The Bill 124 One-Time Adjustment in 2026: Who Actually Qualifies and What the Calculation Is Really Measuring

The April 2026 CWELCC Cost-Based Funding Guidelines introduced a provision that has generated significant confusion among Ontario child care operators and their advisors: a one-time adjustment to the rolling top-up for legacy centres impacted by the repeal of Bill 124.

The guideline text is technical and dense. The background context it assumes is substantial. And the practical population of centres that will actually benefit is considerably narrower than the provision might suggest on first reading.

This post breaks down the three eligibility gates, what the calculation is actually measuring, and who is realistically in scope.

What Bill 124 Was and Why It Matters

Bill 124, the Protecting a Sustainable Public Sector for Future Generations Act, 2019, capped compensation increases at one per cent per year for broader public sector employers in Ontario. For affected employers, this meant that even where collective agreements or market conditions warranted higher wage increases, the legislation prohibited them from being paid.

In 2023, the Ontario Court of Appeal struck down Bill 124 as unconstitutional. The consequence for affected employers was immediate and significant: they now faced retroactive and ongoing wage obligations they had been artificially constrained from paying for years. Many centres had to negotiate new collective agreements or issue retroactive lump-sum payments to affected staff.

For CWELCC centres, this created a specific funding problem. The 2026 benchmark allocation and rolling top-up calculations are built on 2023 cost structures as a baseline. If a centre's 2023 wages were artificially suppressed by Bill 124, and their 2025 wages reflected the post-repeal correction, the standard rolling top-up formula would not fully capture the gap. The one-time adjustment is designed to address exactly this.

The Three Eligibility Gates

Gate 1: Must Be a Legacy Centre

The adjustment applies only to legacy centres and agencies - meaning those enrolled in CWELCC on or before August 14, 2024, who have maintained a continuous CWELCC service agreement since that date.

One important nuance in the guidelines: this applies to legacy centres whether or not they received a legacy top-up in 2025. A centre that fit within its benchmark allocation in 2025 - meaning no top-up was needed - could still qualify for the Bill 124 adjustment if its wages were suppressed by the legislation and have since corrected.

This is meaningful. It means the eligibility question is not simply whether you received a top-up, but whether your wages were Bill 124-constrained.

Gate 2: Must Have Been Subject to Bill 124

This is where the practical population narrows significantly.

Bill 124 applied to broader public sector employers - generally defined as organizations receiving more than one million dollars annually in Ontario government funding. The legislation primarily captured:

• Non-profit organizations with collective agreements or formal compensation structures constrained by the one per cent cap
• Larger multi-site operators receiving significant government funding
• Centres with unionized staff whose collective agreements were directly subject to the cap

For-profit operators and smaller non-profits receiving less than one million dollars annually in Ontario government funding were generally not subject to Bill 124. This means that for the majority of small independently operated licensed centres in Ontario, the legislation simply did not apply - and neither does this adjustment.

If your centre is a small for-profit or independent non-profit without unionized staff, this provision almost certainly does not apply to you.

Gate 3: Must Demonstrate Direct Impact Through Documentation

Even where a centre was technically subject to Bill 124, they must demonstrate the direct impact of the repeal through:

• Payroll reports
• Collective agreements
• Employee contracts

This is not a self-attestation. The guidelines require documentary evidence of actual wage suppression and subsequent correction - not simply an assertion that wages increased between 2023 and 2025. The documentation must show the specific connection between the Bill 124 constraint and the post-repeal wage adjustment.

What the Calculation Is Actually Measuring

The formula in the guidelines is measuring the gap between what wages actually were in 2025 and what they would have been expected to be based on normal 2023 cost escalation - then asking whether that gap exceeds what the profit and surplus allocation already covered.

The calculation works as follows:

Step 1

Determine 2025 actual eligible wage costs, specifically the Program Staffing and Supervisor components from the Standardized Financial Report. Critically, retroactive lump-sum payments stemming from the Bill 124 repeal are excluded from this figure. The adjustment covers only the ongoing elevated wage level - not the catch-up payments for prior years.

