Extended Paid Parental Leave Set to Narrow Gender Pay Gap: Peak Union Body

New parents will gradually gain access to an additional two weeks of paid leave each year until the 26-week mark is reached in 2026.

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The recent extension of paid parental leave from 20 weeks to six months will narrow the gender pay gap and bolster support for working parents, the peak union body says.

New laws passed on March 18 will gradually extend paid parental leave for new parents by two weeks each year, starting from July 2024, until they can take 26 weeks off work by July 2026.

It will see parents gain increased flexibility with the option to take four weeks off together, previously limited to two weeks.

Over 180,000 families are expected to benefit from this initiative, costing the government around $4.4 billion (US$2.87 billion) annually from 2026/27.

The Australian Council of Trade Unions president Michele O'Neil said women would reap significant benefits, as new mothers lose 55 percent of their income in the first five years after having a child.

“That’s the effect on working women. You lose that much pay,” she said.

However, those already on leave during the financial year rollover will not get the extra two weeks, as the leave period starts when the application is made.

Ms. O'Neil said the paid parental leave scheme “still has a fair way to go.”

“We want to see continued improvements,” she said, urging the government to increase parental leave to 52 weeks and raise the payments above the minimum wage.

Parents receiving parental leave at the minimum wage would receive $23.23 per hour or $882.80 per week, whereas the average wage is $1,888.80.

“We got to make sure that you aren’t disadvantaged or discriminated against if you have a baby,” Ms. O'Neil said.

Relief Despite Child-Rearing Costs Remaining High

Nevertheless, many families will still receive paid leave from their workplace in addition to government pay.

“So, if people are eligible through the means testing, then they will also get both the government and their workplace entitlement,” social services minister Amanda Rishworth said.

Employer-provided benefits differ depending on an employment contract or a workplace policy.

It might involve paying the employee their regular wages during some or all of their leave. This is despite the cost of raising a child remaining hefty for most Australians.

Finance expert Victoria Devine indicated that the average monthly expenses from pregnancy to child-rearing years range from $700 to $750.

The social services minister acknowledged the financial strain young children place on households. However, she pointed to the recent plan to include superannuation payments on government-paid leave to elevate long-term strain.

The government announced this month its intention to start paying superannuation on Paid Parental Leave from July 1, 2025.

“Because taking time out of work and not making the contributions to your superannuation can often be one of the reasons women end up with a smaller retirement saving,” Ms. Rishworth said.

“But of course, our tax cuts are critical. Our tax cuts help. I think the figures are every woman working will get a tax cut, but 90 percent of women will be better off as a result of Labor’s tax cut changes. That’s immediate support that we can provide to families as well.”

It follows the Greens’ failure to get the government to bring forward paying superannuation on government payments before July 2025.

“There is still no justification for why women are being asked to wait for 16 months,” Senator Larissa Waters said.

Calls for Streamlined Processing for Small Businesses

Meanwhile, independent senators David Pocock and Jacqui Lambie pushed for smoother payment processing for small businesses.

They were concerned the expanded scheme added too much paperwork for small businesses and suggested that Services Australia should handle it unless companies prefer otherwise.

“Small businesses do not have human resource departments, they don’t have armies of accountants on their payroll,” Senator Lambie told the chamber.

In response, Labor Senator Malarndirri McCarthy noted only four percent of businesses annually would need to manage paid parental leave, with minimal time and financial costs, although some employers faced minor challenges.

The government assured that it was assisting employers in simplifying the administrative process.

“There wasn’t the evidence to back up removing small business from this,” the social services minister noted.

“We will always look at how we improve the administration of Paid Parental Leave for businesses and make sure that it is as smooth as possible.

“We'll continue to work to make sure that our paid parental leave scheme improves.”