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Financial planning tips

September 13, 2017

How do maternity benefits work?

Preparing for a new baby is exciting, but it can also be stressful financially. Understanding mat leave benefits can help.

Preparing for a new baby is an exciting time. But it can also be stressful financially. Along with all of the things you need to plan for your new bundle of joy, you have to figure out how much time you can afford to take off from work.

The good news is that maternity leave benefits have come a long way since limited benefits were first added into Canada’s Unemployment Insurance Act in 1971, and proposed changes announced in 2017 may bring them farther still.

Today, maternity and parental benefit payments are part of the federal Employment Insurance (EI) program and apply equally in all provinces except Quebec (which has its own program). However, eligibility for leave from work and the length of time you can take are governed by provincial labour and human rights codes, so be sure to check the regulations in your province.

To help you find out what you’re entitled to, here are 5 basic facts about how maternity and parental benefits work in all parts of Canada except Quebec (see below for info on Quebec):

  1. Moms: Biological mothers are entitled to a 16-week maternity leave — a 1-week waiting period followed by 15 weeks of benefit payments. In addition, both biological and adoptive mothers are entitled to up to 35 weeks for parental leave, for a maximum combined leave of 52 weeks.
  2. Moms and dads: Both biological and adoptive mothers and fathers are entitled to up to 35 weeks for parental leave at the basic benefit rate (55% of average insurable earnings), for a maximum combined leave of 52 weeks. Parental leave can be taken by either parent (biological or adoptive) or split as they wish between both parents. The 2017 federal budget proposed extending parental leave to 61 weeks, which adds up to 18 months of combined leave, but the parental leave benefit in that case would be only 33% of insurable earnings. Essentially, it would mean stretching the same benefit amount over a longer timeframe. Note: The changes to the Employment Insurance Act required to extend parental leave haven’t yet been made.
  3. Eligibility: To be eligible for maternity or parental leave benefits, you need to have worked for at least 600 hours for 1 or more employers in the 52 weeks before your leave begins.
  4. Waiting period: There’s a 1-week waiting period before your maternity or parental benefits kick in, when you do not get paid. Given you won’t receive any payments during this period, it’s important to plan accordingly.
  5. Amount: In most provinces, the basic benefit rate only covers 55% of your average insurable earnings up to a maximum $51,300 in earnings per year (which works out to a maximum benefit of $543 per week). Employers may offer to “top up” the basic rate, but they aren’t required to do so and most employers don’t. (According to Statistics Canada, only 1 in 5 employers tops up).

If your annual family income is $25,921 or less, you will also receive the EI Family Supplement. The additional payment depends on your net family income, the number of children you have and their ages. It’s added automatically to eligible claims and can increase your benefit rate to as much as 80% of your average insurable earnings, but your total benefit is still capped at $543 per week.

Maternity and parental benefits in Quebec

In Quebec, maternity and parental benefits fall under a provincial program, the Quebec Parental Insurance Plan (QPIP). QPIP offers 2 different plans: the basic, with longer leave provisions but lower benefits; and the special, with higher benefits paid over a shorter time. Here’s how they work:

  1. Moms and dads: Biological mothers may take either the basic 18 weeks’ maternity leave or the special 15 weeks. Parental benefits (paid to 1 parent or shared) can be paid for either 32 weeks (basic) or 25 weeks (special). Adoptive parents can receive parental benefits for either 37 weeks (basic), or 28 weeks (special).
  2. Dads only: Paternity benefits (for fathers only) cover either 5 weeks at 70% or 3 weeks at 75%. Fathers can split parental or adoption benefits with their partners.
  3. Eligibility: If you are a salaried or self-employed worker, you are eligible to receive benefits, provided you have paid QPIP premiums and have earned at least $2,000 in the year before you take your leave. (Note that the conditions vary slightly, depending on your worker status — whether you are salaried or self-employed.)
  4. Waiting period: There’s no waiting period, but allow 14 days for your application to be processed. If you qualify, your benefit payments will take effect as of the beginning of your leave.
  5. Amount: The percentage of your income you receive depends on whether you choose the basic or special plan, and whether the payments are for maternity, parental or adoptive benefits. In any case, benefit payments are calculated on your insurable earnings up to a maximum of $72,500. The QPIP benefits summary table shows the applicable percentages. Use the QPIP benefit calculation simulator to estimate the gross amount you may receive.

If your net family income is less than $25,921, you may be granted an increase in benefits.

More information on maternity and parental benefits is available from the Government of Canada.

More tips for new parents:

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