When one of your employees announces they’re expecting a baby, your first thought might not be “competitive advantage.” But maybe it should be.
Offering flexible, family-friendly policies can help your small business stand out in a tight labour market. Big companies might have the flashier perks — health benefits, stock options, pension plans — but smaller teams can offer something just as valuable: personal support and flexibility.
If you can make parental leave work smoothly for both your employee and your business, you’ll not only keep things running — you’ll build loyalty, trust and a reputation as an employer who cares.
Here’s what you need to know about navigating maternity and parental leave as a small business owner in Canada in 2025.
1. Cover the legal bases
Before anything else, make sure you understand your legal obligations. Federal and provincial laws outline what employees are entitled to when it comes to maternity leave. It's worth knowing the basics before you make your own policies.
Here’s a quick rundown:
- Maternity benefits (for birth mothers) cover up to 15 weeks through Employment Insurance (EI).
- Parental benefits can be taken by either parent — up to 40 weeks (standard) or 69 weeks (extended), depending on the option chosen.
- Together, maternity and parental leave can last as long as 18 months.
For Alberta employers, the Employment Standards Code allows up to 16 weeks of maternity leave and up to 62 weeks of parental leave — and your employee must give at least six weeks’ written notice before taking leave.
See the federal and provincial (Alberta) rules.
You’re not required by law to pay employees during this time, but you do need to hold their job and continue their benefits if they’re normally part of your compensation package.
It’s a good idea to put your parental leave policy in writing — one that’s consistent, transparent and aligns with your company values. A lawyer or HR consultant can help you fine-tune it.
2. Start planning early
You’ll want to figure out:
- Who will handle their workload — Will you hire a temporary replacement, divide responsibilities among the team, or bring in freelancers or contractors?
- When to train a replacement — Ideally, overlap for a few weeks before the leave starts.
How to manage communication — Will your employee check in occasionally or completely disconnect? Make expectations clear before the leave begins.
Remember, small business teams often wear many hats. It’s rare to find someone who can do everything exactly the same way, so aim for coverage — not perfection.
Employee or contractor? Read this helpful blog from our friends at Goodlawyer.
👉 Tip: Don’t take on more yourself if you’re already maxed out. Delegate where possible. Keeping your own workload manageable will help everyone stay sane during the transition.
3. Think about the economics
EI covers part of your employee’s income while they’re away — 55% of average weekly earnings for standard benefits (up to $668 per week in 2025), or 33% for extended benefits (up to 69 weeks).
Some employers choose to “top up” those benefits — meaning you pay extra to bring their income closer to what they normally earn. It’s optional, but a meaningful gesture that can go a long way toward retention.
You can also choose to continue paying for benefits (like health or dental) during the leave. It’s an expense, yes — but also a sign that you value your team and want them to come back.
Just remember that EI has income thresholds. In 2025, if your employee earns more than $78,000 during the tax year, a 30% clawback can apply on excess income, or on EI benefits themselves — whichever is less.
It’s smart to loop in your accountant before offering a top-up, so you know how it will affect your payroll and tax deductions.
4. Keep the communication flowing
Before your employee’s last day, make sure you’ve documented everything:
- A clear, up-to-date job description
- Step-by-step lists of daily and weekly tasks
- Passwords, processes and files that a temporary worker might need
This prep work will save you stress later — especially if your employee’s plans change (which happens more often than you’d think!).
You can also create a short “leave plan” document outlining:
- Who’s covering which tasks
- Any key deadlines during the leave
- Expectations for check-ins or updates, if any
While employees aren’t required to stay in touch during parental leave, it’s reasonable to ask for a quick heads-up if their return date changes.
5. Don’t forget the ROE
Whenever an employee takes maternity or parental leave, you need to issue a Record of Employment (ROE).
- If you file electronically, do it within five days of the last pay period.
- If you issue a paper ROE, you have five calendar days after the interruption of earnings.
This document lets Service Canada process EI benefits. Skipping it can cause delays (and headaches) for everyone involved. If you’re unsure, your payroll software or accountant can help you complete and submit it properly.
6. Build loyalty with flexibility
Beyond the basics, think about how you can make returning to work easier.
Some small businesses offer a gradual return — part-time hours or reduced responsibilities for the first few weeks. Others allow employees to work remotely a few days a week.
Even small gestures — like checking in before they return or sending a welcome-back gift — can show that you care.
Your employee will remember how you handled this time. When people feel supported, they’re more likely to come back — and to give their best once they do.
Managing parental leave in a small business isn’t just about compliance — it’s about community.
When you plan ahead, communicate clearly and show flexibility, you make life easier for your employee and for yourself. You’ll also earn a reputation as a business that truly supports work-life balance — and that’s something money can’t buy.
At True North Accounting, we help small business owners make sense of the numbers behind decisions like these — from planning EI top-ups to forecasting your cash flow while a key team member is on leave.
👉 Book a chat with one of our CPAs to review your payroll setup, plan your next hire or simply get peace of mind about where your business stands.
Did you find this blog helpful? Read more about Small Business Basics topics that may be relevant to you and your small business.
