Asheville, NC (CompNewsNetwork) - With billions of dollars pouring into federal construction contracts, contractors need to know that paying fringe benefits as cash wages to comply with the Davis-Bacon Act is not prudent and can put them at a competitive disadvantage.
The Davis-Bacon Act stipulates paying locally “prevailing wages” including the “anticipated cost of prevailing benefits.” Based on a union scale, this is generally expressed as a per hour labor wage plus a per hour cash equivalent for the value of benefits.
Without recognizing that it costs them extra money, many contractors pay the fringe benefit portion as additional cash wages, since this seems to be the easiest way to handle it. This, however, adds unnecessarily to their costs because it is subject to such payroll costs as FICA, FUTA, state unemployment taxes, Workers' Compensation premiums and public liability premiums.
Contractors have a viable alternative. Allocating the fringe benefit amount to an approved benefit plan removes the benefits portion from the payroll burden, resulting in significant savings.
Contractors will quickly recognize that by separating the fringe benefits, contractors' labor costs are lower, which improves their bids.
Sign up for our monthly eBulletin on Workers' Compensation www.workcompprofessionals.com/ebulletin.html.
This material is provided as general information and is not a substitute for legal or other professional advice.
Kevin Ring is the Director of Community Growth for the Institute of WorkComp Professionals, which trains insurance agents to help employers reduce Workers' Compensation expenses. He joined the Institute in 2003 after having managed IT systems for a mid-sized manufacturing company. A licensed property and casualty insurance agent, he is the co-developer of a new Workers' Comp software suite that will help insurance professionals in working with employers.
Be the first person to comment!
You must Login or Register in order to read and make comments!