Surprise $441m plan to improve parental leave in federal budget

An overhaul of the parental leave scheme seeks to solve the problem of gender – and superannuation – pay gaps.

An overhaul of the parental leave scheme seeks to solve the problem of gender - and superannuation - pay gaps. Picture: David Crosling

A surprise $441m plan to improve the terms for parental leave represents a pre-election appeal to the women’s vote while defusing rising discontent over the gender gap in superannuation.

Women are paid less than men across the economy and also retire with less: The gender pay gap is 14 per cent but the super pay gap is closer to 28 per cent.

A proposal to improve women’s super by adding super payments to government parental leave made it as far as federal Cabinet but the government has moved to go deeper into the gender gap issue opening up parental leave to a much larger slice of the population.

Under the refreshed program, a tangled regime which offers different deals to women and men in super gets overhauled where – at its best – both members of a couple can get maximum benefits in the system, including the ability to combine government paid leave and employer paid leave.

The actual payments under the government parental leave scheme remain unchanged at $772 a week. However, the threshold for eligibility moves considerably higher from an individual threshold of $150,000 to a household income of $350,000. The new scheme also consolidates existing time frames to one overarching arrangement where either member of a couple can take up to 20 weeks off work.

According to the government, the enhancement of the scheme should make an immediate difference to employees of small business where parental schemes rarely match the conditions offered by major corporations: ”This will particularly support women who are the primary earner and do not currently have access to employer funded leave,” says a government statement.

Under the new scheme, the government – particularly Superannuation Minister Jane Hume (who is also the Minister Women’s Economic Security) can argue the terms and conditions for optimising a couple’s income earning potential are much improved.

Higher earning women may more regularly return to the workforce allowing a lower earning partner to take the parental leave scheme which is indexed to the minimum wage.

“Giving families greater choice and flexibility about managing work and care will boost women’s workforce participation and enhance their economic security,” says Senator Hume.

At present, the vast majority of parental leave payments go to women – the level is almost at 90 per cent in government schemes:

Offering better parental leave arrangements should improve women’s income in mid-career, boosting superannuation savings over the course of working life, Currently, women retire with about $146,000 in savings while men retire with around $204,000.

Tied to the parental leave program is new funding directed towards enhancing women in leadership roles – women hold more than half of government board seats while that portion in the private sector drops to 34 per cent on the ASX 200.

Meanwhile, there is also an effort to get women into traditionally male-dominated trades.

The government has announced it is investing $38.6m over the next four years to provide additional support services to younger female workers.

At the other end of the spectrum in an effort to get more women into corporate boardrooms, there is a new $9.4m scheme that to expand the Future Women’s Jobs Academy.

The government says the gender pay gap has already narrowed from 17.4 per cent in 2013 to 13.8 per cent now. Women’s workforce participation – at 62.4 per cent – is already at a record high with women’s unemployment, in common with total unemployment, at its lowest level since 1974.

The budget “demonstrates the government’s continued commitment,” says Senator Hume.