How Neonatal Leave and Pay Changes Impact Your Business

The Neonatal Care (Leave and Pay) Act 2023 required regulations to bring the key provisions of this legislation into force. These regulations, which shall be subject to Parliamentary approval,  have now materialised and can be found here.

 Why has this new right been implemented?

There was no specific statutory entitlement to leave and/or pay for parents of children who require neonatal care. Parents in this situation may have been able to use a portion of their other existing rights to family-related leave and pay e.g. maternity leave, to care for their baby in hospital or at another agreed care setting. However, some mothers reported they had to leave work because they were not ready to return at the end of their maternity leave period, and as paternity leave is limited to two weeks, some fathers and partners have had to rely on statutory unpaid parental leave in order to take this time off. In the explanatory note accompanying the regulations, the Government reference that around 40,000 babies spend over one week in neonatal care each year – it is estimated that around 60,000 parents will be eligible and around 34,000 parents will take up paid neonatal care leave each year.

 The Impact Assessment accompanying this new right identifies that there will be an annual net direct cost on business of approximately £18.6m net. However, “as is the case for all statutory parental payments, small business will be able to claim back 103% of the payment made to the employee by setting those amounts off against deductions which they remit regularly to HMRC.”

What are the key take aways of this new right?

 The new right shall apply in respect of children who are born on or after 6th April 2025 and provide eligible employees the right to take “one week’s neonatal leave for every week their child spends in neonatal care capped at a maximum of twelve weeks.”

 Neonatal care is defined as medical care received in hospital and medical care received in any other place which meets the following criteria: the child was an inpatient in hospital and the care is received upon that child leaving hospital, the care is under the direction  of a consultant and the care includes ongoing monitoring by, and visits to the child from, healthcare professionals arranging by the hospital and palliative or end of life care.

 To be eligible to this new right, the child’s neonatal care must start within 28 days of birth and the admission last for a continuous period of seven days or more.

 The entitlement to neonatal care leave is available for employees who are the child’s parent, an intended parent or the partner of the child’s mother. If they are the parent or intended parent of the child they will have the responsibility for the upbringing of the child, or if  they are the partner of the child’s mother, they will have the main responsibility (apart from any responsibility of the mother) for the upbringing of the child. There are provisions regarding adoption and overseas adoption contained in the regulations.

 The entitlement to leave will apply to all employees, regardless of how long they have worked for their employer. The parent can take the leave when their child is still receiving neonatal care or after any other parental leave that the parent may be eligible for such as maternity leave.

 Statutory payment

There will be a new statutory payment for parents taking time away from work following a child’s admission into neonatal care. The payment will provide a measure of earnings replacement which will support parents to take this time away from work to care for their baby. Provided the employee meets the eligibility criteria, the statutory payment will be paid at either a flat rate of £187.18 per week for 2025/2026 or 90% of average earnings calculated over a set reference period, whichever is lower whilst absent from work.

In the explanatory note which accompanies the regulations it states “whilst employers will administer the statutory payment on behalf of Government, they will be entitled to reclaim a proportion of the amount through setting payments off against deductions which they remit regularly to HMRC.”

 Employment protections and parents’ right to return to the same job

Parents who qualify for neonatal care leave will be afforded the same employment rights and protections as parents taking other relevant family related leave. This means that they will be protected from detriment or discrimination arising from them taking, or seeking to take, neonatal care leave. Employees who are eligible for neonatal care leave will also have a right to return to the same job after a period of neonatal care leave or a combined period of neonatal and other forms of qualifying family related statutory leave if they are absent from work for a period of 26 weeks or less.