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In Canada we are pretty darn lucky to have a great maternity (and paternity) leave system, although surviving on 55% of your income for much of the year can be pretty daunting.  Some of my friends in the United States are not so lucky and have 12 weeks of leave after giving birth and then have to go back to work.

Maternity and Parental Leave in Canada

Generally, to qualify to receive money during your leave, you have to be employed and have worked for at least 15 weeks full-time before applying for the benefits, or if you are a self employed individual, you have to pay into the benefits and make a long term commitment to continue paying into the benefits (e.g. you cannot opt out once you opt in).

According to Service Canada, to calculate your weekly rate while on leave, you just multiple your current earnings by 55%, and you can receive up to a maximum of $51,300 as of January 1 2017. This means that you can receive a maximum Employment Insurance amount of $543 per week.  This value is updated and evaluated every year.

This income is taxed (of course!).

You have to have a one week waiting period (they recently reduced this from a two week waiting period) and then maternity leave starts for 17 weeks, and this starts after the baby is born.

Afterwards, it can be switched to parental leave (35 weeks) which adds up to a full 52 weeks, or a full calendar year.

Many employers offer a top up to the benefits and can be anywhere from 75% to 90% of your previous earnings (which definitely helps a lot!).

Nonetheless, it is definitely reduced and many new parents may not be used to this reduction in income, hence there may be thoughts about making some money on the side.

Before you do that, make sure to think carefully about those side gigs!

Earning Money While on Maternity or Parental Leave

Any extra money earned while on the 15-17 weeks of maternity leave will be deducted dollar for dollar (meaning for an extra dollar you earn, a dollar will be taken away from your benefits payment), which makes earning extra money on the side extremely non-satisfactory.

So earn any side money while on maternity leave!

For the remaining 35 week parental leave portion, there are two options with recent changes.

  1. You can earn $50 per week or 25% your weekly benefit, whichever is higher… anything more than that will be taken away dollar for dollar
  2. With the 2016 Budget, there is a new program that is in effect until August 11 2018 called the Working While on Claim program (link is to a Youtube video from Service Canada).  With this pilot project, if you work while on parental leave, you get the luxury of keeping 50 cents of their benefits for every dollar earned while on claim, up to the 90% of your weekly benefits, then anything more than this is taken away dollar for dollar.  This is called the “optional rule”

Default Rule: Let’s say you get $500 per week for parental leave, and you earn $300 one week in side money.  With this rule, you 25% of weekly benefit is $125.  So $175 ($300-125) will be subtracted from the $500 for that week.  So total for that week is $300 (earned money) and $325 (benefits)= $625.

Optional Rule: Let’s say you get $500 per week in benefits, and you earned $300 in side money again (it is less than 90% of weekly benefits).  So you get to keep $150 with the optional rule (you keep 50 cents for every dollar you earn while on claim).  Total for that week is $150 (earned) + $500 (benefits)= $650.

The caveat is that you have to calculate your earnings/ work time on a weekly basis and not lump it together.  You also have to report your income while working on parental leave regularly.

Check out the Service Canada website for more information about how much the taxman will take away when you earn money while on maternity or parental leave.  The Service Canada customer service agents will even listen to your story and potential situation and tell you which option is best (the conventional or default way or the Working While on Claim way) for you if you plan on earning any income while on parental leave.

Potential Work Arounds and Other Income

If you are a freelancer, potential work arounds to this include not getting paid while you are on parental leave portion of the year and invoicing later or earlier/ before your parental leave starts.  This would avoid the clawback.

Or you can just start selling things for cash and have a big garage sale and not report this income!

The other thing to know is that non-earned income e.g. rental income and dividend income or passive income and capital gains are excluded from this and should not be taken away dollar for dollar from your weekly parental leave benefits (phew!).

Readers, have you earned money while on parental leave?  Did the math come out right for calculating the Default and Optional choices?  

Article comments

Roopak says:

If I receive a cashback that is deposited 4-5 days after the last day of work (It is for a house we purchased a month ago) do I have to report this to Service canada as I am applying for Maternity benefits.

Aly says:

Hey guys, Ive already told my employer ill be taking a 12 month mat leave which ends in April however I am not wanting to go back to that job right now. Is It possible to extend my Mat leave to 18 months, but then work another job in the meantime? From the 12-18th month I know I will not be getting any EI or top up from work. I just want to delay going back to my pre-mat leave job. Could not find this info online

Tessa says:

That’s what I’m doing. Since you’re not receiving money from 12 month on there won’t be any tax implications.

Mary says:

What if you have a corporation that you can get paid through as a contractor. I don’t believe that would affect your mat leave unless you’re getting paid through your corporation.

Ramanjeet Dhaliwal says:

Hi, I am on mat leave right now. Without thinking we deposited a borrowed cheque ( as we need some money) in our bank account. The cheque is on my name and bank account is joint for me and my husband. I am not doing any kind of job right now. So will this lead to a clawback?

Melissa says:

Do you have to call service Canada everytime you make a few dollars or can you just wait and claim it on your tax season and just pay money back if thats the case. ? Like im currently on mat leave but I clean my church a few times a year while the other lady is on holidays. So can I just wait and submit a to at tax season

Robb Engen says:

Hi Melissa, you should be completing reports through your My Service Canada Account. It’s called the Internet Reporting Service – log in and select “Employment Insurance (EI)”, then click “Latest claim” or “Payment information”.

Fill out these reports weekly.

Santhia says:

Hi there,
How many hours can I work a week if i’m on a maternity leave? Thank you

Robb Engen says:

Hi Santhia, if you work any hours while receiving maternity benefits you will only be able to keep 50 cents of your benefits for every dollar you earn, up to 90% of the weekly insurable earnings used to calculate your EI benefit amount. This 90% amount is called the earnings threshold. If you earn any money above this threshold, we will deduct it dollar for dollar from your benefits.

