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Paid Parental Leave Scheme – What is it? And how do I setup my software for it?

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Paid Parental Leave Scheme

Paid Parental Leave Scheme – What is it? How do I setup my software for it

The new Paid Parental Leave scheme became compulsory on 1 July 2011 – it is an offer from the government whereby up to 18 weeks paid parental leave is offered to eligible working parents of children born or adopted on or after 1 January 2011. The government makes a payment to the employer to then pass on to the employee. This post explains generally what is involved to setup and record Paid Parental payments within your software. For full details go to our software website What is the current rate of Parental Leave? The rate is paid at the National minimum wage. For more information go to Paid Parental on page Useful Business Links. How to do it:

  1. Create an account to track parental leave – We need to create a Liability account to track your Parental Leave. Depending on your Parental Leave reporting obligations, you may want to create an Expense account to track this leave instead of a Liability account. Speak to your accountant or the ATO for the appropriate solution based on your circumstances.
  2. Create a new Wages category
  3. Exempt Paid Parental Leave from calculating superannuation
  4. Exempt Paid Parental Leave from accruing entitlements – depending on the way the employee is set up
    1. Hourly employees – the entitlement will not accrue as there are no hours to calculate the percentage. This seems contradictory, but normally hourly employees will accrue leave as a percentage of hours worked. While they are on Paid Parental Leave, they are being paid via a Salary Wage category, rather than an Hourly Wage category. Therefore having no hours on the paycheque means that no leave will accrue.
    2. Salary Employees – need to have the Entitlement(s) deselected in their card. This is because generally these employees will be set to accrue a flat amount of hours per Pay Period/Month/Year, and unless the entitlement is deselected in their card, the entitlement will continue accruing throughout the period of their Paid Parental Leave.
    3. Note: When the employee finishes the Paid Parental Leave you will need to select these entitlements again so that the leave entitlements will accrue.
    4. What do we do when my employee is taking Paid Parental Leave? In MYOB you go to the standard pay and zero all the salary or hourly $ amounts, and against the Paid Parental Leave category, enter the amount that is to be paid.
    5. We are now ready to process Paid Parental Leave payments for your employees. When you have finished paying the Paid Parental Leave payments, you can use the Reset to Original Amounts button on the Payroll Details tab of the employees card (as shown above) to restore the values back to the standard hours.
      1. Receiving the payment from the government. When the employer receives Parental Leave payment from the government, this needs to be recorded as a Receive Money transaction into the Liability account created.
      2. Note – Paid Parental Leave and Payment Summaries – If you include the Paid Parental Leave amount in the Gross Wages on your Payment Summary, you will need to account for this if you attempt to reconcile the total from the Payment Summaries with the Total in your Wages & Salaries expense account. The Paid Parental Leave amount is not shown as an expense, and therefore it is expected that the Payment Summary Total will be higher than the total of the Wages & Salaries expense account. For more information on Payment Summaries, see the MYOB support note Preparing and printing Payment Summaries.
      3. Removing Paid Parental Leave When an employee returns to work after parental leave, their card needs to be updated so the Paid Parental Leave payment will be removed from the employee’s standard pay, and their normal Base Salary will be reinstated.

Author: Account keeping plus (Business accounting software

Administration, Bookkeeping and Compliance for small business, and Self-Managed Super Funds (SMSF) Training, trouble-shooting, or we can do the books and payroll for you! Self Managed Superannuation Fund Service Provider, Free support 30 min call 0407 361 596 Australia (+61 drop 0 from overseas) MYOB Certified Consultant, Reckon/QuickBooks Professional Partner.

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