Parental Leave Obligations for Australian Small Business Employers

When an employee announces a pregnancy or adoption, many small business owners are unsure exactly what they are legally required to provide. The answer involves overlapping obligations under federal legislation, modern awards, and the government's Paid Parental Leave scheme — and getting it wrong can result in Fair Work Act breaches, discrimination claims, and significant back-pay liability.

This guide explains what Australian SMBs must know about parental leave in 2026.

The Two-Layer System

Parental leave in Australia operates on two levels:

1. Unpaid parental leave under the National Employment Standards (NES) — the employer's direct obligation
2. Paid Parental Leave under the Paid Parental Leave Act 2010 — a government payment administered through Services Australia and, from July 2025, increasingly employer-facilitated

Most small business owners focus on the government payments and overlook the NES obligations. Both matter.

Unpaid Parental Leave Under the NES

Who Is Entitled?

Employees who have completed at least 12 months of continuous service with you are entitled to unpaid parental leave. This includes:

• Birth mothers and their partners
• Adoptive parents
• Employees who are the primary carer of a child

Casual employees with regular and systematic engagement over at least 12 months are also entitled to unpaid parental leave.

How Much Unpaid Leave?

An eligible employee is entitled to up to 12 months of unpaid parental leave. They can request an extension of a further 12 months, bringing the total to 24 months. You can only refuse the extension request on reasonable business grounds.

Both parents can take unpaid parental leave simultaneously for up to 8 weeks (concurrent leave).

Notice Requirements

Employees must give at least 10 weeks' notice (if reasonably practicable) before taking parental leave, and must confirm the dates at least 4 weeks before the leave starts. However, if the birth or adoption happens earlier than expected, these notice requirements are relaxed.

You must respond in writing to any request for extended unpaid parental leave within 21 days.

Right to Return to Work

Employees returning from parental leave are entitled to return to their pre-leave position. If that role no longer exists, they are entitled to a position that is comparable in status, pay, and location.

You cannot eliminate an employee's role while they are on parental leave as a device to avoid their return. Doing so constitutes both a breach of the NES and potentially a general protections adverse action claim.

Keeping in Touch Days

Employees on unpaid parental leave can perform up to 10 keeping in touch (KIT) days of work for you during the leave period. These are voluntary — the employee must agree to each KIT day — and they are paid at the employee's ordinary rate. KIT days do not affect the employee's parental leave entitlement.

Government Paid Parental Leave

Who Receives It?

The Paid Parental Leave scheme provides government-funded payments to eligible primary carers (usually the birth mother or adoptive parent). To be eligible, the employee must:

• Be the primary carer of a newborn or recently adopted child
• Have met the work test (worked at least 10 of the 13 months before the birth/adoption, for at least 330 hours)
• Be an Australian resident
• Meet the income test (adjusted taxable income of $175,000 or less as an individual, or $350,000 or less as a couple from 2025–26)

How Much and for How Long?

From July 2025, eligible parents receive up to 22 weeks of Paid Parental Leave payments (increasing to 26 weeks by 2026), paid at the national minimum wage. The entitlement is shared between both parents — one parent cannot take the entire entitlement if both parents work.

The scheme is administered through Services Australia. Employers do not fund these payments.

Employer Obligations Under the Scheme

From July 2025, employers of businesses with 20 or more employees are required to facilitate Paid Parental Leave — meaning the government pays the money to the employer, who then passes it to the employee through payroll. This creates additional payroll administration obligations and reporting requirements via Single Touch Payroll.

For businesses with fewer than 20 employees, the government can pay Paid Parental Leave directly to the employee — you do not need to facilitate the payments unless you opt in.

Award-Based Parental Leave Top-Ups

Some modern awards require employers to pay additional entitlements during parental leave. The most common example is redundancy pay during parental leave — an employee made redundant while on parental leave must receive their full redundancy entitlements, not a reduced amount.

Some awards also require employers to pay superannuation during periods of unpaid parental leave, or to provide salary top-ups to bridge the gap between the government payment and the employee's ordinary pay. Check your applicable award carefully.

Discrimination and General Protections During Parental Leave

Employees are protected from adverse action related to pregnancy, parental leave, or potential parental leave. This includes:

• Dismissal because of pregnancy
• Demotion or salary reduction upon return from leave
• Restructuring that eliminates a role while the employee is on leave
• Failure to offer parental leave when the employee is eligible

These protections are enforced under both the general protections provisions of the Fair Work Act and state and federal anti-discrimination legislation.

Even the perception that an adverse action was connected to a parental leave request can trigger a claim. The Fair Work Commission can shift the burden of proof to the employer to demonstrate the decision was not adverse action.

Common Parental Leave Compliance Mistakes

1. Denying Leave to Part-Time or Irregular Employees

Many SMBs incorrectly assume that only full-time employees are entitled to parental leave. The entitlement extends to part-time employees and regular casuals who meet the 12-month service requirement.

2. Failing to Hold the Role

Restructuring a role to prevent an employee on parental leave from returning is a significant compliance risk. Courts and the Commission look at the timing and circumstances of any restructure — if it happens to coincide with a parental leave absence, it will be scrutinised closely.

3. Missing the 10-Week Notice Requirement

While employees are responsible for giving 10 weeks' notice, you should also be proactively ensuring your HR processes prompt employees to give notice in time. If an employee fails to give adequate notice due to a miscommunication you could have prevented, the Commission may hold you partly responsible.

4. Not Responding to Extension Requests

If an employee requests to extend their unpaid leave beyond 12 months, you must respond within 21 days. Failing to respond is a breach independent of whether the extension would have been granted.

5. Incorrect Superannuation During Leave

Some awards require superannuation to continue being paid during parental leave periods. Check your applicable award and ensure your payroll is configured correctly.

Special Considerations for Small Businesses

Small businesses face practical challenges around parental leave — particularly when a key employee takes extended leave and the business cannot easily absorb the gap.

Options include:

• Hiring a temporary or fixed-term replacement (noting that the replacement's role ends when the original employee returns)
• Redistributing duties among existing staff
• Engaging a labour hire or contractor to cover the period

When hiring a fixed-term replacement, be clear in the contract that the term is linked to the parental leave period, not an arbitrary date — this protects you if the original employee returns early.

How Reguladar Helps

Parental leave compliance involves multiple deadlines — the 12-month eligibility threshold, the 10-week notice requirement, the 21-day response window for extension requests, and the return-to-work obligation. Missing any of these creates legal exposure.

Reguladar tracks employment-related deadlines and obligations specific to your business, surfacing what you need to do and when. If you have an employee approaching the 12-month mark or going on leave, Reguladar alerts you to your obligations before they fall due.

Get clarity on your parental leave obligations. Start your free compliance check at Reguladar and see your full employment law profile in one dashboard.