CWELCC Owner's Compensation - Clearing Up the Confusion

What is Allowable for Owner's Compensation Under the New CWELCC Cost-Based Funding Model**

If you're confused, you're not alone. Owner's compensation is one of the most misunderstood areas of the new CWELCC cost-based funding model - and in this post we'll clarify what the rules are and what's allowed.

At ChildcareCPA, we help many childcare operators navigate this issue - so let's clear up one of the most common misconceptions first.

In reality, there is no CWELCC owner's compensation cap on what an owner can pay themselves. But when it comes to claiming that compensation through CWELCC funding, the story is a bit more nuanced—and essential for you to understand if you’re the controlling owner of a licensed childcare centre in Ontario.

Let’s break it down. In this post, we’ll clarify:

• What the $465/day ($121,365/year) figure actually means - it is not the maximum salary owners are allowed

• What is (and isn’t) eligible as an expense

• How owner salaries are treated under the 2025 Cost-Based Funding Model

• What owners can do to stay compliant

There is No Salary Cap...but there is a Funding Limit

The $465/day figure is not a limit on how much you can pay yourself. Instead, it’s a cap on how much of your salary will be included in your base CWELCC funding for 2025.

Here’s how it works:

For controlling owners, the 2025 funding cap is the lower of:

1. Your actual 2023 compensation (salary + benefits), adjusted for inflation by 1.0465, or

2. $465 × number of licensed service days in 2025 (typically 261 days, or $121,365)

This funding cap determines how much funding for owner's compensation will be included as part of your benchmark cost-based funding in 2025. This is a funding limit, not a salary limit.

For example, if your 2023 salary was $120,000, your adjusted 2025 cap would be about $125,580. You can still pay yourself $140,000—just note that your benchmark funding would only include $125,580 for your compensation, and the remainder ($14,420) would be redirected from other cost categories.

What’s Allowed

While the funding is capped, the eligible expense is not—provided your compensation meets the CWELCC cost-based eligibility criteria. Specifically they are:

• Attributable to the provision of childcare for CWELCC-eligible children

• Appropriate for the provision of childcare for CWELCC-eligible children

• Reasonable in quality and amount for the circumstances

If you're working in your centre in an operational role—such as Director, Supervisor, or Administrator—your salary is fully eligible as an expense under CWELCC, just like any other staff member. Even if that amount exceeds the funded cap, it is an eligible expense for reconciliation purposes if it meets the above criteria.

For best practices, your compensation should be:

✅ Paid via payroll (T4) [dividends are not considered eligible expenses under CWELCC]

✅ Attributable and required for the provision of childcare services for CWELCC-eligible children

✅ Reasonable and appropriate for work performed

✅ Documented (be ready to provide supporting documentation if needed, including job descriptions, etc.)

Why This Matters

Understanding the difference between funding and eligible expenses is critical.

Too many owners have underpaid themselves historically, drawing dividends when they thought they could afford to do so, or only when they needed to. This misunderstanding can lead to financial stress, staffing imbalances, and burnout.

Getting this right means:

• You're compensated appropriately for the work you do

• Your books and budgets reflect reality

• Your CWELCC funding is fully compliant

If you’re an owner, this means: pay yourself through payroll, not dividends. Keep documentation ready. Don’t assume the funding cap limits your income.

Final Thoughts: Pay Yourself Fairly—With Clarity

You are allowed to pay yourself more than $465/day ($121,365/year). That amount simply limits what will be included in your base CWELCC funding—not what you can earn or expense.

If you are paying yourself above this amount, you are effectively re-directing benchmark funding from other areas for this expense - and you have the flexibility to do so, as long as the expense meets the CWELCC Eligibility Criteria (attributable, reasonable, appropriate).

✅ Pay yourself via payroll. Dividends are not a business expense and will not be eligible expenses for CWELCC cost-based funding reconciliations

✅ Track your time and role. Be able to support why your salary is reasonable and appropriate

✅ Document everything clearly

✅ Work with a bookkeeper who understands CWELCC

Need help making sense of owner's compensation - or want help upgrading your accounting and financial reporting? We specialize in helping childcare centres navigate funding, compliance and your unique financial and accounting needs.

Reach out anytime! You can also email us at hello@childcarecpa.ca.

**Disclaimer: there are differences in CWELCC cost-based funding calculations and reconciliations across regions. The information provided here is intended as a general guide. We strongly encourage you to consult with your Region to ensure compliance with the specific rules and guidelines applicable to your centre.