Maternity Leave

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Last Updated: Wednesday, 26 February 2025 14:21

The Holidays Act covers how annual leave while on Parental (Maternity) leave should be accrued and paid.

Any available leave must be treated in the normal way and should all be all taken at the starting of the leave period. It is paid at the greater of ordinary and average rates. From that time forward, until a year after returning to work, leave is paid at the average rate only.

KeyPay requires that the employee status be changed to M which removes the employee from the input form and unintentional pay entry. Employment continues (but unpaid) and therefore future leave entitlement also continues. As earnings are now zero the average leave rate continues to drop progressively as pay-days of no value are included in the average and pays over 52 weeks old are excluded. For a salaried based employee the average rate would drop to about half after six months. If available leave prior to beginning parental leave is not taken you must manually override the average at pay entry (change option to Y) and set it to the effective pre-maternity rate to pay it later.

On return to work the employee status must then be changed back to Active for normal pay entry to resume. At this time a date must be supplied, the default being one year from returning to work. While either on the M status, or until this date is reached, any further leave leave taken, either available or in advance, is paid at just the average rate, not at the greater of ordinary and average. The decay of the average rate now reverses as more earnings are entered. Finally, after a whole year, the average will have returned to the value when the maternity leave began. (Assuming no changes to salary, ordinary rate, or work pattern have occurred during that time.)

The actual effect on the employee therefore depends entirely on just how long they were on maternity leave.

e.g. After one whole year away, the average rate would be zero and their new leave-available given at anniversary worth nothing on return. If taken, then it would be the same as leave without pay. After 6 months working, their average would be have returned to roughly half their pay rate. They are still entitled to the whole time off though, but the rate paid for it varies. Shorter periods of leave will result in proportionally similar results, but payment of leave at average only still applies for 52 weeks on returning as it takes 52 weeks following the period of absence for its effect to completely move out of the averaging total.

If the employee resigns before returning to work, employment is deemed to have ended on the date that maternity leave began. At that date it is likely that some leave YTD earnings were present and this must now be paid out as part of a termination.  However, its also possible that their leave anniversary has passed and they have been credited with another years entitlement which now doesn't apply. This state must be reversed back to that at the date the maternity leave began. (Last Pay)
In KeyPay this simply requires changing their state back to Active, overwriting the current pay values with the leave YTD earnings plus the Gross paid at Last Pay. Or, taking the leave YTD earnings after the last pay was posted and the new average rate as these now include the last pay. And in both cases adjusting for any available leave. i.e If this was part of the last pay the Leave balance must be zero, or set back as appropriate.
To ensure the greater of average and ordinary applies, their parental leave ending date should also be cleared. The employee can now be terminated in the current pay in the usual way. This should result in the same total payments as would have applied if they had just resigned instead of starting Maternity leave.

Its advisable to print an employee master report when such leave begins to document the status and entitlements for termination in case they don't return.