Parental Leave

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Information on what paid and unpaid leave is available for new parents can be found on the MBIE website.

Parental Leave (or maternity leave) is unpaid leave of up to 18 weeks. During this time the employee may be eligible for payments from the Inland Revenue for paid parental leave. Employees can apply for paid parental leave by completing the form on the Inland Revenue website.

Many employers agree to pay out an employee's leave and holiday pay when they go on parental leave. If you wish to do so, simply run a Final Pay for the employee but don't specify a Finish Date.

While the employee is on parental leave they should continue to accrue leave, so should still be included in regular pay. You should take the following steps.

  1. On the Employee Setup screen under the Leave tab make sure that the employee has Accrue Leave Based On set to Normal Hours per Week and set the value of hours per week to what they would otherwise have been working.

  2. When running a pay for the employee remove any gross earnings and include the pay code Extended Unpaid Leave with the quantity set to the normal hours they would be paid and the rate set to zero. The employee will accrue annual leave for the pay period based on their Normal Hours per Week. It will also reduce their average pay rate so that leave taken in the year after returning to work can be paid at a lower average rate.

  3. If the employee was originally set to Accrue Leave Based on Hours Worked, make sure you set them back to that when they return from their parental leave.

The employee may also choose to take additional unpaid leave for up to one year (including the parental leave), which should continue to be processed as above. 

The MBIE website has information regarding annual leave provisions while on parental leave.

When paying annual leave in FlexiTime you are given the option of using the ordinary, average or normal employee rate, normally you would select the higher of these rates when paying out annual leave. The excerpt from the Department of Labour website above suggests that the annual leave that becomes due during parental leave or for one year after returning from parental leave should be paid out using a different rule to annual leave that becomes due at other times. It says this leave should be paid out at the average rate.

FlexiTime records the annual leave due balance as a single total and does not differentiate between leave that becomes due while on parental leave or not. Typically an employee would be paid out any leave due prior to beginning parental leave so the previous entitlement provision would not apply. We suggest that rather than paying out the leave that becomes due during parental leave or for the year following using the average pay rate, you instead apply the rule that any leave taken for one year following the return to work is paid at the average pay rate. This may be slightly advantageous to the employee but is a much easier rule to apply.

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