Parental Leave - 12 Weeks on Pay

November 2001

By the Employment Team

Paid parental leave will become a reality from July next year. Employers need to consider the ramifications of the scheme.

Introduction

The Government has recently announced its decision to offer taxpayer-funded paid parental leave for 12 weeks from 1 July 2002. The Government proposes that the bill amending the Parental Leave and Employment Protection Act 1987 (PLEP) will have its first reading in Parliament before Christmas, after which it will be referred to a select committee for public submissions.

Existing entitlements

The PLEP currently prescribes a number of different types of parental leave - all of which are unpaid. A female employee may currently take maternity leave for up to 14 weeks, and a male employee may take paternity leave for up to 2 weeks. Either partner can, in addition, take extended leave being unpaid leave of up to 52 weeks in total for both spouses (maternity/paternity leave is accounted for within this period) to care for a child after birth or adoption.

Under the Act, 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 similar position open for the employee during the period of the leave. There are a number of limited defences open to employers who claim it is impossible to keep an employee's position open, for example, where the employee is in a key position.

Eligibility and entitlements under the new scheme

The new scheme will change the current minimum parental leave entitlements for employees provided for in the PLEP by introducing 12 weeks' paid parental leave. Eligibility for paid parental leave will be based on the existing criteria set out under the PLEP. The criteria requires the parent to have been in paid employment with the same employer for 10 or more hours a week for a full year before the due birth or adoption date. Payment will be made for 12 weeks and the mother can choose to transfer it to her partner. Eligibility extends to those in same sex relationships.

Under the scheme, parents will not be required to return to work after the paid 12 week period because they will still be able to take extended unpaid leave for a total of 52 weeks following the birth or adoption of a child.

Eligible women will receive either, a maximum payment of $325.00 gross per week, which equates to a net figure (based on 21% tax rate) of $256.75, or 100 percent of their previous weekly earnings, whichever is lower.

The scheme will cover approximately two-thirds of working mothers who have children; this excludes those who are either self-employed or do not meet the eligibility criteria set out under the PLEP. An estimated 20,000 mothers per year will qualify for paid parental leave which includes 5,000 mothers who work part time and 15,000 who work full time. The annual gross cost of the scheme is estimated to be $57 million. The scheme will not affect private or voluntary arrangements between employers and employees for parental leave payments.

Impact on businesses

With the introduction of this scheme, New Zealand will join all OECD countries (with the exception of Australia and US) which provide paid parental leave. The entitlements range from 12 weeks in New Zealand, to 18 weeks in Great Britain and up to 450 days in Sweden.

The Government's decision to introduce paid parental leave enables businesses to retain valuable staff who wish to take time off for parenting. However, businesses will need to consider possible ramifications of the scheme and, in particular, sexual discrimination in the workplace. It is unlawful to refuse to hire women because they are of childbearing age, and it is important that employers do not let the gender of job applicants or the fact that they could have children in the near future influence their hiring decision.