Can small business afford paid maternity leave?

• Yvette Neilson
• 19 November 2008
• Page 1 of 2 : single page

In September 2008, the Productivity Commission released the results of its inquiry into paid parental leave, set up by the Rudd government in early 2008 to examine ways to improve support for parents of newborn children.

The inquiry proposed a taxpayer-funded parental leave scheme that would provide 18 weeks of paid leave for women and two for men, both at the minimum wage of $544 per week.

This would replace the current baby bonus. Employers would still have to pay superannuation and the benefits would be subject to normal taxation.

The continuing superannuation contributions have proved extremely unpopular. Under the scheme, business owners would act as paymasters, providing capped superannuation for employees for the leave period, but only for employees eligible for such benefits before taking leave and who are entitled to unpaid leave.

The 18 weeks could be shared, and the self-employed, same-sex partners, contractors and casual employees would also be eligible. The government is set to make a final decision in January 2009.

The estimated cost is around $530 million annually, of which taxpayers would contribute around $450 million with business picking up the remaining $75 million.

The Productivity Commission said the proposed scheme would:

• Improve child and maternal health and generate welfare benefits by increasing the time parents take away from work
• Stimulate lifetime employment rates of women
• Increase retention rates for business, with reduced costs for training and recruitment.

How we got here

Jeanne Brooks-Gunn, professor of child development at Columbia University in the United States, believes the difference in individual countries’ attitudes to maternity leave has its roots in population growth after the second world war.

Brooks-Gunn believes many European countries developed maternity leave policies after WWII to help combat falling birth rates.  In the post-war US and Australia, however, immigration from war-ravaged European countries ensured population growth.

Jane Waldfogel, professor of social work and public affairs at Columbia, says European and American feminist movements had differing goals.

“In Europe, feminists emphasised special treatment for mothers, including maternity leave and child care,” Waldfogel says.

“The American feminist movement didn’t want to hear anything about mothers. They wanted equal rights for women, not special treatment.”

The reaction from small business

The scheme comes as a relief to small business advocates who feared the report would suggest a paid maternity leave funded by business and the private sector. While many small business owners recognise the need for parents to take time off to care for children, the resounding chorus from most small business groups on the matter has been, ‘we can’t afford it’.

Robert Mallett, general manager of operations at the Council of Small Business of Australia, supports the idea of maternity leave being paid from the public purse.

“But this cost for superannuation, I don’t think that’s positive for small business,” he explains. “I don’t support the employer having to pay a superannuation component, especially since the person may not return to work.”

Richard Evans, executive director of the Australian Retailers Association says he warmly supports the idea of maternity leave.

“We feel that since society is saying there is too much demand on mothers and they should spend time with their babies, society should pay for it,” he says. “Many retailers already have paid maternity leave programs in place: Woolworths and Myer both offer six weeks paid leave, and Woolworths also offers a two-week bonus if the  employee returns to work.

“The big issue is that we are opposed to any cost transferred to small business. It’s hard enough for business owners to keep jobs open and replace competent staff with temps, but if they have to wear extra costs on top of that.

“The current proposal means employers would have to double-dip on superannuation, paying for the absent employee and for their replacement, but they would also have to pay them through their payroll system, which adds to salary bills and payroll tax. Then there’s the cost of administering the program.

“Not enough thought or awareness has been given to how the costs will flow through to small businesses, who will have to reduce their employment costs and adjust their business model to wear these costs.

“The result will be increased prices. The major brands will be able to carry the cost but the smaller ones won’t, and it therefore becomes an anti-competitive issue,” he concludes.

Beyond the financial

However, there are reasons beyond the fiscal to consider.New South Wales Commissioner for Children and Young People Gillian Calvert contributed to the Productivity Commission’s report and has long argued paid maternity leave of at least one year would be best for children’s development – much better than a system that forces mothers back to the workforce and children into care.

“There are compelling biological arguments for enabling parents to be with their babies for at least the first year of their lives and preferably the second,” Calvert says.

“Research shows the continuous interaction between baby and parents in the first 12 months of life shapes brain wiring – affecting how a child regulates their emotions, communicates, solves problems, thinks logically and reacts to the world.”

Calvert commends the report for acknowledging the importance of six months exclusive parental care, but is disappointed the proposal only funds 18 weeks of leave.

“This will seriously disadvantage working families as too many Australian parents are financially pressured to return to work early,” she says. “As a country, we should be supporting them to build this important foundation for their children’s development and therefore the nation’s future prosperity.”

In particular she feels casual employees and low paid workers have not been fully considered.

“Under this scheme, any leave they have will be used up during the pre-natal period,” she says.

“We advise working families to demand from the government at least six months, ideally 12 months, of legislated paid parental leave.

“If a developing country such as Vietnam, with a gross domestic product less than 7% of Australia’s, can fund six months paid parental leave, then Australia certainly can.