8.2 Self-employment

Created on: 
Jul 29 2016

(fully countable core)

Legal References:

The Self-employment section includes:

  • 8.2.1 How do I determine WorkFirst participation requirements for self-employed participants?
  • 8.2.2 What are self-employment plans?
  • 8.2.3 How many self-employment hours count towards federal participation?
  • 8.2.4 eJAS Codes
  • 8.2.5 Self-employment - Step-by-Step Guide

8.2.1 How do I determine WorkFirst participation requirements for self-employed participants?

Self-employment occurs when a participant is working as a business owner or independent contractor. Participants working at least 32 hours or more per week at minimum wage, with an approved self-employment plan, may use self-employment as their primary path to independence.

Deferral from employment services activities can occur if self-employed participants meet all of the following conditions:

Participants:

Single participants with a child under six:

Working at least 32 hours per week at their business

Working at least 20 hours per week at their business

Their business generates income equal to the federal minimum wage times 32 hours per week, after business expenses are subtracted

Their business generates income equal to the federal minimum wage times 20 hours per week, after business expenses are subtracted

Have an approved self-employment plan from a local business resource center.

Have an approved self-employment plan from a local business resource center.

 

Even though we determine grant amount and federally countable hours differently as of August 1, 2015, how we count hours for WF activity will stay the same. We will continue to subtract actual business expenses in the above calculation, rather than subtracting 50% of the gross.

You may use the SE Hours Calculator to get the number of PT or FT hours per week to use for WorkFirst participation. Input the amount of the gross monthly business receipts (from ACES) and the allowable, reported business expenses. Please note, this calculation may result in more participation hours than the federally countable hours described in section 8.2.3.

If the participant doesn’t meet all these conditions, s/he:

  • Can continue their self-employment,
  • Must participate in employment services activities, and
  • May stack participation with other WorkFirst activities.

8.2.2 What are self-employment plans?

If a participant wants to pursue self-employment, refer her/him to a local business resource center. For information on local business resource centers in your area, visit the Small Business Development Center website, Service Core of Retired Executives website, or any other local entities that provide business plan guidance. Add the referral to the participant’s IRP and give them a reasonable amount of time to complete needed actions with the local business resource center. The local business resource center will help the participant pull together the following information required for plan approval:

  • A business statement of self-employment plan, and
  • Profit and Loss statements (or projected Profit and Loss statements, if a new business).

The local business resource center will also provide the participant with ongoing technical support, such as help to:

  • Acquire any necessary business, professional or tribal licenses,
  • Set up a quarterly business plan, and
  • Learn about affordable credit and business training.

The self-employment plan will come back to you so you can decide whether to add self-employment to the participant’s IRP and approve any needed support services (like paying for small business training courses) or child care. Developing the self-employment plan with a local business resource center and accessing ongoing technical support aren’t countable activities.

8.2.3 How many self-employment hours count towards federal participation?

As shown on the chart below, there is a set formula that ACES will use when determining how much income a participant's business is generating, and how this translates into the number of federally countable self-employment hours per week. WorkFirst staff use the process in 8.3.1 to determine WorkFirst participation requirements when developing an IRP.

ACES will use self-employment data to calculate the grant amount and the average weekly hours of self-employment that count toward federal participation. ACES will display that information in eJAS in Employment Hours History.

ACES will apply the 50% self-employment standard deduction, as appropriate, to determine the amount of the cash grant without any action on your part. Only enter verified business expenses on the ACES EARN screen. ACES will treat all SE earned income expense types as actual business expenses.

ACES self-employment formula to calculate federally countable self-employment hours
  1. ACES will subtract the participant's allowable, verified business expenses or 50% of the gross monthly business receipts (whichever is higher) from her or his gross monthly business receipts.
  2. ACES will divide the result by the federal minimum wage.
  3. The result is the number of self-employment hours per month.
  4. ACES will divide the number of hours per month by 4.33.
  5. The result is the number of self-employment hours per week that will count toward federal participation.

Definition of Employment: Any legal income generating activity which is taxable under the United States Tax Code or non-taxable under treaty between an Indian Nation and the United States.

8.2.4 eJAS codes

When a participant is self-employed, use the eJAS codes:

  • RO (other referral)
  • JT (job skills training)
  • FT (full time employment)
  • PT (part time employment)

8.2.5 Self-employment - Step-by-step guide

  1. The WorkFirst Program Specialist (WFPS) or WorkFirst Social Service Specialist (WFSSS):
    1. Calculates the average weekly self-employment hours as explained in 8.2.1.
    2. Defers the participant from employment services activities for three months if they are earning an amount equal to 32 hours of minimum wage or more and want to pursue self-employment. (Single participants with a child under six, earning an amount equal to 20 hours per week, can meet participation requirements without having to participate in additional activity. The WFPS or WFSSS should recommend strengthened participation of 23 hours per week in a core activity when possible. See Section 1.2.3 – What are the strengthened participation requirements?)
    3. Send the participant to the local business resource center for a self-employment plan assessment.
  2. The local business resource center will:
    1. Approve or deny the participant’s self-employment plan,
    2. Provide ongoing technical support to participants with viable self-employment.
  3. Upon receipt of the self-employment plan decision, the WFPS or WFSSS:
    1. If approved:
    • Adds self-employment to the participant’s IRP, showing the number of self-employment hours calculated,
    • Authorizes any necessary support services, and
    • Refers to WCCC authorizing workers for child care, as needed.
    1. If denied, refers the participant to employment services activities, with the appropriate number of hours allowing for the part-time self-employment activities.
    2. If the local business resource center won’t approve or deny the plan, uses best judgment to decide whether to add self-employment to the participant’s IRP for the next 6-12 months, based on the likelihood of them becoming self-sufficient through self-employment. Consider:
      • Family size,
      • Amount of income generated by the business, and
      • How long they have been on TANF/WorkFirst.

Resources

Related WorkFirst Handbook Sections

Other Resources