Canada has one of the most generous maternity and parental leave programs in the developed world. But most people won’t ask “how does maternity leave work in Canada?” until they need to apply for it!
Maternity and parental leave is funded by Employment Insurance (EI)
Maternity and parental benefits in Canada are funded by Employment Insurance (EI). Almost every working Canadian pays into EI, and then they can withdraw from it in the event of a layoff, job loss, or you guessed it: parenthood.
EI premiums are deducted directly from your paycheque and matched by your employer. Insured workers pay $1.62 in EI premiums per dollar earned, up to a maximum earned income of $53,100. This works out to you paying a maximum EI premium of $860.22 per year if you earn $53,100 or more. If you earn less than the maximum, you will pay proportionately less in EI premiums.
How much money do you get on maternity leave in Canada?
EI pays out 55% of your insurable earnings to a maximum salary of $53,100 in maternity leave.
This means if you earn $53,100 or less, you will receive 55% of your salary from EI on maternity leave. If you earn $53,100 or more, you will still only receive 55% of the maximum $53,100. In 2019, the maximum amount of EI you can receive on maternity leave is $562 a week.
After your maternity leave ends, either parent can take parental leave. You can choose the standard parental leave plan and receive 55% of your insurable earnings for 35 weeks. Or choose the extended parental plan to receive 33% of insurable earnings for 61 weeks.
The total amount paid out on either leave plan is the same. It’s simply spread out over 35 weeks or spread out over 61 weeks.
The money you receive from EI will be directly deposited into your bank account if you regularly file your taxes and the CRA has your banking information. Otherwise, your payment will be mailed directly to your home as a cheque.
You pay income taxes on your maternity and parental leave benefits!
One thing that sometimes surprises new parents is that they have to pay income taxes on their maternity and parental leave benefits. EI payments are always subject to income tax, and this includes your maternity and parental benefits.
How much you will pay in income taxes depends on your household income. But since your household income is typically reduced on maternity or parental leave, it probably will be lower than your regular tax rate!
Don’t forget you’ll also get the Child Canada Benefit (CCB) during this time
The other perk of parenthood in Canada is once your child is born, you’re eligible for the Canada Child Benefit (CCB). The CCB is a monthly disbursement made to parents form the Government of Canada to help with child-rearing costs. You can receive up to $553 per month per child under the age of 6.
This income is tax-free, so it won’t impact the amount of your maternity leave or parental leave benefits. Furthermore, you can use this cash however you like. From increased baby items to putting money in your child’s RESP, you can spend the Canada Child Benefit however you want.
You can take up to 18 months of paid leave from work
We tend to refer to all the benefits given to new parents as “maternity leave”. However, both the time and payment are actually split into separate maternity and parental benefits by the government’s calculation. This is something many people are surprised to learn when they see how maternity leave works in Canada.
Only the mother can claim maternity leave and benefits. However, either the mother or father can claim parental leave and benefits. Often the mother claims both the maternity and parental leave time and benefit, which is why we tend to refer to all of it as “maternity leave”.
- How to Open a Registered Education Savings Plan (RESP)
- The Canada Child Benefit Explained
- How to financially plan for an unplanned baby
How does maternity leave work in Canada?
EI maternity benefits are offered to biological mothers, including surrogate mothers, who cannot work because they are pregnant or have recently given birth. A maximum of 15 weeks of maternity benefits is available. This can start as early as 12 weeks before the expected date of birth and can end as late as 17 weeks after the actual date of birth.
This means you can go on “maternity leave” as soon as 3 months before your due date. The third trimester is rough, my friends, so don’t hesitate to ditch work a few weeks early if it suits you and fits your budget!
A outlined above, on maternity leave, you’ll receive up to 55% of your insurable earnings as income through EI, to a maximum of $562 per week.
Parental leave is for mom or dad, biological or adoptive parents
Parental benefits can be either a maximum of either 35 weeks or 61 weeks. The benefits are available to biological, adoptive, or legally recognized parents. The two parents can share these parental benefits, or one parent can claim the full time alone.
Because a mother can claim both the maximum maternity as well as maximum parental benefit, women in Canada can receive up to 50 weeks of standard parental benefits or 76 weeks of extended parental benefits.
Fathers can claim the maximum parental benefit, but they cannot claim maternity benefits. As of right now, there is no dedicated paternity leave in Canada that only fathers are eligible for. There is some discussion of introducing a “use it or lose it” paternity leave, but so far right now fathers are eligible only for parental leave and parental benefits.
You will receive 55% of your insurable earnings to a maximum of $562 per week on standard parental leave. You will receive 33% of your insurable earnings to a maximum of $317 per week on extended parental leave.
Should you take the extended parental leave benefits?
While it may be tempting to take the full 18 months of leave to “save” on childcare costs, it’s far more expensive than choosing the 12 months leave. In fact, it’s over a $40,000 mistake to take the longer leave!
From a purely financial perspective, it is better to receive 55% of your income for 12 months than it is to receive 33% of your income for 18 months. This is true even when you add a new daycare bill to the mix!
|35 week leave||61 week leave|
|benefit income received (assuming $53,100 annual salary)||$19,670||$19,670|
|lost wages 12 to 18 months (assuming $53,100 annual salary)||$0||- $26,550|
|childcare costs 12 to 18 months (assuming $1,500/mo for infant)||- $9,000||$0|
|income earned 12 to 18 months (assuming $53,100 annual salary))||$26,550||$0|
|Net Gain/Loss||+ $37,220||- $6,880|
Childcare for an infant in North America is anywhere from $1,000 to $2,000 (or more) per month. However, daycare is an investment not an expense. As you can see above, taking leave from the workforce for only 12 months instead of 18 months results in a net gain of over $30,000 to your household. This is compared to an over $6,000 loss for taking the longer leave. In other words, getting back to work at 12 months instead of 18 can be worth $40,000 or more to your household.
However, you may want the extra time home with your child, even at the financial cost. Or you may not actually be able to find childcare in your area that will accept your child at 12 months. With many daycares boasting 3-year waitlists, some parents are forced to choose the extended leave out of necessity.
Make sure to start planning your childcare options as soon as you find out you’re pregnant. You must choose either the 12 month or the 18 month leave before you take time off. You cannot change your decision once you have begun your parental leave.
How long do you need to work to qualify maternity leave in Canada?
To be eligible for EI maternity benefits, you must have accumulated at least 600 hours of insurable employment in the past year. This works out to about 30 hours per week over 6 months or only 15 hours per week for a year.
Because the amount you receive in maternity or parental benefit is 55% of your income, it is in your best interest to earn as much as you can, at least up until the insurable maximum of $53,100. The more money you earn in your 600 qualifying hours, the more you will receive in maternity and parental benefits.
Avoiding pregnancy discrimination
Despite Canada’s generous support for mothers, pregnancy discrimination is still a thing. Many women hide pregnancies when applying for a job, or wait to tell their current employer to be avoid being passed over for projects, raises or promotions.
Pregnancy discrimination is a form of sex discrimination and violates the Canadian Human Rights Act. You don’t have to tell your employer you are pregnant. This is true if you are applying for a new job or working at an existing employer.
You actually only need to give 4 weeks notice to your employer before you go on maternity leave. It’s likely your pregnancy will be visible before then, but you’re still not obligated to disclose! You know better than anyone when is the best time to tell your employer you’re pregnant and will be taking leave. You can share your pregnancy as early or as late as you want.
Hopefully, you have an employer that’s supportive of motherhood and families. If you don’t, strongly consider not coming back to that job after maternity leave.