The Neonatal Care (Leave and Pay) Act 2023 came into force on 6 April 2025. It applies to babies born on or after that date and gives eligible employees the right to Statutory Neonatal Care Pay and Leave, if they or their partner have a baby that needs neonatal care. Although not a tax topic, it is likely to be relevant to in-house teams managing payroll taxes.
What’s the issue?
Neonatal Care Leave
An employee can take up to a maximum of 12 weeks’ Neonatal Care Leave from the first day of their employment. One week of leave can be taken for every seven consecutive full days the baby spends in neonatal care. Employees must take all leave within 68 weeks of the baby’s date of birth.
Employees can take the leave:
- While the baby is in neonatal care, or in the first week after (‘tier 1’ leave); and
- More than a week after the baby has left neonatal care (‘tier 2’ leave).
Statutory Neonatal Care Pay (SNCP)
SNCP is currently paid at £187.18 per week or 90 percent of average weekly earnings (whichever is lower). To qualify for SNCP, an employee must be employed for at least 26 weeks up to the end of the qualifying period.
How does this interact with other family friendly types of leave?
Employees must take Neonatal Care Leave after any Statutory Maternity or Adoption Leave. If the baby is in neonatal care, or in the first week after, Neonatal Care Leave can be interrupted by other types of pre-booked parental leave (such as Paternity or Shared Parental Leave). The remaining period of Neonatal Care Leave can be tagged immediately onto the end of the other parental leave.
What do employers need to think about?
On 22 August 2025, the Government published a technical guide to help employers determine their employee’s eligibility, how much leave and/or pay they have accrued, and to help their employee decide how they should take their leave and/or pay. The guide also covers complex situations, such as:
- What happens if there are multiple children in neonatal care;
- If a child is readmitted into neonatal care;
- Eligibility; and
- Fitting the entitlement around other types of family-related leave.
This guide includes the following topics:
- Eligibility criteria - Knowing whether your employee qualifies for Neonatal Care Leave and Pay;
- Information your employee must provide;
- How to calculate how much Neonatal Care Leave and Pay your employee has accrued;
- When Neonatal Care Leave can be taken;
- How to fit Neonatal Care Leave and Pay around other statutory leave and pay;
- How to calculate the relevant week and average earnings;
- Information you are required to provide to HMRC; and
- How you can support your employees.
Employers should ensure their HR and payroll teams are familiar with this new right and technical guide and in a good position to support employees requiring this leave. Employers may wish to update their suite of family friendly policies to reference this new leave and ensure HR teams and line managers are able to sign-post employees to these new entitlements.
Employers will need to take steps to ensure HR and payroll systems are able to track any Neonatal Care Leave, its interaction with other types of statutory leave and calculate payments due accordingly to ensure compliance and smooth employee experience.
How KPMG can help
Please speak to the authors or your usual KPMG in the UK contact to understand how KPMG can help you support your workforce and meet your new employer obligations.
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