Maternity and Parental Leave Part 1 – The Basics

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.
How to make extra money while on Maternity leave?
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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Mr. CBB
I’m from the UK and now a recent permanent resident in Canada. I bought my first house at the age of 21 after University then my second at the age of 24. I’ve always been fascinated with personal finance, savings, learning to make money and watch it grow while combating debts along the way. Canadian Budget Binder is a place where I get to share my experiences with personal finance and learn about yours along the way. I hope you stick around and check me out on Twitter, Facebook and Pinterest where I am active on all social media sites. Cheers, Mr.CBB
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Comments

  1. Denise Eshom says:

    I’m all done with maternity leave but I will share with friends :)

  2. I’m all done with mat leave too. I had no idea you could work on parental leave! Wish I knew that! I don’t really have much financial advise to those on leave, but I did watch for sales and stock up on items I knew I was going to use (wipes, baby wash, diapers, etc).

  3. Since starting my maternity leave we are actually doing better off financially thanks to smart shopping, couponing and not having to pay childcare for our oldest daughter. I am averaging about 50% in savings per month in household purchases.

  4. My tip is to call EI and ask for extra taxes to be taken off of your EI benefits. A few friends told me when they did their taxes the year after mat leave they owed a ton. I called a few months into my leave and had them take off extra. I was really nervous still when I had my taxes done a few months ago but I ended up getting over $1000 back!!!!

    Mat leave can be tough. We saved for it but I ended up having him 7 weeks early so I missed out on 2 whole extra months of savings. I had 6 weeks of top-up available to me from my company as well. I ended up taking 7 extra weeks off unpaid at the end, 2 weeks due to a seasonal layoff and 5 weeks were, well that’s a long story but in the end I ran out of money but it was worth it to stay home that little bit longer!

    • Could you not simply take off those taxes yourself and put them into an RRSP? Maybe Sarah Can give us a bit more insight into this. Glad it turned out for you! Thanks for your comment and tips Jen! Mr.CBB

  5. i was in school full time when i had my son and unemployed with my daughter but i found watching for good sales on the much needed supplies helped.. i chose to have cloth diapers my gran to save money and instead of wipes i kept a cloth in a baggy in the diaper bag to clean his bum this way i didnt hav to risk irritation and saved lots in that regard.. but always budget

    • Hi Jussie, Thanks for your comment. It’s amazing how much we have evolved when it comes to having a baby. Everything seems so commercialized and if you don’t do something this could happen etc etc. We all survived and made out well whether we had wipes or a cloth, diapers or cloth diapers… It’s a matter of choice and decision… thanks again! Cheers Mr.CBB

  6. Wendy LeDrew says:

    I had no idea you could work on parental leave. Great post! I would say save where you can while on mat leave, have yard sales, shop at good will etc… to save on money.

  7. Christine Weadick says:

    Boy mat leave has changed since my kids were born!!!! I was off 3 months with my oldest boy and 5 months with my daughter. Benefits ran out with my daughter but I stayed home an extra couple of weeks as it was mid August and I went back after Labour Day.

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