Parental leave is a complicated topic and the subject of lots of questions from employers and employees.
In this article, we'll cover an introduction to parental leave entitlements, provide some links to more information as well as cover how you record parental leave in PaySauce.
Visit the Employment website for a comprehensive overview: Parental Leave.
Parental leave eligibility
To be eligible for parental leave entitlements, an employee should have been working for at least 6 months - this doesn't have to be for the same employer.
The employee must also have worked for an average of at least 10 hours per week for the 6 months prior to going on parental leave.
To view the full details of eligibility visit the Employment NZ website. This is often referred to as maternity leave, but this set of parental leave entitlements is actually separate entitlements called 'primary carer leave' and 'extended leave', as well as another option called 'negotiated carer leave' for when an employee may not qualify for primary carer leave.
Partners leave
An employee may be eligible to take up to 2 weeks unpaid partner’s leave if they’re the spouse or partner of someone who is pregnant or taking primary care of a child under the age of 6 years.
Employees can take:
2 weeks of unpaid partner's leave if they have been employed for more than 12 months
1 week of unpaid partners' leave if they have been employed for more than 6 months but less than 12
Recording parental leave in PaySauce
You only need to record parental leave for the primary carer: if your employee is taking partner's leave, you can record this using leave without pay (or special leave if you have a policy to pay paid partner's leave).
Select Employees and click on the employee's name.
Select the Settings tab, then select leave from the menu.At the bottom of the leave settings, select 'yes' for 'employee is on parental leave.
Enter the start date and end date. If there is an adjustment to the dates later, that's fine - come back and adjust them.
If your employee is set to the 'varied hours' work type, you'll be asked to specify the number of hours that the employee is normally working. This is to ensure their correct leave entitlements are met while they are on parental leave. You can view the average hours worked each day in the employee's Balance screen, and then use that to work out the total of average hours per pay.
Click the Save button at the top of the Employee's settings window.
Special leave
Pregnant employees can take up to 10 days of unpaid special leave. They can use special leave for any pregnancy related reason, such as appointments with their midwife or for scans.
This is unpaid leave and can be recording using leave without pay in PaySauce.
Important facts about parental leave
Keeping in touch hours
Keeping in touch hours
When your employee is on parental leave, you will not be able to pay them anything except 'keeping in touch hours'.
Employees can perform paid work for you and stay on parental leave for up to 64 hours during the period of parental leave. This will not impact their paid parental leave entitlement. Keeping in touch hours cannot be paid in the first 28 days after the birth of the child.
Employees are considered to have 'returned to work' from parental leave if:
they do more than 64 hours of paid work during paid parental leave
they do paid work within the first 28 days after the birth of the child
start with a new employer
start self-employment
You can pay keeping in touch hours to your employee using the specially provided field on their pay card in PaySauce.
If your employee is receiving paid parental leave and keeping in touch hours, one of them will need to be using a secondary tax code - probably the keeping in touch hours, but the employee must determine this. Your employee should provide you with the correct tax code to tax their keeping in touch hours.
Leave entitlements
Leave entitlements
An employee away from work on Parental Leave will gain annual leave and sick leave as if they were still at work. This is correct, because the law says they are still entitled to leave.
Annual leave that an employee earns while on parental leave is subject to a special payment rule. This is set out in Section 42 of the Parental Leave and Employment Protection Act.
The law says that if an employee becomes entitled to annual leave during or within twelve months after parental leave, their annual leave pay is calculated based on their average weekly earnings in the 52 weeks before taking leave, with no comparison to their usual pay rate.
Because this includes unpaid time away from work on parental leave, the average weekly earnings can be much lower than what they’d normally get for a week’s work (because they have no employment earnings during the period of parental leave). The employee's average rate will increase the longer they are back at work and earning again.
If your employee takes this annual leave before it has become 'entitled' leave (i.e. while it is still accrued) then this rule does not apply and it will still be paid at the higher of their average weekly earnings or their ordinary weekly pay.
Sick leave entitlements are not affected, and is still paid at the usual rate after parental leave.
You may choose to have a company policy that applies the usual annual leave rate calculations to employees (i.e. pay them at their normal rate, not the lower rate after parental leave).
Returning to work
Returning to work
There's nothing special you need to do when an employee returns to work from parental leave.
It is common for employees to change their working hours after parental leave. If this is the case for your employee, ensure that you adjust their working hours correctly (see Managing employee's hours settings for more information).
Employee not returning to work
Employee not returning to work
If your employee does not return to work after parental leave, their last day of employment is considered to be the day prior to parental leave starting. Their termination pay should be calculated based on this date, and not account for any entitlements that have arisen during the period of parental leave.
This includes any gross earnings paid from keeping in touch hours.
Common questions
Clearing out a balance
We're often asked if it is okay to just pay out all of an employee's leave balance before they go on parental leave. The same rules apply here as for any employee: if entitled, the employee going on parental leave may request a cash up of up to one week of annual leave. Beyond that, the annual leave must be taken as time away from work. It is not legal to pay out leave in a lump sum beyond what is permitted in the annual leave cash up entitlements.
Cash up
Employees may request a cash up of annual leave while on parental leave. As long as they meet the cash up requirements this is able to be paid, however the employee may need to consider their tax code (if they are receiving a parental leave benefit). Depending on whether or not they are cashing up leave that they became entitled to while on annual leave, the rate may be impacted as well.
More information
We have written extensively on parental leave in a series of blogs if you're looking for more information on managing parental leave in your workplace. They also link to a checklist which we prepared in with our partners, Crayon.
More on the rule that impacts annual leave payments after parental leave: The override rate
Parental leave: When your employee is expecting
Parental leave: Avoiding common mistakes
Parental leave: Employee entitlements to parental leave
Parental leave: Job protections
Parental leave: During parental leave
Parental leave: Returning to work
Parental leave: Employee entitlements when returning to work