In many service-led industries such as security, IT, janitorial, or landscaping, you may operate under the McNamara O’Hara Service Contract Act (SCA). For the construction business owner working in the government contracting arena, there is an added layer of compliance as compared to private work, but the rewards can be worth it. Following IRS laws and regulations, Social Security Administration (SSA), and state, pulling out some cash for payroll taxes is required. Oops, there was an error sending your message. Under the Davis-Bacon Act, employers can either choose to pay the fringe benefits as additional cash wages (which would result in an effective hourly wage of $38) or provide a “bona fide” benefit plan. Pennsylvania prevailing wage law defines prevailing wage as a “base wage rate” plus “fringe benefits”. If the contractor agrees and complies, that will end the compliance review unless debarment procedures are initiated. is a needed learning curve to ensure they are meeting all that the government Shifting paper-based payroll to paperless payroll is time-saving and efficient to work in today’s digital world. These hours must be logged in individually. As mentioned earlier, state laws vary, and some consider cash payments of the fringe as part of the base rate, which would affect overtime in that state. Would you like more information on finding a Davis Bacon benefit plan to suit your company’s needs? Save time and money by responding electronically to unemployment information requests. Prevailing wages are set by the U.S. Department of Labor and are included in the bid specifications of covered contracts. The contribution could be a pension plan, medical help or anything along these lines. The path to calculating the average amount of fringe benefit owed to an employee working in excess is taking the total straight-time wages and dividing by total hours worked. Paying into a benefit plan saves a company these taxes and also benefits every employee personally because it helps them to have a more secure retirement. This step is somewhat complicated for merit shop contractors because benefits are seldom purchased at an hourly rate. 300 hours x $38.00 = $11,400 Annualization calculations for contractors that are subject to a collective bargaining agreement are simple because they are required to pay an hourly amount for benefits to the union benefit fund for all hours worked, regardless if they are public or private work. In construction, you may operate under the Davis-Bacon Act (DBA). Because the fringe benefit portion of the prevailing wage is expressed as an hourly amount, the first step in calculating fringe benefit credit under annualization is to translate benefit costs from an annual to an hourly rate. Misclassifying workers is wrong and against the law. Companies in every industry are overwhelmed with payroll. Federally and in most states, the contractor must submit certified payroll records weekly to the contracting agency. A contractor always has the option of making up the underpayment of benefits by providing the worker with additional wages equal to the underpayment. The prevailing wage rates are established by The Washington State Department of Labor and Industries, Davis-Bacon Act and the respective state “mini Davis-Bacon Acts” impose a condition on construction projects. annual cost of fringe benefit divided by the total number of hours worked in the year. The views and opinions expressed within are those of the author(s) and do not necessarily reflect the official policy or position of Parker, Smith & Feek. It’s for this reason more and more employers are adopting retirement plans. Our corporate mission is to provide software solutions that solve modern data and compliance challenges through a model of dedicated partnerships, designed to ensure your success. The Davis Bacon Act was put into law requiring companies that perform work on federally-funded jobs to pay all employees working on the job a prevailing wage. All rights reserved. “Fringe benefits” means bona fide benefits contribution, except those required by Federal/State law (unemployment tax, workers No two of the thirty-two state prevailing wage laws or the federal Davis-Bacon Act are exactly the same. Businesses are reviewing teleworking contracts, methods to communicate, and payroll meets. Some states vary the holding period for records. The only way an employer can take credit is via converting the hourly equivalent of the benefit into its cash equal, i.e. This is particularly true for compliance with prevailing wage laws. Annualization is one of the most commonly misunderstood concepts in the Davis Bacon Act (DBA), Service Contract Act (SCA) and state laws. Calculating Your Own Fringe Benefits as an Employee. Contractors that step into government contracting know there The rate of costs to the contractor must be reasonably anticipated in providing bona fide fringe benefits pursuant to an enforceable commitment to carry out a financially responsible plan or program, which was communicated in writing to the employees. In addition to the bona fide plan rules, contractors and subcontractors must maintain basic payroll records during the course of the work and preserve them for three years for federal projects. In our example, the obvious choice would be to pay the $5,000 underpayment as additional cash wages, which is substantially less than the additional $15,000 that would have been needed to get the annualized credit up to the $20 per hour prevailing rate obligation. Use this calculator to estimate the amount of unemployment benefits for which you may be eligible. A commercially available payroll is not able to handle the onerous spreadsheets and manual processes. that will increase profits, win contracts, eliminate risk exposures, get help Is your business accessible to those with disabilities? Example of a laborer employed by a merit shop contractor: Total hours worked for the year: 1,500, Total hours worked on public work: 500, Prevailing fringe benefit rate: $20 per hour, The total annual cost of benefits: $15,000 (Medical, dental, pension, etc ), Annualized hourly credit for benefits: $10 per hour ($15,000 benefit cost/1,500 total hours). Brush up your resume, sign up for training and create an online profile with Missouri’s largest job bank. In Washington State, there are many large contractors such as Lockheed Martin, The Boeing Company, Vigor, and Granite Construction that are each awarded well over $100 million a year. View a summary of changes. While these additional requirements may not be inconsistent with the fringe benefit requirements in a prevailing wage policy, they may not be consistent or even easily reconcilable. To see how different factors can influence the prevailing wage rate, we have created this flowchart that will take you through the prevailing wage process. One of the most unique aspects of the Davis-Bacon Act and state prevailing wage laws is the “annualization” requirement—an employer must make the same fringe benefit contribution on all hours worked, including time spent on both public and private projects. As a responsible employer, you also must withhold tax deduction. The lack of personal savings combined with the looming Social Security problem poses significant future economic problems for the average construction worker. Every dollar, of cash wages paid to employees is subject to payroll taxes including FICA, FUTA, state unemployment taxes, and worker’s compensat, rate on the last two tax requirements, but on average the cost works out to around twenty-five cents per dollar paid in cash wages. In the event of violations, the compliance officer will meet with the contractor and explain the violations and request payment of back wage and/or benefits and an agreement to comply in the future. Smith may be reached at 800.662.6177. Fringe benefits are: Contributions irrevocably made to a trustee or third party pursuant to a bona fide fringe benefit fund plan or program. Here’s some practical advice, Why Your Business Needs a Davis Bacon Pension Plan. The U.S. Department of Labor Wage and Hour Division and their state equivalents conduct audits and investigations relating to the Davis-Bacon Act and state prevailing wage laws. In the audit process, a compliance officer will check to see if the wage determination is posted at the jobsite. Essentially there are two options. Paying the employees on time is one of them that determines a company’s reputation. Find out if your employer has workers’ compensation coverage in the event of a workplace injury. Many contractors choose to pay the fringe portion of the prevailing wage in cash, believing it’s the simplest way to comply with the law. Phone: (425) 889-8855 Benefits service companies offer owners years of experience and fringe benefit plans to make the contractor’s job easier in bidding for government work and remaining compliant after they get the job.