Even if you have the easiest baby in the world, maternity or parental leave won’t be the blissful paradise you imagined if you’re constantly stressed about your reduction in income. In this two-part series I’ll outline how the benefits work, and how you can make them work for your budget.
Maternity and Parental Leave Benefits in Canada
Unless you work for a company that offers an income top up programs or paid maternity leave most parents on leave will only receive basic maternity benefits, which fall under Canada’s Employment Insurance program.
While many people refer to the year a mother takes off after the birth or adoption of a child a maternity leave, it’s actually a combination of two leaves. The first leave is called maternity leave, and is only available to birth mothers and surrogate mothers for up to 15 weeks.
After the 15 weeks, the leave is now called parental leave. This cheque can be collected by either the biological or adoptive parents for up to a maximum of 35 weeks.These benefits can be claimed by one parent or shared between the two partners, but cannot exceed a combined maximum of 35 weeks.
Parental leave benefits must be claimed within the 52 weeks following the child’s birth, or for adoptive parents, within the 52 weeks from the date the child is placed with you.
Leave payments are capped at 55% of your average insured earnings up to a yearly maximum insurable amount of
$42,300 $45,900 as of January 1,2012.
This places the current maximum payment at
$447 $485 per week. You could receive a higher benefit rate if you are in a low-income family earning with a net of $25,921 or less per year – be sure to check into this. Your payment is a taxable income, meaning federal and provincial or territorial taxes will be deducted.
Working while on leave can be a good way to earn extra money. It doesn’t make financial sense to work while on the maternity portion of the benefit, as your earnings will be deducted dollar for dollar from your benefits, unless you make significantly more than the benefits (after the cost of child care is deducted, if needed).
If you work while you’re receiving a parental leave benefit, you’re allowed to earn
$75 per week or 40%. This was changed as of August 2012 to $50 per week or 25% of your weekly benefits whichever is higher. Any income earned above that amount will be deducted dollar for dollar from your benefits.
Update: Oct 18,2012- There is now a New Pilot Project In Place in which they are currently making changes to. Review this pilot project for any changes to the above as it may affect you.
New Pilot Project: Once the waiting period is over earnings are deducted at a rate of 50% of each dollar earned up to 90% of the weekly insured earnings used to establish the benefit rate.
After you reach the 90% threshold money is deducted dollar for dollar. As of January 2013 you will have the option to stay with the current pilot project or revert to the old pilot project if you are an eligible claimant during the period August 5,2012- August 1,2015.
Check out Part 2 In this Series: Maternity and Parental Leave Part 2: Budgeting
Post Contribution By: Sarah Deveau is the author of Money Smart Mom: Financially Fit Parenting. Reach her at Money Smart Mom.
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