Alex is Sprintlaw's co-founder and principal lawyer. Alex previously worked at a top-tier firm as a lawyer specialising in technology and media contracts, and founded a digital agency which he sold in 2015.
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If you employ staff (or you’re about to hire your first employee), parental leave can feel like one of those “we’ll deal with it when it happens” issues.
But when an employee tells you they’re pregnant or they’re becoming a primary carer, you suddenly need to get across maternity pay, timeframes, job protection, payroll processes, and how you’ll keep the business running in the meantime.
In New Zealand, what many people call “maternity pay” is usually the government’s Paid Parental Leave (PPL) payment. It’s funded by the government in most cases, but employers still have important legal obligations around leave, communication, record keeping, and protecting an employee’s position.
Below, we’ll walk through what “maternity pay” means in practice, what you must do as an employer, and the common traps that can create disputes (even when everyone has good intentions).
What Does “Maternity Pay” Mean In NZ (And Who Actually Pays It)?
In NZ, “maternity pay” is commonly used to describe Paid Parental Leave. The key point for employers is this:
- Paid Parental Leave is generally paid by Inland Revenue (IRD), not by you as the employer.
- Your employee applies for it (and they’ll usually need information from you to support the application).
- You still have legal obligations around parental leave entitlements, job protection, and how you manage the employee’s absence.
Paid Parental Leave sits alongside other employment obligations and rights, including minimum standards under the Parental Leave and Employment Protection Act 1987 and the Employment Relations Act 2000.
As a general guide, employees usually need to meet minimum work and service requirements to qualify for parental leave entitlements (for example, meeting minimum hours and having worked for you for at least 6 or 12 months can affect what leave they’re entitled to and the strength of their return-to-work protections). Eligibility for the IRD payment is also subject to statutory criteria and caps.
Also, don’t forget that the employee may use other types of leave around pregnancy and birth (for example, sick leave or annual leave), depending on their circumstances and what you agree on.
If your business chooses to provide additional paid leave (often called “top-up pay” or “company maternity pay”), that’s usually a contractual benefit rather than a legal requirement. If you do offer it, make sure it’s clearly documented in the Employment Contract or relevant policy so expectations are clear from day one.
What Are Your Legal Obligations When An Employee Takes Parental Leave?
When an employee notifies you that they’re taking parental leave, your obligations usually fall into a few practical buckets: confirming entitlements, supporting the application process, managing their role, and protecting their employment rights while they’re away.
1) Receive Notice And Respond Properly
Employees have to give notice and provide certain information within the required timeframes. In real life, not every employee will do this perfectly (especially early on), so it’s best to respond calmly and focus on what you need to progress things.
From an employer perspective, you should:
- acknowledge the notification in writing;
- confirm what you understand the employee’s intended leave dates are;
- ask for any required information or documentation (politely and only what’s relevant); and
- ensure you’re meeting your obligations under the Parental Leave and Employment Protection Act.
Practically, this usually means you’ll want the employee’s expected due date (or placement date, where relevant), their proposed start date for parental leave, and enough information to help you assess service/eligibility and plan cover. If you’re unsure about the notice requirements that apply in the circumstances (for example, changes to dates or shorter-notice situations), it’s worth getting advice early so your response is compliant and consistent.
If you don’t have a clear internal process, it’s worth putting one in place as part of a broader Workplace Policy set so your managers handle things consistently.
2) Support The Paid Parental Leave Process
Your employee generally applies to IRD for Paid Parental Leave. You may be asked to provide employment details (like start dates, hours, and confirmation of leave dates).
A common “small business” pain point is timing: you want certainty about the leave period so you can arrange cover, but the employee may still be finalising medical appointments and plans. The best approach is to keep communication open and document any updates in writing.
Important: Paid Parental Leave is administered by IRD and is taxable income. IRD generally handles deductions and payments, and you should be careful not to give tax advice-if an employee has questions about tax treatment, eligibility, payment rates, or timing, it’s safest to refer them to IRD or a qualified tax adviser.
