Life

The Ins and Outs of Maternity Leave

By Investors Group / June 2016

Soon-to-be parents have so much going on during pregnancy that they often forget to look into leave until the baby arrives. Plan early, so you don’t miss a paycheque.

Whether or not one gets an employer top up can be an important factor in determining who takes parental leave. For example, if your spouse can use top ups to increase their benefit rate to 80 per cent, it may be best if they use most of the 35 weeks.

For many parents, the nine months leading up to a baby’s arrival is a wild ride, and not just emotionally and physically. Many people forget that their financial picture can change dramatically as well.

Amber Tomlinson had no idea how maternity leave would impact her bank account when she became pregnant five years ago. But rather than wait until the last minute to find out, she spent a few days in her first trimester searching leave benefits online. She also pulled out her work contract to see if her employer was going to top those benefits up.

Fortunately, between employment insurance and work, about 80 per cent of her salary would be covered while she was away. “That’s still a cut, but it wasn’t the financial burden it could have been,” she says. “Plus, being home meant I could save on suits, parking and lunches.”

If you’re about to take maternity or parental leave, here’s what you need to know about how much you’re going to receive.

Expect to earn less

To qualify for maternity leave, your income will have to drop by at least 40 per cent during your leave – not including any employer top up – and you’ll have had to pay into Employment Insurance (EI) for at least 600 hours in the previous year. Under the EI program, maternity leave covers up to 15 weeks, while 35-weeks of parental leave – which is open to both parents of a newborn or a newly adopted child – can be shared.

For most people, the basic rate for calculating EI benefits is 55 per cent of your average insurable weekly earnings, up to $50,800 for 2016 – that’s $537 per week. Of course, if your employer offers a top up, your weekly pay will be more.
Decide who should take parental leave

Whether or not one gets an employer top up can be an important factor in determining who takes parental leave. For example, if your spouse can use top ups to increase their benefit rate to 80 per cent, it may be best if they use most of the 35 weeks.

Keep in mind that EI and top-up benefits are added to your taxable income, but any regular tax deductions are based on the benefit amount. In other words, it doesn’t take into account salary you received before your leave, nor any employer contributions, which could result in a tax bill. You can avoid getting hit with a huge tax bill by asking your employer to deduct more tax from their top ups.
Do your research

EI benefits vary slightly by province and territory so be sure to learn the rules in your region, and take a good look at benefits offered by your employer(s).

Tomlinson recommends doing the research early – they were able make adjustments to their budget and felt comfortable knowing at least that part of their pregnancy was under control. “There are a lot of things that you have no say in when you’re pregnant, like raging hormones and swollen feet,” she says. “My leave plan though – that’s set in stone.”

7 questions to ask yourself before the baby arrives

Use this checklist to make sure you’re getting all the benefits you’re entitled to.

Are you and your spouse / partner eligible for EI benefits?
Do either of you have a top-up program at work?
Can you use vacation and sick days during your leave?
What’s your annual income and how much tax is deducted from benefits?
Will your employer continue to cover life, health and dental benefits while you’re away?
Can you make retirement plan contributions while on leave?
Do you have to repay top-up benefits if you don’t return to work?