The hidden catches in parental leave to watch out for - The Prosperity Project

Paid parental leave schemes can vary between employers, but some "quirks" in the law can catch parents by surprise. Photo / 123rf

There’s a lot to learn and prepare for when you’re expecting a baby, so the quirks and pitfalls of the New Zealand paid parental leave system can easily get lost in the flurry of antenatal classes, scans and pram decisions.

That was the case when Stephanie Pow had her first child. Despite having been an investment banker, she says: “I certainly found out the hard way that there are a lot of financial puzzles to solve as a new parent”.

Her company Crayon now focuses on empowering prospective parents to make good financial decisions and, as part of that, compiles a register of companies’ parental leave policies.

“It’s an awkward question to ask. You know, in a job interview, a lot of people would hesitate to say, ‘look, what’s your parental leave policy’ for fear that it will work against them in that process.”

Pow told Nadine Higgins on The Prosperity Project, the Herald’s personal finance podcast, that the system is complicated. “It’s a lot to expect someone to navigate well when, you know, they’ve got so much else on their mind, too.”

New Zealand’s paid parental leave system isn’t a particularly generous one, either.

“A fun fact, or not-so-fun fact, is that New Zealand is one of three developed countries to have no paid partners’ leave whatsoever,” Pow says.

There are also fish-hooks in the legislation, one of which lies in wait when parents return to work and want to take a holiday – as what their leave is worth can provide a nasty shock.

“We’ve had people write in and say, ‘I got paid $6 an hour, what happened? That’s much below minimum wage’.

“So, there’s a quirk in the legislation – I guess you’d call it a quirk – and it basically says any annual leave you become entitled to while on parental leave, or in the 12 months after you return, is paid at your average weekly earnings.”

So if you’ve been on leave for 12 months earning nothing, then your leave is worth nothing the day you return.

That legislation is currently under review, but Pow says “it’s been under review since 2020 and we’re now sitting in 2025”.

Listen to the full episode of The Prosperity Project for more about what you need to know about the financial side of taking parental leave

The podcast is hosted by Nadine Higgins, an experienced broadcaster and a financial adviser at Enable Me.

You can follow the podcast at iHeartRadio, Apple Podcasts, Spotify, or wherever you get your podcasts. New episodes are released every Monday.