Carly says:

I have a question. I have an opportunity to make $720/week. My maternity leave pay is at the maximum. Would this cancel my maternity leave pay? Or would I be able to keep my maternity leave pay and make a bit extra?

Robb Engen says:

Hi Carly, your benefits would be reduced by 50 cents for every dollar you earn up to the weekly insurable earnings amount ($595 x 90% = $535.50), and then if you earn anything above that amount it would be reduced dollar for dollar. It’s up to you whether you think a 50% tax on your earnings up to $535.50 per week, and a 100% tax on anything above that, is worthwhile.

Emily says:

Hi there.
So if you’re in mat leave. You can only work up to 4.5 days a week.. or is that for the whole month!? I have an opportunity to do hair for a movie and would get paid a day rate. But it would be more then 4.5 days for the whole month.. I would hate to take the opportunity and my benefits get cancelled!
Thanks for the help!

Robb Engen says:

Hi Emily, forget the 4.5 days – that’s just to represent the max of 90% of your previous weekly earnings.

Focus instead on this: you can keep 50 cents of your benefits for every dollar you earn, up to 90 percent of your previous weekly earnings. Above this cap, your EI benefits are deducted dollar-for-dollar.

Kary says:

Am I allowed to work by law during my unpaid maternity leave? Like I am only paid for one year, but choose the 1.5 yrs mat leave. So during that 0.5yr, whether I’m allowed to work? Thanks!

Robb Engen says:

Hi Kary, the extended maternity leave means you will receive 33% of your weekly salary instead of 55% (with the 12 month option).

If you earn money while receiving EI benefits, you can keep 50 cents of your benefits for every dollar you earn, up to 90 percent of your previous weekly earnings (roughly four and a half days of work). Above this cap, your EI benefits are deducted dollar-for-dollar.

You are not eligible to receive EI benefits if you work a full week, regardless of the amount you earn. However, this will not reduce the total number of weeks payable on your claim.

Kdubbs says:

If I started an Instagram business that’s a kids consignment store ( sell other peoples clothes And keep a portion of the sale) but everything was paid in cash – would that be considered an income? I can’t imagine it would make that much.m but it might be considered a business. Thoughts?

Robb Engen says:

Hi Kdubbs, you should technically report any income earned through the sale of goods or services, whether it was received in cash or not. CRA defines a business as “any activity that you do for profit.”

Russ Wylie says:

If my daughter receives money gifted to her from her grandfather will it effect her maternity,parental cheque from the Ontario goverment

Robb Engen says:

Hi Russ, there is no gift tax in Canada and so there’s no need to report that as income, which means no impact on your daughter’s EI benefits while on parental leave.

katya li says:

Hi! I am currently getting EI mat payments. Can I work as a independent contractor and not get any deductions ? or i still get deducted ?
thank you

Robb Engen says:

Hi katya, you’d have to report any income earned to the CRA while collecting EI maternity leave benefits.

You can keep 50 cents of your EI benefits for every dollar you earn, up to 90% of the weekly insurable earnings. This 90% amount is called the earnings threshold. If you earn any money above this threshold, it will be deducted dollar for dollar from your benefits.

Serim Park says:

I’m taking a french class from the government during the maternity leave. so, I get some allocation from the government. Do i have to claim this as earned-income? also, I received funding from my university. and do I have to claim this? Thank you for your help in advance 🙂

Koli says:

I have called EI to report income while on Parental Leave, they documented the information and said they will continue to pay benefits. I thought they will ask me to repay part of the money I earned. Does anyone know what happens next? and if I would be asked to pay, how would that be calculated? Which option:
– Total amount earned starting date of earning deducted a dollar for dollar from future payments, or
– Total amount earned deducted a dollar for dollar from all EI payments collected over the duration of my leave?

Thanks in advance for helping!

Wendy says:

Does anyone know if I collect the emergency unemployment due to coronavirus will this affect mat leave later. I am 20 weeks pregnant now

Lisa Jackson says:

Hi Wendy,

You cannot collect both EI and CERB. You can read more here: https://stg.youngandthrifty.ca/guide-to-covid-19-emergency-benefits-and-financial-relief/

Laura says:

Does the company have recourse if a father takes unpaid parental leave from one job, but works at another and does or does not collect EI benefits? Can he be fired from the company he is on leave from?

Lisa Jackson says:

Hi Laura,

We would recommend speaking with an attorney or your local legal aid centre. This isn’t something that we can advise on.

Sameer says:

My wife went on maternity leave in November and her company is paying out an annual bonus to her now in February based on hers and the company’s performance in 2018. Will this lead to a claw back? I’m guessing we need to call Service Canada and report it?

Cj says:

Would it be legal to do consulting work during the last 5 months of my maternity leave and get paid after my maternity leave ends? Or will Cra ding me for it?

Rob Parsons says:

I think I see an error above. You state:
“Any extra money earned while on the 15-17 weeks of maternity leave will be deducted dollar for dollar (meaning for an extra dollar you earn, a dollar will be taken away from your benefits payment), which makes earning extra money on the side extremely non-satisfactory.
So earn any side money while on maternity leave!”

Shouldn’t that be parental leave, rather than maternity? Or have I totally misunderstood? (The latter is always possible, alas.)

Andrew Stevens says:

Just a small correction. One of your statements above is not co correct…you don’t receive up to $51,300 in benefits. That’s the cap on the income that is eligible for benefits. If you read the Service Canada site that you linked to, it says the max benefit is $543 a week, which is $28,236 annually. That equates to 55% of $51,300.

Just wanted to correct that as the way you’ve got it stated is a bit misleading. Max benefits you can get per year is just over $28K