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    A small business owner’s guide to maternity leave in Canada

    “Competitive advantage” may not be the first words that come to mind when you think about your employees requesting parental leave. But as it turns out, flexible benefits that support new families may be what sets you apart from the attractive health insurance, pensions and retirement packages large companies can offer.

    As employers search for unique ways to attract and engage top talent, the employment package your small business offers needs to be enticing and supportive. But how do you nurture employee engagement as priorities shift, and your people start a family? For young professionals, the option to enjoy time with their new additions isn't just a perk, it's a necessity.

    To help you manage parental leave with minimal disruption to your small business – and be the brag-talk of the baby meetup – we have tips on how to offer flexible arrangements that support new parents (and ultimately, build employee loyalty). 

    (See the 2021 winners of the Canada's Top Family-Friendly Employers competition.)


    Cover the legal bases

    Know your legal obligations when it comes to parental leave. With the law as your starting point, you can start to develop policies that are in alignment with your company’s values. Some small businesses offer flexible work arrangements, allowing employees to return to their jobs on a gradual part-time basis, with reduced responsibilities, on a modified work week, and/or the ability to telecommute.

    First, know how long maternity leave in Canada is. You may be surprised to learn that EI benefits are actually broken into 15 weeks for maternity, and up to 61 weeks of parental benefits dependent on the employee’s choice of standard or extended benefits.

    See the federal and provincial (Alberta) rules. 

    Don’t be afraid to consult your lawyer if you plan to design a parental leave policy in addition to EI, taking into consideration specific eligibility requirements to qualify for benefits – such as a minimum length of full-time employment (e.g. 12 months) and how much notice is required when requesting leave. The next step is to know how your business will experience the least amount of interruptions possible (especially if your employee will be on leave for 18 months).


    Start planning early for parental leave

    As soon as you learn an employee is expecting a baby or planning to adopt, you can take action to make the transition as smooth as possible.

    As a small business owner, you know exactly what it’s like to wear a number of hats; it should come as no surprise that your employees do, too. Keep in mind, it may be a challenge to find one person who can perform every aspect of the job. To manage your employee’s workload, you’ll need to decide whether you’ll:

    •   hire a temporary worker to take on their position during the leave
    •   distribute the work among your other employees, or
    •   manage the extra workload with freelancers and independent contractors

    Employee or contractor? Read this helpful blog from our friends at Goodlawyer. 

    The sooner you can find a replacement to start training, the better. Your plate is already full, so don’t take on additional tasks that are better suited for existing team members or a temporary employee.


    The economics of parental leave

    Business owners may consider offering a top-up to their employees while they are on maternity leave receiving EI, and/or covering the employee’s benefits during this period. This may be a larger expense to the employer, but the real value to any company is its employees — treat them well, and they'll do wonders for your company.

    There is, however, a maximum amount your employee may receive in income before an EI clawback may apply. In 2022, if your employee is collecting EI benefits and their total income for the 2022 tax year exceeds $75,375.00, they will be required to pay the lessor of:

    1. 30% of income received in excess of $75,375.00
    2. EI benefits received

    In addition, employees receiving additional income while collecting EI benefits will be required to repay $0.50 on every dollar received of EI benefits, up to 90% of the employee's average weekly earnings. The employee will need to repay any EI benefits received on income in excess of this threshold for that period


    The importance of communication

    Before your employee goes on leave, make sure you have the following in writing:

    • a complete and up-to-date job description for the role they perform
    • a list of daily and weekly procedures for their position
    • any additional notes that will help a temporary replacement perform the job

    A breakdown of all your employee’s duties is essential for anyone who steps in to help – and invaluable should the expectant mom or dad decide not to return to work.


    Don’t forget the ROE

    When an employee goes on parental leave, as an employer you must issue a Record of Employment (ROE) to them. If you’re doing it electronically, you have five calendar days after the end of the last pay period. 

    If you are issuing a paper ROE, you have to issue it within five calendar days of the employee's interruption of earnings or the date you become aware of the interruption of earnings.


    Final thoughts

    The solution for effectively managing a maternity or paternity leave is three-fold: consult, plan and communicate.

    By following the recommendations in this article, you’ll ensure your employees’ rights are upheld and your business can continue to thrive when parental leave is required.

    As a final tip, while an employee isn’t required to communicate with the office while on leave, you can ask that they offer the courtesy of letting you know, as soon as possible, if plans change.

    Although it may be an employee’s full intention to return to work, circumstances can easily change once a baby arrives! 


    Get the advice you need for every financial situation 

    At True North Accounting, we help small business owners set up a foundation for success and thrive. Book a meeting with one of our knowledgeable CPAs so we can look at the numbers, give you the low-down on how your business is doing, and create a plan for growth.

    Did you find this blog helpful? Read more about Small Business Basics topics that may be relevant to you and your small business.

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