Wage and fringe benefit requirements
How much do I need to pay to an employee?
A contractor must compensate a worker in accordance with the state wage determination(s) and/or federal general decision(s) incorporated into a contract for the actual work performed regardless of the worker’s skill level. Prevailing wage specifications are located in the contract executed for the public works project and can be obtained from the prime contractor or the contracting agency. Attend a Prevailing Wage Compliance workshops.
Wage rates specified in the state wage determination and/or the federal general decision contain two components: the hourly basic rate of pay and the hourly fringe benefit rate of pay; together they equal the total prevailing hourly wage rate. In order to demonstrate compliance, the contractor must compensate a worker at a minimum, a combination of cash and fringe benefits equaling the total prevailing hourly wage rate.
What wage applies if there are multiple wage determinations in a contract?
If a contract contains multiple wage determinations for various types of construction, the contracting agency will enforce the payment of wages based on the wage determination that is applicable to the type of construction.
If a contract contains both state and federal wage determinations for a specific type of construction, the contracting agency will enforce payment of whichever is greater - the state or federal total prevailing hourly wage rate per classification.
If a contract contains multiple state highway and heavy wage determinations, there shall be only one standard of hours of labor and wage rates for the entire project; the contracting agency will enforce payment of the higher total prevailing hourly wage rate per classification.
Can I take a credit for fringe benefits that are provided to an employee?
A contractor may fulfill a portion of its total prevailing hourly wage obligation by providing a "bona fide" fringe benefit to an employee. Fringe benefits must be paid for all hours worked – both straight time and overtime hours and must be determined separately for each employee. The two types of plans that may be considered are called "funded" and "unfunded."
What is a funded plan?
A fringe benefit plan that allows a contractor to make an irrevocable contribution on behalf of an employee to a financially responsible trustee, third person, fund, plan or program, without prior approval from the United States Department of Labor. Contributions must be made regularly, not less often than quarterly. Types of "funded" plans may include:
- Pension plans
- Health insurance
- Life insurance
In order for a "funded" plan to be considered, it must meet the following:
- The benefit contribution made by a contractor on behalf of an employee must be submitted to a financially responsible trustee, third person, fund, plan or program;
- the commitment to provide the benefit must be legally enforceable; and
- benefit must be communicated in writing to the employee
What is an unfunded plan?
A fringe benefit plan that allows a contractor to furnish an "in-house" benefit to an employee; the cost to provide this benefit if funded from the contractor’s general assets rather than funded by contributions made to a trustee, third person, fund, plan or program. The contractor must set aside, in an account, not less often than quarterly, sufficient assets to meet the future obligations of the plan. Types of "unfunded" plans that do not need prior approval from the United States Department of Labor are:
- Holiday plans
- Vacation plans
- Sick pay plans
In order for an "unfunded" plan to be considered, it must meet the following:
- It must be reasonably anticipated that the plan will provide a benefit;
- the plan represents a commitment that can be legally enforced;
- the obligation to provide the benefit is carried out under a financially responsible plan or program; and
- the plan or program has been communicated in writing to the employee
Can a contractor take a credit for other costs?
A contractor is not allowed to take a credit against the total prevailing hourly wage rate for benefits that are required by state, federal and/or local laws, such as:
- Worker's compensation
- Unemployment insurance
- Social security contributions
Furthermore, a contractor is not allowed to take a credit against the total prevailing hourly wage rate for costs related to doing business, such as: transportation, meals and lodging expenses, unless such expenses are customarily furnished to an employee during the course of his or her regular employment.