Neonatal care leave and pay: what a small employer has to do

There is a category of employment law that most small employers never look at because they hope never to need it. Neonatal care leave is squarely in it. Then one Tuesday a member of your team rings from a hospital corridor, their baby has been moved to a neonatal unit, and you have about four minutes to say something that will be remembered for the rest of their time with you.

Since 6 April 2025 there has been a statutory answer, and it is a good one. Neonatal care leave gives parents up to 12 weeks off, on top of maternity, paternity, adoption and shared parental leave, when their baby needs neonatal care. It is a day-one right. Most small employers have not written a policy, briefed a line manager or checked that their payroll software handles the pay code — which is a shame, because this is one of the rare pieces of employment legislation that is cheap to comply with and enormously valuable to the person receiving it.

The right, in one paragraph

If a baby is admitted to neonatal care within 28 days of birth and stays there for at least seven full and consecutive days, each eligible parent gets one week of neonatal care leave for every full week the baby is in care, capped at 12 weeks. Leave must be taken in complete weeks, and it must be used within 68 weeks of the baby's birth. It sits on top of any other family leave, so a mother taking 52 weeks of maternity leave can add neonatal care leave to the end of it rather than losing part of her maternity entitlement to a stay in hospital.

The leave and the pay are two different tests

This is the point small employers most often get wrong, so it is worth separating clearly.

The leave is a day-one right. Length of service is irrelevant. Someone who started the week before qualifies exactly the same as someone with fifteen years in.

The pay is not. Statutory neonatal care pay requires 26 weeks of continuous service with you by the relevant week, and average weekly earnings of at least the lower earnings limit, which is £129 a week for 2026/27. Where those conditions are met, the payment is £194.32 a week for 2026/27, or 90% of average weekly earnings if that is lower. Income tax and National Insurance are deducted as with any other statutory family payment.

So a genuinely new starter is entitled to the time off and not to the statutory payment. That is an uncomfortable conversation and it is much better had from a written policy than invented on the phone.

Tier 1 and tier 2: the notice rules that trip employers up

The notice requirements are split into two tiers, and the split is deliberately generous where it needs to be.

Tier 1 covers leave taken while the baby is still receiving neonatal care and in the week following discharge. Notice must be given before the employee is due to start work on the first day of absence, or as soon as reasonably practicable if that is not possible. In other words, a phone call from the hospital is enough. Do not build a process that demands anything more at this stage.

Tier 2 covers leave taken after that first week following discharge, and the rules tighten because the employee can plan. Written notice of at least 15 days is required for a single week, and at least 28 days for two or more weeks taken together.

Notice for the pay is separate again: it must be given within 28 days of the first day of the leave the payment relates to, or as soon as reasonably practicable.

The employee is standing in a hospital corridor. The one thing your process must not do at that moment is ask them to fill anything in.

What it actually costs you

Less than most owners assume, because statutory family payments are recoverable.

Take an employee on £34,000 who takes the full 12 weeks. Statutory neonatal care pay at £194.32 a week for 12 weeks is £2,331.84. Employers reclaim 92% of statutory family payments as standard. But if your total gross Class 1 National Insurance liability in the previous tax year was £45,000 or less — calculated before the Employment Allowance is applied — you qualify for Small Employers' Relief and reclaim 109% for 2026/27, the rate having risen from 108.5% when the compensation element went from 8.5% to 9% on 6 April 2026. That uplift exists to help with the employer's National Insurance on the payments.

So for most genuinely small employers, the illustrative figure above is recovered as £2,541.71 — slightly more than you paid out. The statutory element is close to cash-neutral. Your real cost is cover: overtime, a temp, or work redistributed across a team that is already busy. Budget for that, not for the pay.

The reclaim runs through your payroll software and your Employer Payment Summary, exactly as maternity and paternity recovery does. If your software is current it will already have the code. If it is not, find out now rather than in the week it matters most.

Six things to put in place this week

One: write a one-page policy. What the right is, who to tell, what happens to pay, and who covers the work. Two: check your payroll software has statutory neonatal care pay and that whoever runs payroll knows where it is. Three: brief your line managers on the single most important instruction, which is to say yes on the phone and sort the paperwork later. Four: add a line to your onboarding pack so new starters know the leave is available from day one. Five: decide in advance whether you will enhance the pay, and be consistent — enhancing for one person and not the next is how a good intention becomes a discrimination claim. Six: record the notice and dates properly, because statutory payment records need to be kept.

Finally, know how this fits with everything else. It is separate from — and additional to — maternity and paternity leave, covered in maternity and paternity pay for small employers, and separate again from the short-notice time off dealt with in carer's leave, dependants' leave and bereavement leave. It is not sickness absence, and it must not be recorded as such.

Employees are protected from detriment and from dismissal for taking or seeking to take neonatal care leave, so handling it badly carries legal risk as well as the obvious human cost. But the honest reason to get this right is simpler. This is the worst fortnight of someone's life, and you get to decide whether your business made it better or worse. Very little else you write this year will matter as much to one person.

Common questions

Is neonatal care leave a day-one right?

The leave is, the pay is not. Eligible parents can take neonatal care leave regardless of how long they have worked for you, so someone who joined last month has the same entitlement to the time off as someone with fifteen years' service. Statutory neonatal care pay is a separate test: it requires 26 weeks of continuous service by the relevant week and average weekly earnings of at least £129 a week for 2026/27. Where both are met the rate is £194.32 a week, or 90% of average weekly earnings if lower. Keeping the two tests separate in your policy avoids the most common mistake here.

What if the baby is only in neonatal care for a few days?

Then the entitlement does not arise. The qualifying conditions are that the baby was admitted to neonatal care within 28 days of birth and remained there for at least seven full and consecutive days. Below that threshold there is no statutory neonatal care leave, though the parent may well have other options — annual leave, dependants' leave for an unexpected emergency, or paternity leave if it has not been taken. Above the threshold, entitlement builds at one week of leave for each full week the baby is in care, capped at 12 weeks, taken in complete weeks within 68 weeks of the birth.

Can we ask for proof before granting the leave?

You can ask for the information the notice rules require, which is essentially the employee's name, the baby's date of birth, when the neonatal care started, and a declaration that they meet the eligibility conditions. What you should not do is demand hospital records or medical evidence as a precondition of the first week's absence. Tier 1 notice can be given verbally before the start of the first day of absence, or as soon as reasonably practicable — a call from the hospital is enough. Keep the written declaration for your statutory payment records and collect it once the immediate crisis has passed.

Can we treat it as sick leave or ask them to use holiday instead?

No. Neonatal care leave is a distinct statutory entitlement and must be recorded as such — not as sickness absence, and not deducted from annual leave. Nor can it be offset against maternity, paternity, adoption or shared parental leave, because it is expressly additional to them. Annual leave continues to accrue during neonatal care leave in the normal way. Employees are protected from detriment and from dismissal for taking or seeking to take the leave, so pressuring someone to use holiday instead creates real legal exposure on top of the damage it does to the relationship.