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New Zealand: Paid Parental Leave to Be Extended to 26 Weeks by 2020

(Dec. 5, 2017) On November 30, 2017, the New Zealand Parliament voted to pass legislation that will see the current paid parental leave entitlement of 18 weeks extended in two stages: to 22 weeks from July 1, 2018, and then to 26 weeks from July 1, 2020.  (Parental Leave and Employment Protection Amendment Bill, PARLIAMENT OF NEW ZEALAND (last visited Nov. 30, 2017); Parental Leave and Employment Protection Amendment Bill (text of the bill), NEW ZEALAND LEGISLATION; Press Release, Iain Lees-Galloway, Bill to Extend Paid Parental Leave to 26 Weeks Passes, BEEHIVE.GOVT.NZ (Nov. 30, 2017).)

Background and Rationale

The Parental Leave and Employment Protection Amendment Bill 2017 was among the first pieces of legislation proposed by the new Labour Party-led government, which was sworn in on October 26, 2017.  The Bill was introduced on November 8.  (Press Release, Iain Lees-Galloway, Government Moves to Extend Paid Parental Leave to 26 Weeks with Urgency, BEEHIVE.GOVT.NZ (Nov. 8, 2017).)  Previously, a bill to extend paid parental leave to 26 weeks, which was introduced by a Labour Party member of Parliament in 2015, was discharged by a financial veto of the National Party-led government at its third reading (the final parliamentary stage for a bill) in June 2016.  (Parental Leave and Employment Protection (6 Months’ Paid Leave) Amendment Bill, PARLIAMENT OF NEW ZEALAND (last visited Dec. 4, 2017).)  At the time, the then-Finance Minister Bill English stated, “Treasury estimates the cost of this legislation amounts to $278 million over the next four years, a significant extra – unbudgeted – cost.  That’s on top of the $251 million a year (net of tax) taxpayers are expected to spend by 2020 under the existing paid parental leave framework.”  (Jo Moir, Government Has Used the Financial Veto to Stop an Extension to Paid Parental Leave, STUFF.CO.NZ (June 16, 2016).)

Extending paid parental leave subsequently became part of the policy platforms of the two major political parties during the September 2017 election campaign, with the National Party stating that it would extend the leave entitlement to 22 weeks, while the Labour Party committed to 26 weeks.  (Press Release, Paula Bennett, Michael Woodhouse & Jonathan Coleman, National Supports Young Families: Our Parents and Newborn Package Includes Extending Paid Parental Leave to 22 Weeks, Supporting Families to Grow and Stay Healthy, NATIONAL.ORG.NZ (Aug. 29, 2017); Press Release, Sue Maroney, Labour Committed to 26 Weeks Paid Parental Leave, LABOUR.ORG.NZ (Aug. 29, 2017).)

Upon introducing the amendment bill, Minister of Workplace Relations and Safety Iain Lees-Galloway stated:

As well as the direct financial benefits to households and reducing stress on parents, extending paid parental leave has a range of positive impacts on child development and fostering parent-infant attachment.

It also aligns with the World Health Organisation recommendation of exclusive breastfeeding up to six-months of age, all of which improves short-term and long-term child and society outcomes. (Government Moves to Extend Paid Parental Leave to 26 Weeks with Urgency, supra.)

After the bill passed, the Minister further stated:

Extending the duration of payments is vital for supporting working families with newborns and young children and for New Zealand to catch up with the best international practice.

New Zealand’s current paid parental leave entitlement of 18 weeks is one of the lowest in the OECD [Organisation for Economic Co-operation and Development], with the average number of weeks of paid leave to mothers among OECD countries being 48 weeks. (Bill to Extend Paid Parental Leave to 26 Weeks Passes, supra.)

Previously, the duration of paid parental leave (originally called “maternity leave”) was extended to 18 weeks from 16 weeks on April 1, 2016, and prior to that, from 14 weeks on April 1, 2015.  (Parental Leave and Employment Protection Amendment Act 2014NEW ZEALAND LEGISLATION.)  Amendments to the legislation were also made in 2016 to extend parental leave payments to “non-standard” workers, such as those in casual or seasonal employment and employees with more than one employer, as well as to those who have recently changed jobs.  (Parental Leave and Employment Protection Amendment Act 2016, NEW ZEALAND LEGISLATION; Parental Leave Law Changes 2016, EMPLOYMENT NEW ZEALAND (last visited Dec. 4, 2017).)

Parental Leave System in New Zealand

Different types of parental leave are available under the Parental Leave and Employment Protection Act 1987 (PLEP Act) and Parental Leave and Employment Protection Regulations 2016 (NEW ZEALAND LEGISLATON).  The legislation provides for paid “primary carer leave,” unpaid “partner leave,” and extended unpaid leave that is available to both primary carers and their partners.  (Types of Parental Leave, EMPLOYMENT NEW ZEALAND (last visited Dec. 4, 2017).)  

