These are trying economic times for both businesses and employees. Looking toward a future impacted by COVID-19, it is important to consider both the financial success of a business as well as the success and well-being of its employees.
When considering a prevailing wage trust plan, there are many factors to be considered. By paying prevailing wage fringe benefit dollars into a bona fide benefit plan, those dollars are not subjected to labor burden costs, such as FICA, unemployment taxes, workers compensation and general liability premiums.
When fringe benefit payments are paid to employees directly as cash wages, they are subject to wage taxation and thus incur additional labor burden costs for the contractor. However, the savings on labor burden is just the start when discussing the benefits of adopting a prevailing wage trust plan.
Let’s take a closer look at the possible additional savings a contractor can realize by using a prevailing wage trust.
The fringe benefit portion of the prevailing wage can be used for what is called “bona fide” benefits. They include health/life/dental and disability insurances, vacation, sick and holiday pay, apprentice/craft training, supplemental unemployment, and retirement. We mention these benefits because we have found that contractors often overlook their payments of vacation, holiday, and sick pay. In other words, contractors are paying for paid time off when they could be using fringe benefit dollars.
Here is an example of the savings by using a prevailing wage benefit trust for paid time off (PTO).
- Average vacation/sick and holiday pay is 25 days per year (3 weeks)
- Average weekly pay is $1000
- 50 prevailing wage workers
Potential savings if the contractor shifts to using the prevailing wage trust:
50 workers x $1000 = $50,000 per week x 3 weeks = $150,000 in SAVINGS!
This is accomplished by just shifting the cost from the employer to the bona fide approved PTO benefit in the prevailing wage trust.
While construction companies are considered an essential business by many governments at this time, due to the COVID-19 pandemic, work will likely slow and employees will be looking for additional wage benefits.
Offering supplemental unemployment in a prevailing wage trust plan can save the day!
Supplemental unemployment pays benefits when employees are temporary laid off. This means employees who qualify for state unemployment will also receive supplemental unemployment pay!
As an additional benefit, the employer and employee will both save FICA (7.65%).
These are uncertain economic times, but DirectAdvisors is committed to helping ensure the financial success of your business and helping to partner with you with your prevailing wage concerns and questions.
A fringe benefits plan not only allows you to take the first step toward the fiscal success and growth of your company, it shows a commitment to the financial health and support of your employees. If you are interested in learning more about the value of a prevailing wage plan, please contact us at [email protected], or by calling 518-362-2119.