Maria Kovacic (NSW, Liberal Party) Share this | Hansard source

I have had the privilege of sitting on both the Community Affairs Legislation Committee, which looked at the Paid Parental Leave Amendment (More Support for Working Families) Bill 2023; and the Education and Employment References Committee, which my colleague Senator O'Sullivan chairs, which recently looked into the impacts of paid parental leave on small business.

Before I discuss what we heard during both of these inquiries, it is important to note that it is a good thing that both sides of this chamber agree that 26 weeks of paid parental leave is the right thing for working Australian parents. In fact, in 2010 and 2013 the coalition took 26 weeks paid parental leave to the election, and I'm glad that we are now in a place where paid parental leave is available to Australian parents. But it is also important to highlight that it has been a decade, and in the past 10 years a great deal has changed, especially in the way small businesses operate and in the way they need to manage their payrolls. This is something we heard from small-business owners and their representatives during both the EEC hearings into the potential impacts of the Commonwealth Paid Parental Leave Scheme on small business and their employees and the Community Affairs Legislation Committee hearings into this bill.

As it stands, the way PPL works under the current system is that all employers, regardless of their size, have a mandatory role which requires them to pay government funded parental leave to eligible employees. The purpose of this is to ensure that there is a continuous connection between the employer and the employee; however, this is a system that is oriented around large corporates and institutions who have sufficiently sized payroll teams and infrastructure to be able to manage this and who also have a reliable cash flow. It doesn't consider small and family businesses.

In evidence given at the EEC's inquiry we heard the following testimony from one small-business owner:

It's putting this burden on a business. Now, you know, a big business, they just have to set up a system, I suppose, and it's all automatically done by pressing a button. But … we're a small business, so there's learning about it, which we all have to do anyway, but it would have been so much easier if they had … said, look, this is like a social security payment that we're paying to the recipient.

The reality is that for small businesses that comprise of 20 employees or fewer there is a significant amount of administrative burden that is placed on them in this process.

During the hearing for this bill, Ms Heazlewood from the Australian Chamber of Commerce and Industry spoke about the additional burden that the PPL scheme places on small businesses. She said:

We have heard from our small-business members that having them as the middlemen in the payments process creates a significant administrative burden on payroll processing time. When problems arise with payments, not at the fault of the employer, it can take a lengthy period of time to resolve, often causing the most distress to the employee and create unnecessary tension.

This evidence was backed up by a survey provided by the Motor Traders' Association in their submission on the impacts of paid parental leave on small business. They found that of the 246 automotive businesses that completed their survey, PPL added to the payroll processing time for more than 90 per cent of respondents. It increased the administrative burden on the business for almost 92 per cent of respondents. And it created cash flow problems for over 32 per cent of respondents. We need to think about that: it's adding a cash flow burden to small businesses administering a government payment. The MTA said 96.1 per cent of respondents stated that, given a choice, they would prefer Services Australia to pay the paid parental leave directly.

These survey results were matched by the Australian Chamber of Commerce and Industry survey results, which also found that 88 per cent of small businesses overwhelmingly believe that PPL should be administered by Services Australia, and that 97 per cent of businesses surveyed that had previously administered the system said, if given a choice, they would prefer for the payments to be administered by Services Australia. ACCI's research also found that 90.7 per cent of small businesses who administered the payment reported an increased administrative burden in managing the payment process.

ACCI also found that many small-business employers administering leave payments found no benefit to their relationship with their employees because doing so does not actually involve or require any proper communication. Some of the suggestion is that these payments must be made by the business in order to maintain a connection. If you have a small business of five or six employees and one of your key people is on parental leave, you don't forget about it. You notice it. You know that they're gone. It's very different in a large organisation that may have hundreds or thousands of employees as somebody could fly under the radar in that regard.