3) Protect The Employee’s Job (Or Offer A Proper Alternative)
One of the biggest legal risks for employers around maternity pay and parental leave isn’t the payment itself-it’s what happens to the employee’s job while they’re away.
In many situations, the employee has the right to return to their role. Depending on the employee’s eligibility and service, they may have strong “job protection” rights-often meaning their role must be kept open, or (in limited circumstances) they must be offered a similar job on terms and conditions that are no less favourable.
If you’re proposing any change (for example, restructuring, significantly changing duties, or ending the role), you need to be very careful and get advice early. This is especially important if you’re a small team and you’re tempted to “just make it work” informally.
Even if the business genuinely needs to make changes, you still need to follow a fair process and comply with good faith obligations under the Employment Relations Act 2000.
4) Avoid Discrimination Issues
Pregnancy, family status, and caring responsibilities can intersect with discrimination risk under the Human Rights Act 1993.
As an employer, that means you should be cautious about:
- making assumptions about a worker’s commitment or capacity after having a baby;
- reducing hours, removing responsibilities, or “sideline” decisions without discussion;
- comments or conduct that could be seen as pressure not to take leave; and
- treating a pregnant employee differently in performance management or restructure decisions.
Even where there’s no bad intent, poor documentation or inconsistent treatment can turn into a dispute.
Do You Have To Pay Anything As An Employer (And Can You Offer Top-Up Pay)?
For most businesses, the practical answer is: Paid Parental Leave is not paid out of your payroll, but you may still decide to offer additional support.
When You’re Not Required To Pay “Maternity Pay”
In standard situations, your employee’s Paid Parental Leave is paid by IRD (subject to eligibility and caps). That means:
- you’re not automatically required to keep paying their usual wages while they’re on parental leave; and
- their absence is typically treated differently from annual leave or sick leave.
That said, employees may choose to use annual leave or other entitlements (where applicable), and you can agree on how that will work.
If You Want To Offer A “Top-Up” Or Additional Paid Leave
Some employers offer a top-up so the employee receives closer to their usual wage while on leave. This can be a great retention tool, especially in a competitive hiring market.
If you do this, make sure you set clear rules around:
- how the top-up is calculated (ordinary time earnings vs average earnings, and what happens with commissions or allowances);
- how long top-up pay applies for;
- whether it’s conditional (for example, returning to work for a minimum period); and
- how it interacts with any bonus or incentive plans.
These terms should be documented clearly so you don’t accidentally create inconsistent promises across the team. This is often best handled in the employee’s contract and complemented by a consistent internal policy, like a Parental Leave Policy.
Payroll, Deductions, And Record Keeping
Even if you’re not paying the government Paid Parental Leave payment yourself, you should still keep clean records about leave dates, any agreed top-up, and any annual leave taken around that time.
It’s also smart to be careful about what information you store. Pregnancy-related details can be sensitive personal information, so keep access limited and ensure your business handles personal data appropriately (including obligations under the Privacy Act 2020 if you collect and store employee information).
How Should You Manage Cover, “Keeping In Touch,” And The Return To Work?
This is where small businesses often feel the pressure: you need to keep operating, but you also need to protect the employee’s role and manage expectations with the rest of the team.
Plan For Temporary Cover (Without Creating Future Problems)
It’s common to hire a fixed-term employee or temporary contractor to cover parental leave. This can work well, but the arrangement must be set up properly.
Make sure you have the right documents in place depending on who you hire:
- If you hire an employee: use a compliant employment agreement, and be clear about the genuine reason the role is fixed-term.
- If you engage an independent contractor: have a tailored Contractors Agreement so you’re clear on deliverables, IP, confidentiality, and payment terms.
Misclassifying someone as a contractor when they’re really an employee can create major risk, so it’s worth getting advice if you’re unsure.
Be Thoughtful With Communication While They’re Away
Some employees want to stay in the loop while on parental leave; others want genuine time away. There’s no one-size-fits-all approach.
