Parental Leave for the Self-Employed
Welcoming a new baby can be both exciting and stressful. On top of caring for your newborn, you need to work and earn an income to support your child.
Many companies offer paid parental leave to employees, but if you’re self-employed, can you take maternity or paternity leave?
Parental leave options for the self-employed
Self-employed workers are largely on their own when figuring out parental leave. Luckily, there are a few options available.
In some cases, you might be able to use your insurance benefits to receive an income while taking parental leave. For example, if you purchase short-term disability insurance from a private insurer, you may be able to file a claim after having a child. Some private health insurance plans also have optional provisions for disability leave that you can opt into.
The drawback of these policies is that you must have a medical reason to claim disability to take advantage of them.
When you have short-term disability coverage, you could be eligible for benefits for six weeks or more after giving birth if you have a cesarean section or other complications during delivery. Unfortunately, this only applies to birthing mothers. Fathers and adoptive parents can’t submit a disability claim.
The Family and Medical Leave Act is a federal law that allows new parents to take up to 12 weeks of parental leave annually. However, this leave is unpaid and only mandated for companies with 50 or more employees, making it less useful for self-employed people and entirely unhelpful for solopreneurs.
Some states also have programs that offer financial support for new parents. However, most of these programs require a proactive opt-in. Most of these state-level programs require program contributions and that you make contributions for a certain period of time before being eligible to receive any benefit.
For example, in Massachusetts, self-employed people can opt into the program, which requires paying 0.63% (.88% for 2024) of their pay in additional tax. They also must have earned at least $6,000 in the past four quarters and have paid the tax for at least two quarters before claiming benefits.
Once they meet these requirements, Massachusetts residents can take parental leave and receive weekly pay from the state government. The benefit amount depends on their earnings before they take the leave.
States that offer paid parental leave include:
- New Jersey
- New York
- Rhode Island
- Washington, D.C.
Check with your state to see if a similar program is available and learn how it works.
Unpaid parental leave
For many self-employed people, the default strategy is taking time off without working or getting paid. This strategy allows you to take as much or as little time as you need with your new child. Plus, you don’t have to worry about buying insurance or dealing with paperwork.
Unfortunately, supporting your family and household budget without an income is often not feasible or realistic. Planning for unpaid parental leave as a self-employed individual will require diligent planning and budgeting to get by.
Not only should you anticipate the financial impact of an unpaid leave, but you’ll need to manage expectations with your existing clients and come to an understanding if you will continue to serve them after your leave.
How to prepare for leave
While you could wait until your baby is born and take your leave immediately, it’s better to plan ahead. Here are a few tips to consider while you anticipate taking an unpaid leave.
Make a plan with your partner
Consider staggering your leaves so that you continue to have income and childcare simultaneously. Depending on your situation, it may make more sense for one parent to take a break from their career for a few years to focus on childcare. This can be especially true if childcare is costly in your area or you have multiple children.
Create a budget and build up savings
Determine what your budget will look like once your baby arrives. Then, look at your current budget and try to reduce your spending so that you can set aside extra cash to cover expenses while you are on leave. Also, consider saving a little extra money in an emergency fund.
Talk to your clients
When you plan to go on leave, let your clients know. Alert them to your plans, when you want to start scaling down or stopping work and when you plan to return.
Reduce your workload
Try to lessen the amount of work you are doing leading up to your child’s birth. This can be beneficial in case the baby comes early. You could also continue working with a reduced workload when your child comes so you can find a balance between parenthood and your career that enables you to keep earning money.
You might be able to hire some temporary help while you’re on leave. This can keep your company running while you take time off, reducing the impact on your clients and allowing you to keep some income coming in. Start this process sooner rather than later.
Have a plan for returning to work
Just like you have to plan for taking time off, you should have a plan for getting back to work. Plan to slowly ramp up your hours after you return from your leave so you can get back into the swing of things.
Self-employed workers are largely on their own regarding maternity and paternity leave. Unless you live in one of the few states with paid leave programs, it’s up to you to figure out the financial aspect. Also, make sure your clients are ready for you to take time off.
Use these tips to enjoy time with your new child while ensuring your business is ready for your return.
TJ Porter is a freelance writer based in Boston, Massachusetts. He began covering finance while earning a degree in business at Northeastern University in Boston, Massachusetts and enjoys writing about credit, investing, real estate topics. When he’s not writing, TJ enjoys cooking, sports, and games of the video and board varieties. You can contact him at find more of his work at TJPorterWriting.com