Managing Parental Leave

Employees may be entitled to 22 weeks of government-funded parental leave payments. Employees who have worked for you for six months (for an average of at least 10 hours a week) are also entitled to take up to 26 weeks of unpaid parental leave.

They can take up to 12 months if they have worked for at least 10 hours a week for a year or more. Workers who have worked for you for less than six months may also be entitled to parental leave (in certain situations).

Employees who are able get parental leave payments can choose to first use other types of paid leave they're entitled to, eg:

  • annual holidays
  • alternative days
  • special leave
  • time off in lieu

They can choose to start their parental leave payment period after they have taken other types of paid leave — even if this is after the child's arrival.

In New Zealand, employees still accrue annual holidays whilst on parental leave. An employee's time on parental leave is included as continuous service and the taking of parental leave does not affect entitlement to annual holidays; the employee will still be entitled to a minimum of four weeks of annual holidays (depending on an individual employment contract or the annual holiday method allocated). The payments for the annual holidays will be affected by the parental leave.

Under the Parental Leave and Employment Protection Act 1987, if an employee becomes entitled to annual holidays while they are on parental leave or in the 12 months following any parental leave, the calculation changes. The payment amount will then be determined by calculating only the employee's average weekly earnings for the 12 months immediately before the end of the last pay period prior to the annual holiday being taken.

The calculation would not be compared to the ordinary weekly pay as would normally occur. This means that if an employee takes annual holiday soon after coming back from parental leave there is the likelihood that the payment for annual holidays may be at a lower rate than if they took their leave at another time.

Annual holidays are always calculated at the time the employee takes their leave.

More information

If you are unsure of the employee's entitlement, please contact Employment New Zealand or seek other legal advise.

Below are the links that can help you with this:

Make a note of the employee's leave after their final pay before starting on unpaid maternity leave. We recommend taking a screen-shot of the Annual Leave Liability box in their timesheet.

Stop paying your employee, and wait for them to come back.

Paying during Parental leave

Our suggestion on how you can manage the period of leave in the Thankyou Payroll system  is outlined below and may make the calculation of the leave a little easier.

  1. Take a note on the date your employee commences leave of the current leave balance and the value it will be pay at. 
  2. Go to the Pay types tab in your employee's profile.
  3. Create a new Pay type for Parental leave. Make the value of this zero (0.00).

While they are on parental leave continue to include them in your usual pay runs with this Pay type in their timesheet, they will receive emails and payslips as usual.

While they are on parental leave, continue to include then in your usual pay runs with this new custom pay type that you have created in their timesheet. This way they will also receive email and payslips as usual.

The system will also allocate annual holiday balances on their anniversary date as usual. Once they come back, you will need to ensure that annual holiday is paid out at the correct amount if they are using the leave that they have earned while on parental leave. 

Paying annual holidays after Parental Leave

All leave earned before the employee went on parental leave is paid as usual - they are paid at the greater of ordinary weekly pay or average weekly earnings at the time they take the annual holidays.

Any leave that the employee becomes entitled to while they are on parental leave is calculated at the rate of the employee’s average weekly earnings over the 12 months just before the end of the last pay period before the annual holiday is taken (with no comparison to ordinary weekly pay). 

When entering leave that needs to be paid out at the average earnings you will need to alter the rate. Please call us when you need to do this.

0 Comments

Add your comment

E-Mail me when someone replies to this comment