Paid parental leave in New Zealand is funded from general taxation revenue.  (PLEP Act s 71Q.)  The payments are administered by the Inland Revenue Department (IRD).  (Types of Parental Leavesupra.)  A primary carer may receive weekly parental leave payments equal to the greater of an applicant’s ordinary weekly pay, or his or her average weekly income, for the duration of the paid leave entitlement period.  However, payments are capped at a maximum weekly amount of NZ$538.55 before tax (about US$368.55).  (PLEP Act ss 71D & 71M; Paid Parental Leave, IRD (last updated June 29, 2017); Amount of Parental Leave Payment, EMPLOYMENT NEW ZEALAND (last visited Dec. 4, 2017).) This amount is adjusted each year to reflect increases in the average wage.  (PLEP Act s 71N.)

The primary carer of a child is entitled to one continuous period of leave (currently 18 weeks).  Up to six weeks of the leave entitlement may be taken before the expected date of birth or adoption. (Id. ss 9 & 11.)  The person must have worked for the same employer for an average of at least ten hours a week during the six months before the baby’s due date or the date on which the carer becomes responsible on a permanent basis for the care of a child aged under six years.  (Id. ss 2BA & 9.)  If a person has more than one job, each employment is treated separately.  (Id. s 2A; see generally Parental Leave Eligibility – Who Can Take It, EMPLOYMENT NEW ZEALAND (last visited Dec. 4, 2017).)

A primary carer is eligible for parental leave payments from the government if he or she has been employed for at least an average of ten hours a week for any 26 of the 52 weeks immediately preceding the expected delivery date or adoption.  (PLEP Act s 2BA(4).)  Self-employed primary carers are entitled to the payments on the basis of similar work criteria.  (Id. ss 2BA(4) & 71CB.  See generally Who Can Get Parental Leave Payments, EMPLOYMENT NEW ZEALAND (last visited Dec. 4, 2017); Parental Leave and Payment Eligibility Table, EMPLOYMENT NEW ZEALAND (last visited Dec. 4, 2017).)

The primary carer’s spouse or partner who has worked for the same employer for an average of at least ten hours per week in the 12 months preceding the due date or adoption date is entitled to two weeks of unpaid partner leave (previously called “paternity leave”).  If the duration of employment is six months, the entitlement is for one week of unpaid leave.  (PLEP Act s 19.)  A person who is entitled to paid primary carer leave can transfer all or part of his or her entitlement to an eligible spouse or partner.  (Id. s 71E.)

If a primary carer has been employed for at least 12 months with the same employer, he or she can take up to 52 weeks of total leave, with the period after the end of the paid leave period being unpaid leave.  If the primary carer has been employed for six months before the birth or adoption, the total amount of the paid and unpaid leave entitlement is 26 weeks.  (Id. ss 23 & 26.)  This “extended leave” can be shared with the person’s spouse or partner, either consecutively or concurrently, provided that they also meet the employment criteria.  (Id. ss 28 & 29.)  Unless the employee is in a “key position,” there is a presumption that his or her job should be kept open if he or she takes extended leave.  In determining whether an employee’s position is a “key position” an employer can have regard to matters such as the size of the employer’s enterprise and the training period or skills required for the job.  (Id. s 41.)

Pregnant women are entitled to ten hours of special paid leave for reasons associated with pregnancy.  This leave does not affect the employee’s other leave entitlements.  (Id. s 15.)

The same entitlements apply with respect to each subsequent child, provided that the primary carer works for at least six months before commencing a new period of leave.  He or she can receive payments if six months have elapsed since the end of their previous paid leave period.  (Id. ss 6 & 71F.)

Cost of Extending Paid Leave Duration

In the 2015-2016 fiscal year, IRD made NZ$217 million (about US$148.5 million) in payments to 26,300 parents.  (IRD, Budget 2017 Four-Year Plan – Covering Vote Revenue 10 (Nov. 2016).)  According to figures provided by the Ministry of Business, Innovation and Employment (MBIE), the extension of parental leave payments in the 2017 amendment bill will have a total net fiscal cost of approximately NZ$325 million (about US$422.4 million) over four years.  (MBIE, Extending Paid Parental Leave to 26 Weeks – Questions and Answers (last visited Dec. 4, 2017).)  Funding for the costs associated with extending the duration of paid parental leave will be provided in Budget 2018.  (Parental Leave and Parental Responsibility Bill – Explanatory Note, NEW ZEALAND LEGISLATION.)

The two-step increase mandated by the 2017 bill allows the government to stay within the parameters of the Budget Responsibility Rules that the Labour Party and Green Party agreed to prior to the election.  (Bill to Extend Paid Parental Leave to 26 Weeks Passes, supra; Labour Party & Green Party, Budget Responsibility Rules, Green Party website (last visited Dec. 4, 2017).)