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Budget 2014: Changes to bring paid parental leave up to scratch

04 Apr 2014 6 min read

It’s time for the Government to put a stake in the ground when it comes to paid parental leave, and the Budget is the perfect time to do this, especially with the election set for September 20.

The Labour Party has already taken the high ground on this with plans to extend paid parental leave of $488.17 per week from 14 weeks to 26 weeks, coupled with the introduction of a $60 a week ‘baby bonus’ to all parents who earn under $150,000 for the first year.

For parental leave to be extended, the first consideration needs to be: Who is going to pay for it? Under the present regulations, the Government pays. However, Labour has indicated they will tax the wealthy, which in turn will have an impact on business owners.

The Government’s books are certainly not in a good enough state at present to dramatically increase paid parental leave. But there is a way to satisfy both the Government and parents – by gradually introducing an increase in paid parental leave, perhaps over a period of three years, adding an extra month each year. Of course this should be on the condition that our fiscal position continues to improve. The Government has been working hard to bring the country back to surplus and needs to maintain this position.

Speaking from a mother’s perspective, six months maternity leave makes a lot more sense. Three months after the birth of my daughter, there was no way that I was ready to return to the workforce – it was not an appealing thought at all! Six months in, she was much more settled and I was more mentally prepared. I was more productive, less distracted, and didn’t have to use match sticks to hold my eyes open! 

Some schools of thought believe increasing the period of paid parental leave may keep women out of the workforce for longer, and therefore interrupt business. While an increase to six months may mean some women, who would be relying on this payment, stay out of work three months longer, every woman who meets the eligibility criteria is already entitled to 12 months parental leave. And surely a parent returning to work when they are more focused and engaged is better for business than one returning earlier with little motivation.

For me, the debate is not about should we increase paid maternity leave, but more about by how much and when. According to the publication ‘Essential Mums’, New Zealand has one of the least generous paid parental leave provisions in the OECD, more akin to countries like China (98 days at 100 per cent of salary), India (12 weeks at 100 per cent of salary) Egypt (90 days at 100 per cent of salary) and Algeria (14 weeks at 100 per cent of salary). Not countries we normally sit alongside.

Across the Tasman, mothers in Australia receive 18 weeks at the federal minimum wage (around NZ$660 a week), and fathers or partners receive two weeks paid leave at the same rate. And they are moving to lift the 18 weeks to 26 weeks at full replacement wage up to a maximum annual salary of AUS$150,000, plus superannuation.

The Rolls Royce model in Denmark offers a full 52 weeks at 100 per cent of salary. Our Government needs to be looking closely at these models and find a way to replicate them. This is not an area we want to continue to lag behind in. Change is needed and soon – for the sake of mothers and the productivity of our businesses!

Further enquiries, please contact:

Stacey Davies
Grant Thornton New Zealand Partner, Privately Held Business
T +64 (0)9 308 2591
E stacey.davies@nz.gt.com

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