If you are a resident of Ontario, on Ontario Works (OW), and you find a job, whether it is a part-time or full-time job, and worry that your OW payment will drop so much that working is not worth it. This is the common issue. There is a good news is that Ontario Works is designed to encourage you to work. The program includes an earnings exemption that allows you to keep a significant portion of what you earn. In fact, working always leaves you better off financially than not working. This article explains exactly how your earnings affect your OW payment, step by step. You will learn the formula, see real-life examples, and understand how to use an OW Income deduction calculator to know exactly what you will receive.
Table of Contents
Basic Rule: How OW Income Deduction Works
Your OW payment is reduced based on your net monthly earnings (your take-home pay after mandatory deductions like income tax, CPP, and EI). The rule is different depending on how long you have been on OW.
During Your First 3 Months on OW
For the first three consecutive months you receive OW, there is no earnings exemption. Every dollar you earn is deducted dollar-for-dollar from your OW payment.
Example: If you earn $300 in your first month on OW, your OW payment is reduced by $300.
This is an important reason to delay starting work until after you have been on OW for three months, if possible.
After 3+ Consecutive Months on OW
Once you have been on OW for three months in a row, the earnings exemption kicks in. Here is the formula:
| Portion of Monthly Net Earnings | How It Affects Your OW Payment |
| First $200 | Fully exempt – no OW Income deduction |
| Any amount above $200 | 50% deducted from your OW payment |
Formula to calculate OW Income Deductions and New Payment
- OW Income deduction = (Net monthly earnings – $200) × 0.50
- Your new OW payment = Base OW amount – OW earning deduction
If your net earnings are $200 or less, your OW payment does not change at all.
Step-by-Step: How to Calculate Your OW Payment With Earnings
Let us walk through the calculation using a real example.
Example: Vishakha is a single person on OW, and her base OW payment (Basic Needs $343 + Shelter $390) is $733 per month. She has been on OW for more than three months. She gets a part-time job and earns $600 net per month.
| Step | Calculation | Result |
| 1 | Start with net monthly earnings | $600 |
| 2 | Subtract the $200 exemption | $600 – $200 = $400 |
| 3 | Calculate 50% of the remaining amount (this is the deduction) | $400 × 0.50 = $200 |
| 4 | Subtract the deduction from base OW | $733 – $200 = $533 |
| 5 | Add back her job earnings | $533 (OW) + $600 (job) = $1,133 |
Final Amount: Sarah’s total monthly income with work is $1,133. Without work, she would have only $733. She is $400 better off by working.
OW Income Deduction Table
This table shows how much OW a single person ($733 base) keeps at different earnings levels (after 3+ months on OW).
| Net Monthly Earnings | Exempt Amount | Earnings Above $200 | 50% Deduction | New OW Payment | Total Monthly Income (OW + Job) |
| $0 | $0 | $0 | $0 | $733 | $733 |
| $100 | $100 | $0 | $0 | $733 | $833 |
| $200 | $200 | $0 | $0 | $733 | $933 |
| $300 | $200 | $100 | $50 | $683 | $983 |
| $400 | $200 | $200 | $100 | $633 | $1,033 |
| $500 | $200 | $300 | $150 | $583 | $1,083 |
| $600 | $200 | $400 | $200 | $533 | $1,133 |
| $800 | $200 | $600 | $300 | $433 | $1,233 |
| $1,000 | $200 | $800 | $400 | $333 | $1,333 |
| $1,200 | $200 | $1,000 | $500 | $233 | $1,433 |
| $1,400 | $200 | $1,200 | $600 | $133 | $1,533 |
| $1,466 | $200 | $1,266 | $633 | $100 | $1,566 |
Once your OW payment drops to $0, you are no longer eligible for financial assistance, but you may still qualify for health benefits.
Every time your earnings increase, your total income (OW + job) also increases. You never lose more than 50 cents of OW for every extra dollar you earn above $200.
How to Report Your Earnings to Ontario Works
You must report your earnings every month, even if you earned nothing. If you miss a report, your payments may be put on hold. You can report your earnings in three ways:
1. MyBenefits (online): The fastest and easiest method
2. Interactive Voice Response (IVR): Call the phone reporting system
3. Statement of Income form: Mail or drop off the paper form you receive with your OW cheque or direct deposit statement
You need your gross pay (earnings before OW Income deductions), net pay (earnings after deductions), and pay stubs as proof.
