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,
• A new mum of a child under the age of one,
• 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, but you do need to be eligible as either an employee or a self-employed person. This means you can't combine the hours you worked as an employee with those you worked in a self-employed capacity. You can, however, combine the hours from different jobs.

You also 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).

It's also important to know that you don't need to be going back to the same job after your PPL ends. Once you're on PPL, you can stop working or resign from your job and still receive the payments.

You do need to apply for PPL 'before the earlier of, the date':

• Your child turns one (if you're an expectant mum)
• Your child has been in your care for 12 months (if you're a primary carer), or
• Your return to work.

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.

If you apply for PPL after this date, Inland Revenue will pay you the PPL entitlement you missed out on as a lump sum.

Once they start, PPL payments roll on for one continuous period of up to 26 weeks.

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 you can read more about how they calculate your income here. 

You can expect 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 log on to myIR and formally apply with Inland Revenue.

The application process is detailed here and you’ll need to provide:

• Your myIR log on details
• Your tax code
• Bank account details
• Income details (so the government can estimate your income for PPL)
• Evidence from your 'lead maternity carer' of the due date or birth date of your baby
• You might also need evidence that you are a primary carer who takes permanent primary responsibility for a child under the age of six, keeping in mind that '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 notice of entitlement that tells you the:

• Amount of your regular fortnightly payments, and
• The dates your payments will be received

All in all, myIR makes things easy. As of March 2021, there's a new PPL section in the online service, so you can view and update your PPL information there, going forward. 

There have also been changes to the application process. There's no longer a need for employers to sign or verify the information in your application, and if you're self-employed people you no longer have to get a tax agent to verify your income details when applying for PPL.

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 meet the working requirements to 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, you'll need to:

• Complete the 'transferring PPL' information in your PPL application in myIR, or 
• Complete a 'tranfer my PPL' request in myIR (if you've already applied for PPL). The steps are detailed here.

Your spouse/partner then needs to complete an application. Inland Revenue will notify them when they need to do this, and once all is in order, your entitlement will be updated to show that the payments have been transferred from the date provided.

Money-wise, your spouse / partner's payment amount is likely to be different to yours, because it's calculated on their income, not yours.

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.  

Can you receive other income while getting paid parental leave?

Generally speaking, you can't keep working while getting PPL. However, it is possible to receive these types of income and keep your PPL entitlements:

• Top-up payments from your employer to supplment your PPL payments
• Payments for 'keeping in touch hours'
• Payments for any work that you did before you started PPL.

The government recognises that parents may need to do some of their usual paid work to keep things ticking over while they're looking after a new baby, and this is where keeping in touch hours come in.

If you're self-employed, these hours allow you to do 'occasional oversight or administration of your business' without losing your PPL payments.

And if you're employed, keeping in touch hours mean you can engage in up to 64 hours of work during the 26 weeks of PPL, provided your employer agrees.

Keeping in touch hours can't be used in the first 28 days after giving birth.

Tax-wise, it's important to use a secondary tax code if you get any other income 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 may allow employees to 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.  

References
Inland Revenue
Employment New Zealand