Developments in Parental Leave

Andrew Scott-Howman, Partner | May 2001

Employers will have to wait until August for details of the paid parental leave scheme announced on Mother's Day. In the meantime, they should be aware of their obligations under the existing legislation.

Existing parental leave legislation

Many of our clients will have heard a lot of information from the media in recent weeks concerning parental leave. Most of those comments have been directed at proposed changes to the existing regime. Many employers may, however, be unaware of the terms of the existing parental leave legislation.

The Parental Leave and Employment Protection Act 1987 provides minimum entitlements for employees who wish to take parental leave. An employee may apply for parental leave if she is pregnant (or in the case of a male employee, if his partner is pregnant) or if adopting a child under five years old, provided the employee has worked for the same employer for at least 12 months and works at least ten hours per week.

The Act prescribes a number of different types of leave - all of which are unpaid. A female employee may seek maternity leave, being unpaid leave of up to 14 weeks. A male employee may seek paternity leave (usually taken immediately after the birth of a child) of up to two weeks. Either partner can, in addition, seek extended leave - being unpaid leave of up to 52 weeks in total for both spouses (maternity/paternity leave is accounted for within this period), required to care for a child after birth or adoption. These different types of leave are collectively referred to as "parental leave".

An employee is obliged to give notice to an employer prior to the birth of a child if he or she intends to take any form of parental leave. Provided that notice is properly given, the employer is obliged to keep the same or a similar position open for the employee during the period of the leave. There are a number of limited defences open to an employer who claim that it is impossible to keep an employee's position open (including, for example, where a redundancy situation exists).

The proposed changes

Women's Affairs Minister Laila Harr announced a number of proposed changes to this regime on Sunday, 13 May (Mother's Day). The Minister announced that paid parental leave will commence on 1 April 2002, although key features of the scheme are yet to be finalised. Policy work for the introduction of paid parental leave is intended to be completed by August 2001, with legislation to be introduced later this year.

In other statements, the Minister has indicated an intention to introduce up to 12 weeks paid parental leave. The practical effect of this will be that an employee who elects to take parental leave will be able to seek reimbursement of between 66-80 per cent of her wages (up to a possible weekly cap of $600) for a period of 12 weeks. This benefit, which is projected to cost NZ$60 million annually, will be funded not by employers but by taxpayers. Part-time workers who have been employed by the same employer for 12 months and who have worked at least 10 hours per week will also be eligible for paid parental leave.

The Alliance's original policy was for 12 weeks' paid parental leave at 80 per cent of the employee's wages, funded by a levy on employers. By contrast, Labour's election policy was for 6 weeks' paid leave to be funded by taxpayers.

Interestingly, it has been suggested that Alliance may use concerns about the possible split of TVNZ and its lucrative broadcasting transmission arm as leverage in its negotiations with Labour concerning the terms of the paid parental leave scheme. If so, it may be more likely that Alliance's policy forms the basis for any legislation introduced later this year.

The budget

The Minister of Finance, Michael Cullen, did little more in this year's budget than refer to the projected introduction of this scheme, commenting that it was an area of particular priority for the Alliance Party. It is expected, therefore, that the funding details for any scheme will wait until next year's budget statement.

Good for business?

It is unlikely that many employers will be surprised by the announcements made in recent weeks. Paid parental leave schemes exist in a significant number of western societies (with the notable exceptions of Australia and the United States). In some cases, the extent of paid parental leave is even more generous than the proposed scheme for New Zealand.

The British Labour Government recently announced that from April 2003, new mothers will receive 100 for each of their baby's first 26 weeks, with new fathers entitled to two weeks' paid leave at the same rate.

It is difficult to ignore the possibility that the proposed regime could increase unlawful discrimination against women of childbearing age by employers. There is already some anecdotal evidence of employers asking inappropriate questions at interviews or preventing promotion for this reason.