannuation decisions for employer-funded components.
• Set up a secure process for handling medical certificates and sensitive information, supported by an Employee Privacy Handbook.
• Prepare a simple communications plan (pre-leave, during leave, return-to-work) so everyone knows what to expect and when.

Key Takeaways

• Australia’s Paid Parental Leave combines government-funded support with any employer-funded benefits you choose to offer - both require clear processes.
• The scheme is expanding from 20 to 26 weeks by July 2026 and can be taken flexibly; keep your policy and payroll aligned with the latest rules.
• Employees may be entitled to up to 12 months’ unpaid parental leave under the NES (with a right to request another 12 months), separate from government PPL payments.
• As an employer, you may be asked to administer government PPL through payroll, withholding tax and keeping detailed records.
• Government PPL is generally not OTE for super; your own employer-funded leave settings (including super and accruals) should be documented clearly.
• Put the right foundations in place - an Employment Contract, a clear Parental Leave Policy and supportive workplace practices - to minimise risk and support your team.

If you’d like a consultation on setting up or updating your parental leave documents and processes, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.