This is a really important distinction to understand why this is perhaps appropriate for large businesses and institutional businesses and not for a small or family based Australian business. That is why the coalition is moving a substantive amendment calling on the government to amend the Paid Parental Leave Act to require the secretary, as defined by the act, to pay PPL instalments directly to employees of small businesses, except in cases where a small business opts to pay the instalments directly to an employee. This is giving the small business a choice, if they can manage it, to actually do it or, if they can't, to opt to have Services Australia manage the payment. As we know, under the current system, there is already an opt-in system. An employer who is not legally obliged to make the payment to an employee—for example, if the recipient has been an employee for less than 12 months—can opt in to do so with the agreement of their employee. In the 2021-22 year around 38 per cent of employers had opted in to pay other employees not covered by the legal obligations.

What we also discovered at the committee hearings for this bill was that there is also an opt-out option. During the hearing, when asked about challenges and complexities small businesses may face with administering the system and why they may choose to opt out, Mr Flavel of the Department of Social Services said:

It's more a case that the current opt-out arrangements are not done on the basis of the size of the business, but rather on the basis of the administrative cost, particularly with respect to an employee who wants to take their entitlement in the form of a few days here and a few days there—in other words, anything less than 40 days—the employer has the ability to opt out of that arrangement. Clearly, for any sort of fixed cost, it's always going to be borne more by small business …

Those aren't my words. They're the words of the Department of Social Services. We know small businesses are impacted the most by this scheme, and the department knows this too. Given an opt-out option already exists for employers of any size if their administrative burden is proven to be too costly, why can't this simply be extended to all businesses of 20 people or fewer, who we know do not have the capacity to be the government's payment facilitator?

What makes the refusal to address the administrative burden more worrying and perhaps ironic is that many small businesses are run by women—the very demographic this matter was first designed to assist. During the EEC's hearings, one small private sector employer stated, 'It was just a real headache to set up. I feel that it was actually a really negative thing for both of us—for our business and on the life of the young girl that took advantage of it.' We also heard that, on average, it can take anywhere between four and six hours to set up a small business's first employee. That's just to have it in the system so as to be able to start the processing of that first employee. That's a lot of time. That's time that a small-business operator isn't in their shop, isn't talking to their clients, isn't working on building their business but is actually managing an administrative function of a federal government department. This comes at a considerable cost and also places strain on the employer-employee relationship, which is contrary to the intent of this scheme. The intent is for it to build relationships, not damage them.

By addressing this administrative burden and simply cutting small businesses out of being the middleman for government payments, the government has an opportunity to make this scheme better for everyone. First and foremost, it will save small businesses productivity loss in being an administrator on behalf of the government. More importantly, it means new parents will have their payments managed by Services Australia, who have the capacity to address their changing needs, the cash flow to ensure that they are paid correctly and on time and the institutional knowledge to address any of their questions and concerns on a payment that is being administered by them. The coalition knows that simple changes can be made to this scheme to make life easier for small businesses and new parents. We have the track record to prove that, in terms of our deep engagement with small-business owners.

In government, we saw women's participation in the workforce reach record highs, and we are really proud of that. We amended PPL legislation so that there are special circumstances which allow a person to meet the work test if they have been impacted by family and domestic violence, or a natural disaster, or a severe medical condition, which means we didn't stick to the prescriptive rules that said, 'You have to meet these seven checkboxes, in order to get this payment.' We actually said, 'There can sometimes be circumstances that mean that you don't always fit the test, but you should be eligible for this payment.' We want to take that same approach to ensuring that small businesses are not unnecessarily burdened in making this payment to their staff, instead of having Services Australia manage the payment for them.

In the same way, we made sure women did not miss out on PPL because of circumstances that were beyond their control. We allowed JobKeeper and COVID-19 disaster payments to count towards the work test for PPL to prove a genuine connection to the workplace. Again, these were simple, pragmatic solutions to make sure that the intent of this policy and payment worked in favour of parents. We indexed the income threshold for the first time since the scheme had been introduced, ensuring again that more women did not miss out on these payments—that more families did not miss out on these payments.

We support the transition to 26 weeks paid leave, as we did in 2010 and 2013. But we know that this scheme is unsustainable for small businesses in its current form, and that is why this bill should be passed with our suggested amendments. They would reduce the red-tape-compliance burden on small businesses and allow them to focus on their core work: actually running their small business—ensuring that they have a strong, robust and successful small business for their employees to return to when that time comes.