Step 2

Calculate 2023 adjusted eligible wage costs by taking total eligible 2023 wage costs and multiplying them by the cost escalation factor (1.0465) and the operating scaling factor - using 2025 actual operating data, not planned figures. This differs from the legacy top-up calculation, which used planned data. The use of 2025 actuals makes the comparison more precise and accounts for actual changes in operating scale between 2023 and 2025.

Step 3

Calculate 2025 excess wage costs by subtracting the scaled 2023 adjusted wage costs from the 2025 actual eligible wage costs.

Step 4

Subtract the Actual Amount in Lieu of Profit and Surplus for 2025 from the 2025 excess wage costs.

If the result is negative, the one-time adjustment is zero. If the result is positive, that amount is added to the 2026 rolling top-up as an in-year adjustment.

There are two important implications in this structure.

The retroactive lump-sum exclusion is significant. If your centre paid retroactive amounts to staff following the Bill 124 repeal - which many affected centres did - those amounts are not captured by this mechanism. The adjustment addresses only the ongoing elevated wage baseline, not historical catch-up payments.

The profit and surplus allocation acts as a deductible. The one-time adjustment only applies to the extent that excess wage costs exceed the profit and surplus allocation the centre already received. This prevents centres from claiming both the full profit and surplus allocation and a full wage cost recovery - the formula ensures one offsets the other.

What Happens in 2027 and Beyond

The adjustment is a one-time addition to the 2026 rolling top-up. But its impact does not end in 2026.

Because the rolling top-up in future years is calculated based on the prior year's actual eligible costs relative to the benchmark, a 2026 rolling top-up that includes the Bill 124 adjustment will flow into the 2027 rolling top-up calculation through the standard ratio method. In other words, the adjustment establishes a higher cost baseline that carries forward - which is precisely its design intent.

The Practical Population

The centres most likely to actually benefit from this provision are:

Non-profit centres with unionized staff whose collective agreements were directly constrained by the one per cent cap and subsequently renegotiated at higher rates following the Court of Appeal decision in 2023.

Multi-site non-profit operators receiving significant Ontario government funding who were clearly within the broader public sector definition and can document the specific wage impact.

Centres where the wage increase was formalized in a collective agreement or employment contract and is therefore documentable - not simply an informal wage adjustment that happened to occur in the same period.

Centres where the 2025 benchmark allocation and profit and surplus allocation together were insufficient to absorb the elevated wage costs resulting from the post-repeal correction.

For most small independently operated licensed centres - particularly for-profit operators and smaller non-profits - Bill 124 did not apply, and this adjustment will not apply either. Understanding that distinction early avoids spending administrative effort on a provision that was never designed to cover your centre.

Questions to Ask Your SSM

If you believe your centre may qualify, these are the questions to bring to your CMSM or DSSAB:

Was your centre's 2025 operating funding from Ontario above one million dollars annually during the Bill 124 period? If not, you were likely not in scope.

Do you have collective agreements or employment contracts from 2020 to 2023 that reflect the one per cent cap? If your wage increases during that period were not constrained by a formal agreement, demonstrating Bill 124 impact will be difficult.

Do you have documentation of the specific wage correction - new collective agreement, revised employment contracts, payroll records showing the increase - that directly connects to the Bill 124 repeal? This documentation is a requirement, not optional.

Was the wage correction captured in your 2025 actual eligible wages rather than as a retroactive lump sum? If the correction was paid primarily as a lump sum, the formula will not capture it.

The Bottom Line

The Bill 124 one-time adjustment is a well-designed provision for the centres it was designed to help. But the eligibility gates are specific and the documentation requirements are real. Centres that qualify should be preparing their documentation now - payroll reports, collective agreements, and the specific wage cost comparison the formula requires.

Centres that do not qualify should not spend time pursuing a provision that was not designed for them. Understanding where you fall on the three eligibility gates is the first and most important step.