What matters is that you:
- agree on communication expectations early (for example, monthly check-ins vs only urgent contact);
- avoid pressuring the employee to “work” while on leave unless it’s permitted and genuinely agreed; and
- document any changes to the return-to-work plan (dates, role, hours) as they evolve.
If you do want the employee to attend occasional work touchpoints, be mindful that “keeping in touch” during Paid Parental Leave is not unlimited. There are specific rules and limits on keeping-in-touch hours, and working outside those rules can affect the employee’s PPL payment. If you’re considering any work activity during leave, check the current IRD guidance and document what’s been agreed.
Prepare For Flexible Return-To-Work Requests
When someone returns from parental leave, they may request different hours, remote work, or changes to the way duties are performed.
You don’t always have to say yes-but you should treat requests seriously, respond in good faith, and document the outcome. A rushed “no” (or inconsistent treatment between employees) is a common trigger for disputes.
This is also where a strong set of baseline employment documents helps. If your starting point is clear-hours of work, role scope, flexibility clauses-it’s much easier to have a practical conversation later. Many employers build this clarity into their Employment Contract and reinforce it in a staff handbook.
Common Employer Mistakes With Maternity Pay And Parental Leave (And How To Avoid Them)
Most parental leave issues don’t come from employers trying to do the wrong thing-they come from uncertainty, lack of documentation, or “quick fixes” made under pressure.
Here are common pitfalls we see for small businesses navigating maternity pay in NZ and parental leave obligations:
1) Treating Parental Leave Like Resignation Or “Time Off Without Rights”
Parental leave is not the same as an extended holiday, and it doesn’t end the employment relationship. The employee still has employment protections during this period.
If you’re making operational changes during their leave (like restructuring), get advice early so you follow a fair process.
2) Making Promises About Pay Without Documenting Them
You might verbally say “we’ll top up your pay” or “we’ll keep paying your commission while you’re away” to be supportive in the moment.
The problem is that informal promises can become disputed later-especially if another employee later expects the same benefit. If you offer additional paid leave or a top-up, document it properly in writing.
3) Mishandling Medical Information
Pregnancy and parental leave often involve medical certificates and sensitive details. Make sure any medical or health-related info is treated as confidential and stored securely with limited access.
If you’re unsure whether you’re handling employee data correctly, it can help to get your internal privacy approach sorted as part of a broader compliance review.
4) Getting The Cover Arrangement Wrong
If you hire someone “temporary” but don’t clearly document why they’re fixed-term, you can accidentally create ongoing employment rights and headaches when the original employee returns.
Similarly, if you engage a contractor but manage them like an employee, you could end up with disputes about employment status and entitlements.
5) Not Updating Policies As The Team Grows
When you have a team of 2–5 people, policies often live “in your head.” As you grow, that becomes risky.
Clear, written policies help managers handle maternity pay conversations consistently and reduce misunderstandings. A solid starting point is a tailored Parental Leave Policy supported by a broader Workplace Policy framework.
Key Takeaways
- In NZ, “maternity pay” usually refers to the government’s Paid Parental Leave payment, which is generally paid by IRD, not by the employer (subject to eligibility and caps).
- Even if you’re not paying the government benefit, you still have important obligations around parental leave entitlements, job protection, and acting in good faith under employment law.
- If you offer additional maternity pay (like a top-up), document it clearly in the Employment Contract and/or a Parental Leave Policy to avoid confusion and inconsistent treatment.
- Plan early for temporary cover and make sure you use the right structure and documents (for example, a properly drafted Contractors Agreement where relevant).
- Be careful with discrimination risk and keep communication respectful and documented-especially if business changes happen during parental leave.
- If you’re unsure about your obligations or you’re dealing with a complex situation (like a restructure or disputes about return-to-work), getting tailored advice early can save you time, cost, and stress.
If you’d like help setting up your parental leave process, updating your employment documents, or getting advice on a specific situation, you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.
