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Some new mums are actually losing money by coming back to work

New mothers contemplating returning back to work face a difficult choice no one else can make for them. Should they go back? For how many days a week?

It’s a delicate balance: working will mean a sure and steady flow on income, but not working means saving on expensive childcare costs.

Women make up more than two thirds (69 per cent) of the Australian part-time employee workforce, with caregiver responsibilities tending to fall more heavily on the fairer sex.

Also read: The difference a decade has made on the super gender gap

A recent report by major accounting firm KPMG can now offer new mums a handy rule of thumb: any more than three days of work a week and the earnings become negligible.

The professional services giant has developed a ‘Workplace Disincentive Rate’ (WDR), which calculates the ratio of extra earnings from going back to work against extra costs lost to income tax, family payments and childcare.

A WDR of 50 means half the earnings are being lost to such costs, while 100 per cent means the family is not any better off from the mother working bonus hours at all. Any higher than 100 per cent means the family is actually losing money due to the extra hours being put in.

“KPMG analysis finds WDRs of between 75 per cent and 120 per cent are commonplace for mothers seeking to increase their days of work beyond three per week,” the report said.

Where do I sit?

KPMG have done some modelling that demonstrates how much a mother and her partner earns will ultimately determine if the hours are worth the money.

Interestingly, however, the higher the combined income between two parents, the less worth it it becomes for the mother to work.

Scenario 1

“If a couple with two young children in long day care both earn the minimum wage rate, the family is only $929 per annum better off from the mother increasing her working days from three to four per week.”

“On the extra day the mother is effectively working for just $2.50 an hour.”

Scenario 2

“By increasing her working days from three to four per week she would add $8,000 per annum to the household budget in gross terms, but only $294 per annum after income tax paid, loss of family payments and CCS and extra out‑of‑pocket childcare expenses.

“This mother would be working for less than $1.00 an hour on her fourth working day each week.”

Also read: 5 ways you’re saving money without even realising

Scenario 3

“If the father earns $80,000 per annum and the mother earns the part‑time equivalent of $80,000 per annum, by increasing her working days from four to five per week the mother’s WDR is 90 per cent and she increases the family budget by less than $5 per hour.”

Scenario 4

“Consider a professional couple where the father earns $100,000 per annum and the mother earns the part‑time equivalent of $100,000 per annum. By increasing her weekly working days from four to five, this mother costs the family budget in net terms more than $4,000 per annum, losing $85 every extra day she works.

“Her WDR is 120 per cent, indicating that she would cost the family budget 20 per cent more than she earned by moving from four to five days per week.”

Scenario 5

“If a professional couple were both earning the equivalent of $200,000 per annum, the mother would effectively be earning an extra $2,005 a year by increasing her working days from three to four per week, facing a WDR of 95 per cent.

“She would be working for little more than $5 per hour on those extra days of work. In a household where the father is earning $250,000 per annum and the mother is earning the part‑time equivalent of $150,000 per annum, the mother would cost the household budget $1,524 per annum by increasing her working days from three to four per week.

“She would be losing more than $31 a day by moving from three to four days per week. Her WDR is 105 per cent.”

Also read: How big is the gender pay gap in your sector?

Scenario 6

“In a household where the father is earning $250,000 per annum and the mother is earning the part‑time equivalent of $150,000 per annum, the mother would cost the household budget $1,524 per annum by increasing her working days from three to four per week.

“She would be losing more than $31 a day by moving from three to four days per week. Her WDR is 105 per cent.”