Parental leave: How to get your finances in shape before baby arrives

Types of leaves and benefits available for new parents

New parents in Canada can take advantage of various types of leave. You don’t receive your salary while you’re on leave. Instead, you may receive taxable benefits from the government. The main types of leaves and benefits are:

Maternity benefits (maternity leave)

• These benefits are available to biological mothers. You can choose to receive them during pregnancy and during the weeks following birth. After your maternity benefits end, you may receive parental benefits.

Paternity benefits (paternity leave)

• In Quebec, some of the benefits for new parents are reserved for the biological father or the female spouse of the mother who gave birth, if she is registered on the birth certificate. After your paternity benefits end, you may also receive parental benefits.

Parental benefits (parental leave)

• These benefits are for both parents, whether they are biological or adoptive parents, of the same sex or different sexes. Both parents can take them at the same time, even if they have the same employer. To be eligible for these benefits, the parent must be fully or partially responsible for caring for the child.

How much can I receive in benefits and for how long?

The answer depends on a number of factors, including:

Your province or territory of residence

• In all provinces and territories apart from Quebec, the federal government’s Employment Insurance (EI) program provides maternity and parental benefits.
• Quebec has its own program, the Quebec Parental Insurance Plan (QPIP).

Your eligibility

• In all provinces and territories apart from Quebec: You must fulfil the criteria set by the federal government. Are you self-employed? You may be entitled to benefits if you registered for the Employment Insurance program for self-employed people at least 12 months before the start of your benefits.
• In Quebec: You must meet the eligibility conditions for wage earners, self-employed workers or wage earners who are also self-employed. 

The option you choose for the amount and duration of benefits

In Canada (except Quebec):

• Maternity benefits. These correspond to 55% of your earnings (up to a maximum of $638 per week) for up to 15 weeks.

Then you’ll need to choose between two options:

• Standard parental benefits. 55% of your earnings (up to a maximum of $638 a week) for up to 40 weeks. One parent cannot take more than 35 weeks.
• Extended parental benefits. 33% of your earnings (up to a maximum of $383 a week) for up to 69 weeks. One parent cannot take more than 61 weeks.

There are a variety of specific circumstances that can affect the duration and amount of EI benefits. Visit the Government of Canada website to find out more and estimate your benefits.

In Quebec, two options apply to maternity benefits, paternity benefits and parental benefits:

• Basic plan: Lasts longer, but the benefits are lower
• Special plan: Shorter, but the benefits are higher

Here’s what the two options mean for each type of leave:

Maternity benefits

• Basic plan: 70% of your earnings for 18 weeks
• Special plan: 75% of your earnings for 15 weeks

Paternity benefits

• Basic plan: 70% of your earnings for 5 weeks
• Special plan: 75% of your earnings for 3 weeks

Parental benefits

• Basic plan: 70% of your earnings for 7 weeks, then 55% for 25 weeks
• Special plan: 75% of your earnings for 25 weeks

Once again, it’s a good idea to visit the government’s website to learn about the plans in detail and estimate the amount of your QPIP benefits. 

Additional leave and benefits

In certain cases, you may be entitled to additional leave and benefits:

• Some employers offer their employees supplemental benefits and leave. 
• You may also be able to get additional benefits if your income is below a certain threshold. 

In Quebec, you’re entitled to additional weeks if:

• Both parents share a certain number of weeks of parental leave
• You have a multiple birth (Surprise—it’s twins!) 
• You’re a single parent

What about my job? Here’s what happens while you’re on leave

Remember that you have the right to return to your position after maternity, paternity or parental leave. You can also continue participating in your employer’s benefits program (e.g., group insurance plan) while you’re on leave. Here’s how the payment works:

• Your employer continues paying their share. 
• You pay your share when you return from leave.

 

Expert tip: We recommend you keep your insurance coverage during your leave. What’s more, the arrival of a child is a good opportunity to take stock of your insurance needs and update them if necessary.

Certain contributions are paused 

While you’re on leave, you won’t need to pay:

• Employment Insurance premiums 
• QPIP premiums (in Quebec)
• Canada Pension Plan contributions (learn more about CPP)
• Quebec Pension Plan contributions (learn more about QPP)

Even though your contributions are on pause, your leave will have no impact on what you receive from the government when you retire. Time spent on leave is excluded when calculating your benefits.  

What to do about group retirement plans

Does your employer offer a group retirement plan? In some cases, you may be able to keep contributing during your leave. Your employer makes contributions too. This allows you to continue saving for your retirement. 

Although it can be difficult to contribute when your income is lower than usual, it’s an option worth thinking about. This will avoid:

• Having less income when you retire 
• Having to postpone your retirement by a few years 

Good to know: Some employers allow you to “buy back” months in which you didn’t contribute. However, this is an additional sum you’ll need to find in your budget. Contributing now will cost you less than buying back time later.

 

Make a budget before you go on leave 

There’s no big secret to making sure you’re ready for your leave and for baby’s arrival. To make sure you’re well prepared:

• Find out how much it costs to raise a child

Don’t forget to include other expenses you’ll have during your leave, such as source deductions for your employee benefits and group retirement plan contributions. Next, think about:

• Reviewing your savings plan
• Drawing up a budget or adapting your budget to your new situation
• Adopting some new ways to save money if necessary 

Set up systematic savings before your parental leave

Setting up a systematic savings plan is a painless way to make up the difference between your current earnings and your projected income on leave. Systematic savings can also help build up an emergency fund for unexpected events.

H3: RRSP contributions while you’re on leave

Though it isn’t always easy, try to earmark some money in your budget to contribute to your RRSP. This is particularly important if you don’t have a pension plan with your employer. 

It’s better to reduce the amount of your contributions than stop contributing entirely. Because RRSPs allow you to defer paying taxes, it’s a strategy that can save you money.

It pays to wait: To benefit from greater tax savings, it might be worth waiting until you are back at work and receiving your full salary again before applying the deductions.

The arrival of a new child brings great joy, as well as big changes. With a little planning and some help from our experts, you can optimize your finances to make the most of this special time. We’re here to answer your questions.