Making Money While on Maternity Leave Canada: What Happens

We are very fortunate to have maternity leave benefits in Canada compared to other countries such as the United States. With the introduction of the 18 month extended maternity leave, I am thinking that more people are wondering about making money while on maternity leave. The extended leave gives you more time with your baby, but the downside is that the weekly payments are also extended, and that means less cash flow monthly.

I remember when I had my first maternity/ parental leave, I was very anxious about my finances especially preparing for baby’s first year. I took advantage of baby freebies available and we still lived in a one bedroom.

Even though we could afford the reduced income, I didn’t like seeing reduced income. I wanted to fight back against the Motherhood Penalty. I had thought about making some money while on maternity leave in Canada, and I did some research on how much working even a little bit while on mat leave would ‘cost’ me.

I wanted to save money fast not just save money on groceries in Canada.

Having gone through two maternity leaves (the 12 month kind, not the 18 month kind) I would like to say that I am glad to be back at work. Working is a mini-break from the chaos and tiredness that stay at home parenting involves. That being said, I am also glad to be able to have that time with my kids.

Maternity Leave in Canada

What does maternity leave in Canada entail? In order to receive money during your leave, you have to be employed. You also will have to worked for more than 15 weeks full time before applying for benefits.

You could also be self-employed and receive maternity and parental leave benefits, but you have to pay into these benefits ahead of time.

How much would you receive if you took a 12 month leave per week? In 2022, the maximum weekly Employment Insurance amount for standard parental benefits is 55% of the average insurable weekly earnings. In 2022, the maximum amount is $638 per week.

For the extended parental benefits (e.g. the 18 month leave), it is 33% of average insurable weekly earnings and this is up to a maximum amount as well. For 2022, this maximum amount is $383 per week.

You can double check what you’ll get with the maternity benefits calculator.

The income received during parental and maternity leave is taxed.

Some employers offer a top up to these government benefits from 75% to 90% of your previous earnings for anywhere from 4 months to 6 months to even the whole year (usually federal employees get this luck).

As you can see, $383 a week is $1532 a month (if you receive the maximum benefit) and $638 per week is $2552 a month (for the 12 month leave). It’s not a lot of money per month, which is why earning money while on parental leave is tempting.

For example if you want to reward yourself by saving money on a Louis Vuitton for all your hard work motherhood penalty!

Here’s what happens when you try to make some money while on paid parental leave.

Can You Work While on Maternity Leave?

As of 2018, maternity benefits are part of the Working While on Claim program.

Basically when you are on EI (maternity or parental) benefits, if you make money while receiving this benefits, you are able to keep $0.50 of the benefits for each $1 that you earn.

This is up to 90% of your previous weekly earnings. If you earn above this cap, your EI benefits will be deducted dollar for dollar.

Here’s an example:

Mary is 9 months into her parental leave, and her weekly EI benefit is $573 a month. She is on the 12 month standard leave. She has started to work 4 hours twice a week doing some bookkeeping at home while her mother watches her 9 month old. She earns $160 a week as a part-time bookkeeper.

Because of this, her $573 in EI benefits are reduced by $80 or 50 cents for every dollar she earns as a part time bookkeeper ($160 ÷ 2 = $80). This brings her total EI benefit to $493 ($573 – $80 = $493).

Therefore, Mary takes home $493 per week in EI benefits plus her part time money of $160, for a total of $653 a week.

Working While On Maternity Leave

As you can see, it doesn’t ‘pay’ to work very much during your parental leave (well a little bit, but $80 of your earnings is deducted from your EI benefits).

For more information about working while you are on claim, you can check out the Canada.ca website here. 

It’s important to know that maternity/parental benefits paid by your employer do not count as additional earned income.

How to Avoid Parental Benefit Deductions

There are some ways that you could technically avoid the parental benefit deductions from your EI benefits.

For example, if you are a freelancer (here are some influencer or blogger tax deductions you shouldn’t forget), you could ask to not get paid while you are on leave and instead, you could invoice either before your parental leave starts or after it ends (e.g. during your regular employee working time).  

This would avoid the EI benefits clawback.

Of course, you would have to have the person paying you for the bookkeeping task (for example, in Mary’s example situation above) agree to this.

Managing your money this way is a bit complex but it is a workaround.

How to Make Money While on Maternity Leave in Canada

The good thing is that this EI clawback only counts for EARNED income.

For non-earned income, for example, rental income, dividend stocks income, and capital gains income are not included in this.

Money earned this way is not deducted dollar for dollar or $0.50 to the dollar from your weekly EI benefits.

This is why income producing assets and passive income in Canada are so beneficial.

For other ways to save money while on maternity leave and a low income, check out this post here.

To actually make extra money while on maternity leave in Canada, you would need to do stuff that allows you to work from home or have a very flexible schedule.

If you have the energy to side hustle on maternity leave, you could sell things online. Facebook Marketplace and Craigslist are great options for kids stuff. There are people looking to save money and buy baby clothes, toys, and accessories that are gently used all the time.

In addition, you could go the survey or upload receipt route like Caddle, or Checkout 51 can earn you a few bucks. It’s not very much though but it’s better than nothing.

I have a friend who got creative, created an Instagram account, and started selling hand crafted floral arrangements. She made a few thousand dollars.

maximize Government Benefits

Finally, make sure you complete the financial checklist for new parents and take advantage of government benefits that will pay monthly.

For example in 2023, with the Canada Child Benefit you can get:

• The maximum CCB amount in 2023 is $6,997 per year ($583.08 per month) for children under 6
• The maximum CCB amount in 2023 is $5,903 per year ($491.91 per month) for children between the ages of 6 and 17
• You can receive an additional $3173 per year if your child qualifies for the Child Disability Benefit (as of July 2023)

Here’s how to maximize your Canada Child Benefit and the respective Canada Child Tax Benefit Payment Dates.

If your household has money to save towards your child’s RESP, don’t forget to take advantage of the CESG, which matches 20% of your contribution up to $500 a year.

Related: Justwealth vs Wealthsimple RESP

Finally, although this will be 6 years later, if you live in BC, you should apply for the BCTESG (BC Training and Education Savings Grant) and get a free $1200 from the BC government for your child’s RESP.

Working While on Maternity Leave

To summarize, if you have the energy and need to earn money while on maternity leave in Canada, there are some implications to consider.

While you are on paid EI benefits, what you receive in maternity and parental benefits will be reduced by 50 cents to every dollar that you earn. If you earn up to 90% of your previous weekly earnings, your EI benefits will be reduced dollar to dollar.

I guess the Canadian government wants to discourage new moms on maternity leave in Canada from doing a side hustle!

Have you earned money while you were on parental leave?