Before getting pregnant, I knew very little about maternity leave in Canada.
I knew I would be eligible and that I would receive less money…and that was about it.
Of course, my lack of knowledge about the ins and outs of maternity leave in Canada makes sense. Before having a baby, I didn’t have a reason to have experience with the program.
That changed as soon as I found out we were expecting. Understanding how having a baby would impact our finances was important to me from the start.
Today, I’m sharing a snapshot of what I learned, my experience with maternity and parental leave in Canada so far and a few tips based on my experience.
Maternity leave in Canada: what is it and how does it work
Canada’s maternity and parental leave benefit program is quite generous.
It’s funded through Employment Insurance (EI), a program almost every working Canadian pays into and is therefore eligible to access in the event of a layoff, job loss or, in this case, parenthood.
There are two types of benefits related to becoming a parent: maternity and parental leave.
Only biological mothers can access the maternity leave portion, which amounts to a maximum of 15 weeks. The parental leave portion, on the other hand, can be accessed by either partner. The parental leave benefit also has some flexibility in terms of its length — you can opt for the standard amount of 35 weeks or you can take the extended benefit for 61 weeks.
Additionally, in 2021, a change was made to add an additional five weeks to the standard leave if partners opt to share. The caveat is one person cannot take more than 35 weeks of parental leave. If partners decide to share the leave, both can be on claim at the same time for five weeks.
Maternity leave does not pay out “half your salary.” While EI does pay out 55 per cent of your insurable earnings, it’s important to note that’s on a maximum salary. As of January 2021, that maximum salary is $56,300.
If you earn $56,300 or less, you’ll receive 55 per cent of your salary from EI while on leave. If you make more than $56,300, you receive 55 per cent of $56,300. For 2021, this means the maximum you can receive on maternity leave is $595/week.
After you finish the maternity leave portion, you move into parental leave. Along with opportunities to share parental leave, you can choose how much you want to take — 35 weeks or 61 weeks. However, it’s important to note the payout is the same in both cases. In other words, if you opt for the 61 week extended leave, it means you’ll receive 33 per cent of your insurable earnings each week instead of 55 per cent.
My experience with maternity leave in Canada
We opted to go for the shared 35 weeks of parental leave. We chose this route for two reasons:
- 12 months of leave already represented a significant change to my salary
As mentioned above, maternity leave in Canada (and parental leave) is not half of your salary — it’s 55 per cent of a maximum salary of $56,300.
That’s significant because…well, I make more than that at my job.
Before going on leave, my salary was around $61K pre-tax. Shaving close to $5K off the total BEFORE cutting it in half is significant. Going to 33 per cent just would not work for us.
- Choosing the shared option meant we received an extra five weeks, allowing Jeff to take five weeks off at the start of my leave
The addition of those five weeks is significant, because the change allows both partners to be on claim at the same time. You can split up parental leave any way you want, but before this change, only one person could claim benefits. So, if Jeff wanted to take five weeks, that was five weeks I would not be eligible to claim.
Jeff took his five weeks (technically six, because he also took a week of vacation) right after the baby was born. And while it was a little hard on our budget, I am SO grateful that he was able to be home during those early days. Bringing a baby home…well, it’s a big life change. Having these five weeks allowed us to work together to get through that big transition.
Six steps to prepare for maternity leave
Based on my personal experience with maternity leave in Canada, I have six tips for how to prepare.
Don’t leave preparing for maternity leave to the last minute. While there are some things you can’t do until your leave actually starts (like most of the government paperwork), there are things you can — and should — do in advance.
Find out what your employer requires from you in relation to your leave, including who you need to inform and when you need to inform them. If you’re not sure what your employer provides in terms of maternity leave, ask or do some research to make sure you know what to expect. This will be very helpful when it comes time to actually begin the application process.
Understand your work situation
Does your employer provide a top-up for your maternity leave benefit? If so, for how long? How is it taxed? Are there any conditions on the top-up, like a requirement that you return to your job for a period of time after the conclusion of your leave? If you have health benefits, how are they impacted by your leave? What about retirement contributions?
Ensuring you know what to expect from your employer during and after your leave is important. The best way to learn what to expect from your employer is to connect with Human Resources. They should be able to tell you what information they need from you, when they need it and what you can expect from them during the course of your leave.
Plan for taxes
The money you receive while on maternity leave in Canada is taxable income. However, it is important to keep in mind that Canada Revenue Agency only withholds about 10 per cent of your benefits for tax purpose. If you worked at all in the lead up to your leave, or if your employer provides a top-up, you could find yourself owing at tax time.
In my case, I worked for about two and a half months and received a top-up from my employer during the mat leave portion of my leave. Erring on the side of caution, I decided to put aside 10 per cent of each pay while I’m on leave for taxes. I’m currently storing this money in a high-interest savings account until closer to tax season.
Assess your emergency fund
I’ve said it once and I will say it again: $1K is not enough for an emergency fund. It’s not enough when you’re taking home your full pay cheque and it’s certainly not enough when you’re not.
The amount you’ll want to save in your emergency fund is very much up to your own level of comfort. However, I would recommend having at least one extra month of expenses. This is to account for the fact that it can take up to 28 days for your benefits to kick in. You’ll receive retroactive pay, but that still means going about a month without income.
Even if you prepare for this by saving a maternity fund (which is what I did), I’d still recommend holding some extra in your emergency fund.
Update your budget
If you’re receiving maternity leave in Canada (and/or parental leave), you’re going to be making less money than usual…at a time where you’re going to have more expenses than before.
Government benefits for both types of leave are the same as what you would receive on unemployment. There is likely something to be said about how not working and caring for an infant are not the same thing, but that’s a different post for a different type of blog. I mention this because your budget changes when you have a child. How much it changes will vary depending on choices you make, but inevitably, you’ll be purchasing things you likely didn’t buy before.
For example, one of the biggest surprise expenses for us? Formula. I had every intention of breastfeeding, but for a myriad of reasons, that didn’t work out. Thankfully, formula exists and is a great option for feeding a baby! However, it is pricey, especially compared to breastfeeding.
That said, while I did not expect to need formula for our child, I am glad I made sure our budget had a little breathing room before going on maternity leave. This allowed us to add an unexpected expense to our budget without it totally crumbling.
Having a baby is a life-changing event. Taking care of a baby every day is a lot of work. And if you’re anything like me, those hard days often mean Burger King wins again when it comes to supper…even if it wasn’t part of the original plan.
Stuff happens. Seven months in, perhaps my most important tip is to show yourself grace when it does.
Navigating maternity and parental leave as a first-time parent can be overwhelming at first. That’s why I highly recommend starting early; it gives you time to ask and find the answer to your questions. In my experience, taking time to figure out what your employer offers and what they require of you, assess your budget and plan for emergencies results in a huge weight off the shoulders during a very expensive time.
Have you ever taken maternity leave? How did you prepare?
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