The Child Care Subsidy program requires parents and caretakers who are legally and financially responsible for the child to be working and earning federal minimum wage. To determine if a self-employed individual meets this requirement, the following must be considered:
1. Has the self-employment been ongoing for at least one year?
If the answer to the question is yes, the individual must be earning federal minimum wage. Divide the net income (after expenses) by number of hours the person is engaged in the self-employed activity.
For example, John Tyler has been a self-employed painter for the last three years. His monthly net income is $800. John’s schedule varies but he states he works approximately 30 hours each week. 30 hours/week x 4.3 = 129 hours per month. $800 divided by 129 hours= $6.20 per hour. John will not qualify for child care benefits as his self-employment has been on-going for at least a year and he does not meet the minimum wage requirement.
If the answer to the question is no, the worker will counsel the self-employed individual and develop a plan to increase the person’s earnings by the next renewal. If the client refuses to work on steps to increase their wage, the child care case is denied at application or closed at renewal. This situation must be thoroughly documented in case notes.
For example, May Carter started a cleaning business two months ago. She is paid per each house she cleans. Based on her first two months of business, her hourly wage is $6.75 per hour.
The worker and May discuss ways to increase her business. Mary agrees to advertise on Craigslist and Facebook and plans to increase her cleaning service rates once she has an established customer base. She believes these steps will enable her to make minimum wage. This discussion and plan needs to be documented in case notes. Child care benefits can be approved.
At Mary’s renewal, her income must be reviewed to ensure an increase has occurred. If she is not making minimum wage at that time, no further care is approved. If she is making minimum wage at the renewal, no further monitoring care is continued for an additional 12 months.
2. Has the self-employment been ongoing for at least one year but there has been a major change in income and the client is not meeting the minimum wage rule?
In this instance, the situation regarding the change such as illness, new location, etc. must be emailed to the AFS Child Care Subsidy unit (firstname.lastname@example.org) for further instructions on how to proceed.
3. Is the self-employed individual paid a set wage by the employer which does not equal minimum wage?
In this circumstance, the individual must ask the employer to increase the wages so the income equals minimum wage. If the employer refuses to do so, the child care application is denied.
For example, Sam Evans works for a construction company. He is paid under the table at a flat rate of $8 per hour. Sam has work related expenses such as purchasing tools and gasoline to travel to each construction site. These expenses mean Sam is eligible for a 50% deduction. Once this deduction is given, Sam’s hourly rate will only be $4 per hour which is below federal minimum wage.
Sam’s situation was verified by phone with the employer. Sam’s employer stated that because he does not have the required license for his work field, Sam will not be eligible for a raise. It is crucial that the discussion with the employer be documented in case notes as child care benefits cannot be approved because Sam’s employer refused to increase his wages.
4. Is the self-employment income from the previous year representative of the current year? (Customer self-employed for over 12 months)
If the answer to the question is yes, use the method indicated above to calculate the monthly income.
If the answer to the question is no, because the customer has experienced a substantial increase in income; the worker requests verification of the increased income to determine if the minimum wage rule is being met.
If the answer to the question is no because the customer has experienced a substantial decrease in income and no extenuating circumstances have occurred; the child care application is denied or no further care is approved at renewal.
Example: Tony Nelson applies for child care in July. He has been a self-employed contractor the last 19 months. Tony provides his tax return from the previous year which indicates he was not meeting the minimum wage rule. Tony states he added tile work to his list of services provided as a contractor in January of the current year. Tony provides his pay information from January through June. The provided information shows that Tony is currently meeting the minimum wage rule. The worker must use the most representative income to determine Tony’s eligibility. In this scenario, the most representative income is his last 6 months of records.
Example: Tony Nelson applies for child care in July. He has been a self-employed contractor the last 19 months. Tony provides his tax return from the previous year which indicates he was not meeting the minimum wage rule. Tony states he plans to add tile work to his list of services provided as a contractor in a couple of months. Tony states he thinks he will make about $2000 more a month once he starts providing this service. Since Tony has been self-employed for 19 months and does not meet the minimum wage rule, his application for child care must be denied.