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

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 the bookkeeping (updated June 2020)

1.     Create an account to track parental leave – (June 2020) Best to create 2 accounts – an Income Account PPL and an Expense Account PPL to link the wage category to. Then you can track the total in each account matches at the end of the period (they in-effect cancel each other out).  (the old way advised was – 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 PaidParentalLeave – and link the new PPL expense account

3.     Exempt Paid Parental Leave from calculating superannuation

4.     Exempt Paid Parental Leave from accruing entitlements – depending on the way the software manages this.

a.     Hourly employeesthe entitlement will not accrue (in MYOB Account Right) 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.

b.     Salary Employeesneed to have the Entitlement(s) deselected in their card for most software. This is because generally these employees are usually 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.

5.     Note: When the employee finishes the Paid Parental Leave you will need to select these entitlements again so that the leave entitlements will accrue.

6.     Action – when my employee is taking paid parental leave?
In MYOB for example, 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.

7.     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.

8.     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 Income/Revenue account created.

9.     Note – Paid parental leave and Payment SummariesIf 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 shown as an expense, and therefore it is expected that the Payment Summary total match than the total of the Wages & Salaries expense account. 

10.   Removing paid parental leaveWhen an employee returns to work after parental leave, their card needs to be updated so the Paid Parental Leave payment will be disabled from the employee’s standard pay, and their normal Base Salary will be reinstated.

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