Maternity leave anti-employment, anti-business

By: Mitch Gaynor

Economists are joining business in their opposition to the Productivity Commission’s proposed paid parental leave scheme, arguing it is anti-employment

Economists are joining business in their opposition to the Productivity Commission’s proposed paid parental leave scheme, arguing it is anti-employment and anti-business.

The Productivity Commission this week released its draft report on Paid Parental Leave.

The key plank of the recommendations is 18 weeks paid maternity leave. Employers will pay up to 9 percent superannuation for the period as well as acting as paymasters for the scheme, with the Government to reimburse wages.

The draft estimates employers will pay no more than 3 percent of the annual wage of an employer.

The net cost of the scheme for taxpayers is expected to be $450 million, while business well pay $74 million superannuation annually.

Industry groups including Commerce Queensland argue businesses face an "unaffordable" cost under the proposal.

Commerce Queensland President Beatrice Booth says the logistics of acting as paymaster on top of the superannuation cost – estimated at $75 million annually - would burden employers with unnecessary administrative and real dollar costs.

Labour-reliant industries such as retail and hospitality will be hardest hit, particularly as both employ more women than any other sector.

Restaurant and Catering Australia chief executive officer John Hart says this is yet another impost "eroding" the margins of restaurants.

"There’s no doubt we are the most labour intensive of all businesses, and that means anything that negatively impacts on labour costs hits us hardest - yet we’re also, because of that, the least viable of most businesses," he says.

"Any administration at that level is difficult, particularly for businesses like ours which often don’t have administrative infrastructure.

"To be frank we can’t afford it."

Scott Driscoll, executive director of The Retailers Association, says the only way this scheme will work is with the appropriate funding.

"We’re already tax collectors and we’re now about to become welfare agents. Where is the compensation for administration and compliance costs as well?" Driscoll asks.

"It’ll have a massive effect on many, many small businesses and the alternative is very clear - government needs to cover the costs of these workers entirely."

With Kevin Rudd and a number of his ministers indicating preliminary favour for the Productivity Commission model, KPMG middle marker advisory partner Bill Noye says it is important the Government provides SMEs with some form of compromise if it wants such a "necessary" form of social legislation to succeed.

"This is a way of the future. With more and more females in the workforce, business needs to work this issue through," Noye says.

"It’s just that it’s far too expensive.

"Small business is the administrator of every known tax to man kind… so they absolutely need funding assistance from the government.

"If we’re to really get some equality in the workforce this is a necessary step."

However the Queensland Council of Unions says businesses are overplaying the issue, claiming only 1 to 2 percent of women will be out of the workforce on parental leave at any given time.

According to Griffith University Economics Professor Ross Guest, the recommendations are ultimately a higher-valued baby bonus that will increase the rate at which tax dollars are ‘churned’ through the welfare system.

Tax churning has reached a point in Australia where an estimated 40 percent of families get more from the Federal Government in handouts than they pay in tax, Guest says.

"They’re getting more, or at least as much, in handouts as they’re paying in tax," Guess says.
So bad has it become that Guess says the economy is missing out on 20 cents for every $1 of tax spent by the Government.

The result, he says, will be a reduction in employment as businesses are slapped with a disincentive to hire more workers and recipients have less motivation to save and invest.

"This is more middle-class welfare [and] a lot of this money is going to families who don’t need it," Guess says.

"And where do we raise that money? Ultimately we raise taxes and in raising taxes you create a wedge between what the employer has to pay and what employees get after tax.

"It’s anti-employment."

With a business unable to extract any tangible benefit from a worker on leave, Guess adds that the "contribution" to the welfare of an employee is actually nothing but a "direct tax on employers".

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