Parental leave increases

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Delivering better outcomes for families has long been one of the Government’s top priorities, and it is great news for expectant parents and carers that Labour has implemented part one of their three-part paid parental leave increase, affirming their first 100 days in office pre-election commitment.

Parental leave is a scheme where eligible parents, or other primary carers, who stop working to care for their newborn baby or a child (under 6) are compensated for the otherwise unpaid time they would have to take off work.

In New Zealand paid parental leave is available to everyone, provided you meet the criteria, and you do not need to be a citizen or permanent resident.   

To qualify for paid parental leave, you need to be employed under New Zealand employment law and have worked for an average of 10 hours a week for any 26 of the 52 weeks before the due date of the new-born, or the date you become the primary carer of a child under 6 years of age. There is also the ability to transfer your paid parental leave to your spouse, partner or another carer, provided they also qualify for paid parental leave.

The hours worked to meet the parental leave payment test do not have to be with one employer. If you have changed jobs multiple times throughout the year, as long as you have worked the minimum hours required then this is not an issue. These hours can be either worked as an employee or self-employed, or a combination of the two.    

In terms of applying for paid parental leave, the process has remained the same. There are two steps. One, you are required to notify your employer a minimum of three months in advance for a newborn and 14 days for primary carer, and two, you are required to complete an IR880 form which is sent to the IRD.

As part of the IR880 form, you are required to send confirmation of income and work details. For employees this can be done by an employer’s declaration, if you have had the same employer for the last 52 weeks and they are able to verify you have worked an average of 10 hours a week for any 26 weeks in the last 52 weeks. If you have had multiple jobs and employers in the last year, you will need the statutory declaration to be verified by an authorised person, such as a Justice of the Peace. If you’re self-employed, you must get the IR880 form signed by your chartered accountant or tax advisor if you have one; otherwise you will need to complete a statutory declaration.

If the expectant mother wants to transfer her leave to her spouse or partner, she must first fill out the IR880, and then transfer her entitlement to her spouse by completing an IR881 form. The individual must fill in the form either before the parental leave starts or at any time while on leave, but before they return to work.

The first increase from 18 to 22 weeks occurred on July 1, 2018, with a further extension to 26 weeks expected from July 1, 2020. The policy covers babies with a due date on or after the change date, and also applies for date of adoption or date you become primary carer. The rate of payment has also increased by 4.7 percent in line with the increase in the nation’s average weekly earnings from $538.55 to $564.38 before tax.

If you do not qualify for paid parental leave, there are still other types of leave available to parents including primary carer, special, partners, extended and negotiated carer leave, which all have their own criteria and benefits that they provide.

The comments in this article are of a general nature and should not be relied on for specific cases. Taxpayers should seek specific advice.

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About Author

Tracey Clark

Tracey Clark is a PwC director based in the Waikato office. Email: tracey.e.clark@nz.pwc.com