How does the Paid Parental Leave system work?
How does the Paid Parental Leave system work?
Paid parental leave (PPL) is a government-funded entitlement that helps cover loss of income when parents take leave or stop work to care for their newborn.
Currently, up to 26 weeks of PPL may be paid by Inland Revenue, and it’s not just mums and dads who can receive this support. Other primary carers of young children may also qualify for PPL, provided they meet eligibility criteria around child-raising responsibility and work.
Here we look at PPL in more detail and see what it might offer your family.
Who is eligible for paid parental leave?
To qualify for PPL, you must have permanent primary responsibility for a child under the age of six and be:
- A pregnant woman or new mother;
- The spouse or partner of an expectant or new mum (provided you qualify for PPL and the mum-to-be or mum applies for PPL, then transfers part or all of her PPL entitlement to you); or
- Another primary carer, including an adoptive parent, Home For Life parent, whāngai, grandparent with full-time care or permanent guardian (this doesn’t include a foster carer or child care worker).
What are the work requirements for paid parental leave?
As well as taking ongoing responsibility for the care, development and upbringing of a young child, the PPL system requires that you have been in the workforce in an employed or self-employed capacity.
To qualify for PPL, you must have worked at least an average of 10 hours per week in at least 26 of the 52 weeks before your due date, or the date the child comes into your care.
It doesn’t matter how many employers you’ve had over the relevant time, and you don’t need to be going back to the same job.
You do need to establish a 'sufficient connection' between New Zealand and your relevant employment, (i.e. be working for a Kiwi employer, paying income tax to this country and have an employment relationship that's subject to NZ employment law).
To meet the work requirements for PPL, you also need to have applied for/taken leave or stopped work straightaway to care for your new child.
Once you're on PPL, you can stop working or resign from your job and still receive the payments.
When does paid parental leave start and end?
Generally speaking, you can’t get PPL until you finish working or start parental leave from work, and the latest you can start receiving payments is:
- Your baby’s due date
- Their birth date; or
- The date the child comes into your care.
The payments then roll on for one continuous period for up to 26 weeks (this figure used to be 22 weeks but increased as of 1 July 2020).
If you apply for PPL after your child has arrived, then Inland Revenue will pay you the PPL entitlement you missed out on as a lump sum.
There is also the option of using annual leave or other paid leave before you tap into your PPL. In this case, PPL will start on the day after your other leave ends.
How often will you be paid and how much?
If you qualify for PPL, then the entitlement is paid into your bank account fortnightly by Inland Revenue, with tax and any other payments, like student loan repayments and KiwiSaver contributions taken out.
In dollar terms, PPL payments often mimic your usual income, up to a cap.
If you’re an employee, then your PPL payments will be equal to your ordinary pay, up to a maximum of $606.46 per week before tax.
If you’re self-employed, then your PPL payments will be:
- Matched to your average earnings, up to a maximum of $606.46 per week before tax; or
- A minimum payment of $189 a week before tax.
The government ensures that you get at least the equivalent of 10 hours per week at the minimum wage, and it’s worth noting that your first and last payments might be different to your ongoing fortnightly payments, depending on the date you begin PPL.
What are pre-term baby parental leave payments?
If your baby is born early (before the 37th week of pregnancy), then you might be eligible for pre-term baby parental leave payments before your regular PPL payments begin.
These pre-term baby payments start from the date your baby arrived and continue until the end of what would have been your 36th week of pregnancy. After that time, your normal PPL payments will begin.
Pre-term baby payments will stop if you go back to work, and they can be paid to a non-birth mother who’s a primary carer. There’s more information about this here.
How do you apply for paid parental leave?
Before you receive any PPL payments, you must formally apply by completing an application form and sending it to Inland Revenue.
You’ll need to provide:
- Your IRD number and tax code
- Bank account details
- Income details
- A declaration from your employer, accountant, tax advisor or a Justice of the Peace
- Evidence from your ‘lead maternity carer’ concerning the due date or birth date of your baby
- Evidence that you are a primary carer who takes permanent primary responsibility for a child under the age of six ('permanent primary responsibility' doesn't include the partner/spouse of a mum-to-be - PPL needs to be transferred to them)
If you’re deemed eligible for PPL, then Inland Revenue will send you a payment advice letter outlining:
- Your weekly PPL entitlement amount
- How much your fortnightly payments will be
- The dates your payments will be received
How can you transfer paid parental leave to your spouse or partner?
If you’re a mum or primary carer, you can transfer part or all of your PPL entitlement to your spouse/partner, as long as they also qualify for PPL.
It’s important to note that this PPL transfer can only be done once, and the paid parental leave must be taken in one continuous block (not a week here and there). Also, if you’re transferring part of your 26 week entitlement to your spouse/partner, then their PPL has to start the day after your PPL ends.
To transfer your PPL, both you and your spouse/partner will need to fill out this PPL transfer form. You’ll also need to apply for PPL if you haven’t done so already.
Your spouse/partner will receive a payment advice letter if they’re found to be eligible for PPL, and keep in mind that their payment amount is likely to be different to yours, because it’s calculated on their income.
Can you receive Working for Families Tax Credits as well as paid parental leave?
You can read more about the four types of Working for Families payments here, and the good news is that you may be able to get the in-work tax credit while receiving PPL.
Also, if you register for PPL and Best Start, then your Best Start payments will begin after your PPL ends.
What are ‘keeping in touch’ hours?
Although PPL enables parents and other primary carers to stop work to look after a little one, sometimes people still need to do some of their usual paid work.
To allow parents to receive the PPL payments and return to work in a small way, the government allows for ‘keeping in touch hours’.
If you’re self-employed, you’re allowed to do ‘occasional oversight or administration of your business’ without losing your PPL payments.
And if you’re employed, then you can engage in up to 64 hours of work during the 26 weeks of PPL, provided your employer agrees and this doesn’t happen in the first four weeks after giving birth.
Just make sure you use a secondary tax code for any income you get while being paid PPL, to avoid being hit with a tax bill at the end of the financial year. Inland Revenue says the secondary tax code should be used for your smaller income.
What other parental leave entitlements are there?
Some workplaces offer employer-funded parental leave payments, and unpaid parental leave comes in a few different forms:
Primary carer leave allows employee parents to take up to 26 weeks off work to care for their baby
Partner's leave allows a spouse or partner to take one or two weeks of unpaid leave;
Extended leave allows employee parents to take/share an extra 26 or 52 weeks off work;
Negotiated carer leave lets employees take time off if they don't qualify for primary carer leave; and
Special leave allows mums-to-be to take 10 days off work for things like scans, antenatal classes and midwife appointments before bub arrives.
You can read more about the different types of parental leave here, and this table summarises the paid and unpaid parental benefits you might qualify for. The government's parental leave eligibility tool will also help you work out what parental leave is open to you or your partner, and how long you can take off to care for your baby.
All in all, PPL frees up parents and primary carers to focus on child-raising rather than money-making. By bolstering the family budget for up to 26 weeks of PPL, the government is helping New Zealanders find a better work-life balance.
This child care article was last reviewed or updated on Friday, 10 July 2020
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