Fringe Benefits 101 – A Quick Guide to the Basics
Navigating the compliance and legalities of the Davis-Bacon Act and prevailing wage and fringe benefit regulations can seem daunting. As a leading industry expert for nearly 30 years, we specialize in the administration and compliance of fringe benefit programs while saving contractors up to 8-10% on their prevailing wage labor costs.
According to the Department of Labor’s “Prevailing Wage Resource Book,” the Davis-Bacon “prevailing wage” is comprised of two components – an hourly rate and an hourly fringe benefit rate that is found in a published wage determination document. The hourly rate or “base wage” must always be paid in cash; however the fringe benefit can be paid to a “bona fide” fringe benefits program.
To meet federal regulations, a fringe benefit program must be “bona fide.” The contributions must be made to the program irrevocably to a trustee or third party, that third party must be affiliated with the contractor or subcontractor and the trustee must assume fiduciary responsibility under applicable law[i].
Under the Davis-Bacon Act and 29 C.F.R. (Code of Federal Regulations) § 5.23, fringe benefits are considered to be any of the following:
– Life insurance – Health Insurance
– Pension – Vacation
– Holidays – Supplemental Unemployment Benefits
– Sick Leave
A contractor has the ability to pay fringe benefits in cash, to one of the above mentioned benefit programs or as a combination.
The advantage for a contractor to pay fringe benefits to a bona fide plan is twofold. First, all fringe benefit contributions to the bona fide plan are not subject to payroll taxes (i.e. FICA, FUTA, SUTA), Medicare, workers’ compensation premiums and general liability premiums. All labor costs are PERMANENTLY avoided on fringe benefit contributions. Second, the contractor builds loyalty with their employees by investing in premium benefit programs for them and their families.
Paying fringe benefits to a bona fide plan helps strengthen businesses and rewards employees. Contractors can use the labor cost savings to invest in safety, new equipment and more personnel while providing quality benefits to their employees.
If you are a contractor who performs public works projects, implementing a fringe benefit plan can bolster your business almost instantly! Contact us today, or sign up for our newsletter above to stay up to date on everything Prevailing Wage and Be Always Building!