POLICY

Employment Income

Employment income includes money earned by an applicant or recipient from a range of sources, such as salary, wages, certain commissions, bonuses, tips, gratuities and honoraria. Income from the following sources are also considered employment income:

• Vacation Pay;
• Earnings in Kind; and
• Skill Fees.

Employment Income Deductions

Certain amounts are deducted from the gross employment income of clients to determine net employment income. (See the Allowable Income Deductions policy for details.) The following are allowable income deductions from employment income:

Government of Canada Deductions:

• Income tax;
• Canada Pension Plan contributions; and
• Employment Insurance premiums.
  
  

Deductions as a Condition of Employment:

• Any deductions required by an employer as a condition of employment, such as company pension plan contributions and union dues.
  
  Note:
  If a client claims deductions are a condition of employment, the worker must see a letter, brochure or other document from the employer, which substantiates that employees must pay the deductions.
  
  

Garnishments from Employment Income:
When a creditor garnishees a debtor’s employment income, part of the income is withheld at source and paid to the creditor. The worker allows the first payment on each garnishee as an allowable income deduction when calculating a client’s employment income.

The worker informs the applicant or recipient that all future payments on the garnishee order will be counted as income received. The one-time deduction gives the applicant or recipient time to apply to the court to vary the garnishee order (i.e., reduce the amount withheld).

Note:
The Income Deducted at Source to Repay Other Programs policy addresses garnishments that are not from employment income.

Employment Income Exemptions

The income exemptions for employment income are as follows:

Adult Members

• When earned by an adult member of a household unit with only one adult, the first $230 plus 25% of the remainder of the net monthly employment income.
• When earned by an adult member with a cohabiting partner, the first $115 plus 25% of the remainder of the net monthly employment income.
  
  

Dependent Child

• When earned by a dependent child who is not attending school, the first $350 plus 25% of the remainder of the net monthly employment income.
• When earned by a dependent child while attending school, 100% is exempt.
• All employment income of dependent children who are in school or in the summer months between school terms is 100% exempt.
  
  Note:
  If a client fails to report employment income and there is intent to mislead the department, the earned income exemption is not applied. In situations where a client receives late income, but reports it the following month, the earned income exemption is applied.

Self-Employment Income

Self-Employment income includes money earned by a client from a range of sources such as a business, commission, farming and fishing. Earnings in Kind may also be considered self-employment income. In some cases, self-employment income may come from a home-based business.

Self-Employment Income Deductions

Certain amounts are deducted from the gross self-employment income of applicants and recipients to determine net self-employment income. (See the Allowable Income Deductions policy for further details.) The following are allowable income deductions from self-employment income:

• Government of Canada self-employment deductions for income tax, Canada Pension Plan premiums and Employment Insurance premiums;
• All deductions required by law, including business taxes and business license fees; and
• Reasonable cost of materials, supplies, goods and services that are essential to the business or farm operation, specifically:
  • Interest (but not principal) payments on a loan made for the purpose of the business;
  • Advertising costs, accounting and legal fees, bank service charges;
  • Insurance, license, rental, repair and operating expenses of motor vehicles and equipment essential to the business operation;
  • Delivery, express and freight charges including postage;
  • Veterinary services related to the business or farming operation;
  • Materials and supplies used in warranty work; and
  • Business-related facility costs:
    • lease payments;
    • mortgage interest but not principal payments;
    • property taxes;
    • fire insurance;
    • liability insurance;
    • telephone;
    • utilities; and
    • reasonable maintenance and repairs.
  • In-home child care provider costs that are a condition of the contract with the child care agency
    
    Notes
    • No facility costs are allowed for home-based businesses unless the client can substantiate that the cost is essential to the operation of the business (e.g., a separate telephone line for the business). Shelter costs (rent, mortgage, utilities, etc.) are not considered as essential to the operation of the business as the client would need to pay shelter costs whether or not they operated a business from their home.
    • Clients who provide child care in their own homes can claim the cost of food for the children they care for and any other items that are required to run a day home as a business-related expense, only if providing food and other items are a condition of their contract with the child care agency. Clients are not allowed to claim the cost of food for themselves or their families. Examples of required items to run a day home could be safety gates, fire extinguisher, etc.
      
      

The business person or farmer reports net self-employment income and changes in assets through their monthly reporting. To assist clients in determining their net self-employment income, clients may complete the EMP 5515 Net Self-Employment Income form. The worker may ask them to submit this document as substantiation of net self-employment income.

Self-Employment Income Exemptions

All net self-employment income is deducted dollar for dollar from program benefits and is coded 4303 Self-Employment, with the following exceptions:

Home Based Business – Barriers to Full Employment (BFE)

• Where the BFE adult member of a household unit with only one adult is operating a home based business, the first $230 plus 25% of the remainder of the net monthly income is exempt.
• Where a BFE adult member is operating a home based business and has a cohabiting partner, the first $115 plus 25% of the remainder of the net monthly income is exempt.
  
  

Home Based Business – Child Care Services – Expected to Work (ETW)

• Where the adult member of a household unit with only one adult provides child care in their home, the first $230 plus 25% of the remainder of the net monthly income is exempt.
• Where the adult member with a cohabiting partner provides child care in their home, the first $115 plus 25% of the remainder of the net monthly income is exempt.
  
  

Dependent Child – BFE and ETW

• The first $350 plus 25% of the remainder of the net monthly income for a dependent child who is not attending school, and is operating a home based business is exempt.
• 100% of net self-employment income earned by a dependent child while attending school is exempt. (This includes in the summer months between school terms.)

For those who are eligible to receive the self-employment income exemptions, the self-employment income is coded as 4104 for the Head of Household, 4105 for a Partner, and 4103 for a Dependent Child(ren).

Note:
If a client fails to report self-employment income and there is intent to mislead the department, the earned income exemption is not applied. In situations where a client receives late income, but reports it the following month, the earned income exemption is applied. 

Entering Employment and Self-Employment Income

• The worker enters the client’s income that is not 100% exempt as reported on the CRC, in Client Budget function 9 under the appropriate income code. LISA calculates the earnings exemptions for adult members.
• Dependent Child Not Attending School
  If the dependent child is not attending school, the worker manually calculates the earnings exemption rate.
• See Lisa Codes to enter partially exempt income and deductions