You need to report your earnings from one reporting period (for example, January 16 to February 15) by a specific due date. The information you report determines your OW payment for the following month. For example: Earnings earned between September 16 and October 15, report by October 16. It affects your November OW payment.
Special Situations That Affect the OW Income Deduction
Business or Self-Employment Income
If you run your own business, OW looks at your net profit (gross income minus approved business expenses), not your gross revenue. The same $200 exemption and 50% OW Income deduction apply to your monthly net profit.
Approved business expenses you can deduct:
- Supplies and materials
- Tools and equipment
- Advertising and business cards
- Bookkeeping and legal fees
- Rent for your place of business (not your home)
Expenses you cannot deduct:
- Wages for employees
- Business losses
- Depreciation on assets
- Gifts and entertainment
- Conferences
Self-employment example
A Janney runs a small business from home. Her base OW is $733 (single person).
| Step | Calculation | Result |
| 1 | Gross business income | $800 |
| 2 | Allowable expenses | –$100 |
| 3 | Net profit | $700 |
| 4 | Subtract $200 exemption | $700 – $200 = $500 |
| 5 | 50% deduction on remaining amount | $250 |
| 6 | New OW payment | $733 – $250 = $483 |
| 7 | Total monthly income | $483 (OW) + $700 (profit) = $1,183 |
Child Care Deductions
If you pay for child care so you can work, you can deduct those costs from your earnings before the $200 exemption and 50% OW Income deduction are applied.
| Type of Child Care | Maximum Deductible Amount |
| Licensed child care (province-licensed) | Full actual cost |
| Unlicensed/informal care (family, nanny, after-school program) | Up to $600 per child |
| Before/after-school programs (full-day kindergarten) | Full actual cost |
You cannot claim child care if the caregiver is a family member also receiving OW with you. You can get child care funding from another source. Example with child care: Single parent on OW ($1,002 base), net earnings $800, paying $300 for licensed child care.
| Step | Calculation | Result |
| 1 | Net earnings | $800 |
| 2 | Subtract child care expenses | –$300 |
| 3 | Adjusted earnings | $500 |
| 4 | Subtract $200 exemption | $500 – $200 = $300 |
| 5 | 50% OW Income deduction on remaining amount | $150 |
| 6 | New OW payment | $1,002 – $150 = $852 |
| 7 | Total income | $852 (OW) + $800 (job) = $1,652 |
Full-Time High School or Post-Secondary Students
If you are enrolled full-time in high school or an approved post-secondary institution and have been on OW for three consecutive months, your earnings are fully exempt. This means:
- Your OW payment is not reduced at all by your earnings
- You can save money for school costs without affecting your OW
- Summer earnings are also exempt if you plan to return to school in the fall
For post-secondary students, the exemption applies to the four months before your program starts (pre-study period) and the entire time you are attending school. You must still report your earnings each month, even if they are fully exempt.
Earnings of Children Under 18
If you have a child under 18 who works, their earnings are completely exempt. They do not affect your OW payment at all. You do not need to report them. If your child is 18 or older and not in full-time school, their earnings are treated like any other adult income in the household.
If you lose your job or stop working, you must tell your caseworker immediately. You should also fill out the Statement of Income form for that month, indicate when your job ended, and provide verification (Record of Employment or a letter from your employer). Your OW payment will be recalculated based on your new, lower income. You may also be eligible for Employment Insurance (EI). Visit Canada.ca/EI to learn more.
Leaving OW for a Job
If you leave OW because you found a paying job, you may still qualify for:
- Extended Health Benefit: Helps pay for health costs if you do not have comparable employer benefits
- Employment support: Help with expenses like safety boots
- Better Jobs Ontario: If you leave OW to participate in this training program
Discuss to your caseworker before you leave the program.
In Short,
The Ontario Works earnings exemption is generous, and after your first 3 months on the OW program, the first $200 you earn each month is yours to keep with no OW income deduction. For every dollar above $200, you keep 50 cents of your OW and lose only 50 cents. You are always better off working than not working. Child care costs can be deducted before the calculation, and full-time students have all their earnings exempt.
You can use the Ontario Works Income Deduction Calculator at CanadaCalculators.ca to see exactly how much of your OW payment you will keep based on your earnings, family size, and child care costs, before you start your new job.
