How neonatal care leave will affect your payroll and policies

From 6 April 2025, employers will need to accommodate a brand-new statutory entitlement: neonatal care leave and pay.

Introduced under the Neonatal Care (Leave and Pay) Act 2023, the legislation offers vital financial and emotional support to parents whose babies require specialist neonatal care – and it carries key implications for your payroll processes and workforce management. 

What is neonatal care leave? 

Eligible employees will have the right to take up to 12 weeks of neonatal care leave if their baby is admitted to neonatal care within 28 days of birth and remains in hospital for seven consecutive days or more. 

• Leave entitlement is a day-one right, available from the start of employment. 

• It is offered in addition to maternity, paternity, and shared parental leave. 

• It applies across England, Wales, Scotland, and Northern Ireland. 

Neonatal care pay – Payroll essentials 

While leave is available from day one, statutory neonatal care pay is subject to qualifying criteria: 

• Length of service: Employees must have worked for you for a minimum period. 

• Earnings threshold: Employees must earn at least £125 per week. 

For the 2025/26 tax year, statutory neonatal pay will be £187.18 per week or 90 per cent of the employee’s average weekly earnings (whichever is lower). 

This means your payroll systems must be updated to apply the correct rates and ensure compliance with eligibility checks. 

What should employers do now? 

Around 60,000 parents are expected to benefit annually. To stay compliant and minimise disruption, you should start preparing now: 

• Review and update payroll systems – Ensure your software is ready to process statutory neonatal care pay accurately, including earnings thresholds and pay rates. 

• Update HR policies and handbooks – Clearly set out the new entitlement and how employees can request leave. Communicate changes across your workforce. 

• Plan for workforce flexibility – With up to 12 weeks additional leave available, consider how you’ll manage staffing gaps. Options may include flexible working arrangements, temporary cover, or job-sharing. 

• Provide employee support –  Parents facing neonatal care are under immense stress. Offering clear guidance on their rights, alongside additional support such as counselling services or flexible working options, can make a meaningful difference. 

• Train managers and HR teams – Ensure those handling requests understand the legal framework and how to support employees compassionately and consistently. 

Why supporting neonatal care leave matters for employers 

While there is a clear ethical imperative behind this reform, the benefits for employers shouldn’t be overlooked: 

• Clarity and consistency – A statutory framework removes the ambiguity of ad hoc leave requests, helping you manage absences and pay reliably. 

• Employee loyalty and retention – Compassionate policies can strengthen staff morale and foster long-term loyalty. 

This new entitlement sits alongside other family-friendly developments, such as enhanced flexible working rights and carer’s leave.  

Staying informed will not only ensure compliance but also help position your business as a supportive, modern workplace. 

For further advice on preparing your payroll and policies, contact our payroll team today.