Statutory neonatal care leave and payroll implications for your business

From 6 April 2025, a new statutory entitlement to neonatal care leave and pay will be introduced, providing vital support for employed parents whose babies are admitted to neonatal care.

This new right will allow eligible parents to take up to 12 weeks of leave, with statutory pay available for those who meet the required criteria.

What is neonatal care leave and pay?

The Neonatal Care (Leave and Pay) Act 2023 (the Act) introduces a new day-one employment right for parents with babies who require neonatal care.

This leave is in addition to existing parental leave entitlements, such as maternity, paternity, and shared parental leave.

The Government laid the regulations for this entitlement in January 2025, and subject to Parliamentary approval, it will apply to babies born on or after 6 April 2025.

Who is eligible?

The entitlement applies to a broad range of parents, including:

  • Biological parents
  • Adoptive parents
  • Foster-to-adopt parents
  • Intended parents in surrogacy arrangements

To qualify for neonatal care leave, the baby must be admitted to neonatal care within 28 days of birth and have a continuous stay of at least seven full days.

To be eligible for Statutory Neonatal Care Pay, the parent must:

  • Have at least 26 weeks of continuous employment with their employer at the end of the relevant week.
  • Earn at least £125 per week before tax (from April 2025).

How does neonatal care leave work?

Eligible parents can take between one and 12 weeks of leave, depending on how long their baby remains in neonatal care. This leave can be taken in two tiers:

  • Tier 1 – Leave taken while the baby is still receiving neonatal care and one week after neonatal care ends.
  • Tier 2 – Leave taken outside of the Tier 1 period, but before the end of 68 weeks from the child’s birth.

Notification requirements

Employers must be prepared for different notice requirements depending on whether the leave falls under Tier 1 or Tier 2.

Neonatal care leave:

  • Tier 1 – Employees must notify their employer before the first day of absence or as soon as possible thereafter. This notice does not need to be in writing.
  • Tier 2 – Employees must provide written notice at least 15 days before the start of a one-week leave period or at least 28 days before for a two-week or longer leave period.

Neonatal care pay:

  • Tier 1 – Employees must provide written notice within 28 days from the start of the week they are claiming pay for.
  • Tier 2 – Employees must provide 15 days’ notice for one week of leave and 28 days’ notice for two or more weeks.

Employer considerations for payroll processing

Payroll teams must ensure that their systems can accommodate Neonatal Care Pay calculations and compliance requirements. Key considerations include:

  • Processing up to 12 weeks of statutory pay for eligible employees.
  • Tracking and managing leave requests in both Tier 1 and Tier 2 periods.
  • Ensuring payroll software is updated to handle the correct statutory payments and employer contributions.
  • Providing clear communication to employees regarding their entitlements and the necessary notice periods.

Record-keeping and compliance

Employers must collect and retain key information from employees claiming Neonatal Care Leave and Pay, including:

  • Employee’s name and relationship to the child.
  • Child’s date of birth and neonatal care admission date.
  • Duration of the neonatal care period and expected end date.
  • Confirmation that the employee is caring for the child during the requested leave period.

Does this apply across the UK?

Currently, the Neonatal Care (Leave and Pay) Act 2023 (the Act) applies only to Great Britain (England, Scotland, and Wales).

No equivalent legislation has been introduced in Northern Ireland, meaning businesses operating there will not be affected by this change.

Preparing for the changes

Employers should take proactive steps to ensure smooth implementation of this new statutory entitlement:

  • Update payroll systems to accommodate neonatal care pay calculations.
  • Revise HR policies to reflect the new leave entitlements.
  • Train managers and HR teams on the new regulations and notification requirements.
  • Communicate with employees about their rights and entitlements ahead of the April 2025 start date.
  • Monitor legislative updates to ensure full compliance.

With these changes on the horizon, ensuring your payroll and HR processes are ready will help keep your business compliant while supporting employees during an important time in their lives.

If you need assistance navigating these new regulations, our payroll specialists are here to help.

Contact our team today to ensure your payroll processes are ready for the neonatal care changes.