![]() ![]() Each employee works approximately 500 hours during this time and the fringe amount is roughly $10 an hour.Ģ5 (employees) x 500 hours = 12,500 hoursġ2,500 (hours) x $10 fringe benefit dollars = $125,000 fringe benefit dollars Let’s say Contractor A has 25 employees working on a prevailing wage job that will last six months. On the other hand, if a contractor uses those fringe dollars to fund a “bona fide” benefits plan for his or her employees, that money would be totally exempt from any and all payroll taxes, thus saving the contractor tens of thousands, maybe even hundreds of thousands, of dollars a year. The rate always varies, but it is estimated that the additional cost to the contractor for these payroll taxes is roughly 25 cents for every dollar paid in wages. And the reason is pretty simple: all wages paid to employees are subject to payroll taxes, such as social security taxes, federal and state unemployment taxes, workers’ compensation insurance, and general liability insurance. While that may be true, it’s also much more costly to the contractor. Many contractors pay out the mandatory fringe benefit as wages because it’s the easiest way to comply with the law. So which is better, cash or a bona fide benefits plan? Simply put, if a worker’s base pay on a project was $30 an hour and the fringe benefits amount was $10 an hour, the contractor can pay out the $10 in fringe benefits as wages, essentially increasing the worker’s hourly pay to $40, or they can elect to put that $10 into a benefits plan for their employee. The second is what is known as the “fringe benefits” amount, which is a separate per-hour dollar amount that can be paid out as part of a worker’s wages or used to fund a “bona fide” benefits plan, such as a 401(k), life and health insurance, vacation and holiday pay or even apprenticeship training programs. Prevailing wage is actually comprised of two parts: The first is the basic hourly rate that is paid out to each worker. So prevailing wage is basically a worker’s hourly wage? There are also twenty-seven states that have their own prevailing wage laws, known as “little Davis-Bacon” acts, for any state-funded construction projects and does in some cases, extend to projects at the local and municipalities level as well. The act was intended to avoid situations where contractors would low-ball their proposed costs on a project at the expense of their workers’ wages. Department of Labor and is normally based on the wages paid to workers employed on similar projects in the area. The prevailing wage for any project is determined by the U.S. The act mandates that contractors and subcontractors must pay their workers an hourly prevailing wage when working on any federally-funded construction project in excess of $2,000. Prevailing wage was established under federal law by the Davis-Bacon Act of 1931. ![]()
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