Parental Leave Pay is a Government scheme available to eligible working parents. Eligible employees who are the Primary Carers of a newborn or adopted child may be entitled to receive financial support for up to 18 weeks whilst on Parental Leave.

Services Australia (Centrelink) administers the scheme and has the power to decide whether to make these payments directly to the Employee (generally this happens when the Employee has worked for less than 12 months for the Employer) or to the Employer, who then must pay to the Employee.

Parental Leave Pay is paid at the National Minimum Wage pay rate. It does not accrue Superannuation and it's excluded from both the Workers' Compensation Annual Declaration and Payroll Tax.

Whilst on Parental Leave, Employees do not accrue Annual or Personal Leave entitlements. This period is also considered an 'Absence period not contributing to Service' across all states' Long Service Leave Acts.

Parental Leave payments can be made before, after or at the same time as other entitlements such as Annual Leave or Long Service Leave.

To find out more about Parental Leave rights in Australia, refer to our 2-episode blog series on this topic published on our website.

Set Up Government Funded Parental Leave

If Services Australia requires the Employer to pay Parental Leave pay to the Employee through payroll, new Accounts and Pay Items must be created to process these payments.

Create the Parental Leave Pay Accounts

In order to reconcile your Payroll correctly, you will need to create two accounts: Parental Leave Pay Expenses (used to link to the Pay Item) and Parental Leave Funds Received (used to code the payments made by Services Australia).

Create the Parental Leave Pay Expense Account

Go to Accounting > Chart of accounts
To create a new Liability Account click on [Add Account]

è The Add New Account screen
Select/Enter the following details:
- Account Type > Expense
- Code > Enter a 3-digit code starting with 46
- Name > Type: Employees - Parental Leave Pay
- Tax > Select: BAS Excluded
Click on [Save]

Create the Parental Leave Funds Received Other Income Account

Go to Accounting > Chart of accounts
To create a new Liability Account click on [Add Account]

è The Add New Account screen
Select/Enter the following details:
- Account Type > Other Income
- Code > Enter a 3-digit code starting with 29
- Name > Type: Govt Payments - Parental Leave
- Tax > Select: BAS Excluded
Click on [Save]

Create the Parental Leave Pay Pay Item

Once you have created the Parental Leave Pay Expense Account, you can set up the Parental Leave Pay Pay Item
From the Organisation Menu go to Settings > Payroll Settings
Click on the [Pay Items] > [Earnings] Tab
Click on [Add] > Paid Parental Leave
Select/Enter the following details:
- Earnings Name > Type: Parental Leave Pay
- Display Name > Type: Parental Leave Pay
- Rate Type > Select: Rate per Unit
- Type of Units > Select: Hours
- Rate per Unit > Type the current National Minimum Wage pay rate
- Account > Select: Employees - Parental Leave Pay (46#)
- Exempt from PAYG Withholding > Leave Blank
- Exempt from Superannuation... > Select this option
- Reportable as W1... > Select this option
Click on [Add]

è The Pay Item screen

Set Parental Leave Pay in the Employee Pay Template

Go to Payroll > Employees
Open the Employee contact and select the [Pay Template] Tab
Change the Ordinary hours to 0
Click on [+Add Earnings Rate]

è The Add an Earnings Line screen opens
Select/Enter the following details:
- Earnings Rate > Select: Parental Leave Pay
- Calculation Type > Select: Use Earnings Rate
Click on [OK]

è The Parental Leave Earnings Line is added to the Employee's Pay Template
Set the hours of Parental Leave pay to the Full-Time hours applicable to your Pay Period (38 weekly | 76 fortnightly | 152 monthly)
Click on [Save]