All You Need to Know About Prevailing Wage
The prevailing wage policy has been in place since the early thirties and It requires every employer to pay their workers a Specified hourly wage as long as they are working on a federally funded project construction project that meets the budgetary threshold. The prevailing wage amount payable to the workers is usually determined by the labor department after considering what other workers in the area earn on similar projects. The Prevailing wage policy was put in place to avoid scenarios where workers are low balled by their contractors to exploit and take advantage of their wages. The laws governing the prevailing wage vary from one region to another but they are all applicable to state-funded construction projects but may also extend to local and municipality level projects.
Although prevailing wages may be considered to be a worker’s hourly wage, that is not always the case prevailing wage comprises of the basic hourly rate that every worker earns and the fringe benefits amount which is an exclusive per hour dollar amount that can either be used to pay the workers wages or are channeled into a bona fide benefits plan such is life and health insurance, vacation and holiday pay, or apprenticeship training programs.
One of the biggest challenges most workers face when it comes to their prevailing wage is choosing between receiving upfront cash or subscribing to a bona fide benefits plan. Although most of the contractor’s payout their fringe benefits as wages as it is an easier way to ensure that they are in compliance with the law and requirements, it can also be an expensive option for the contractor. This is because all the wages that the contractor paid to their workers are subject to payroll taxes inclusive of social security taxes, federal and state unemployment taxes, workers’ compensation insurance, and other expenses. Although the rates vary, the additional expenses the contractor incurs through payroll taxes can be up to twenty-five cents for each dollar they payout. If the proceeds are channeled into a bona fide benefits plan for the workers, the money is exempted from any kind of payroll taxes meaning that the contractor can save tens of thousands of dollars and depending on the total amount.
If a contractor uses the fringe dollars effectively, they can implement or improve their current benefits program. In cases where an employer already has benefits, think the fringe dollars allows them to fund their benefits and duplicity since most of the payments are made out of the operational account of the company. Using the fringe dollars to benefit both the employer and employee can significantly reduce the extra expenses. At a time where the labor market has become tight, employees are always looking for total compensation packages that are inclusive of benefits. The fringe dollars are a good opportunity for companies to improve their current programs do they are able to offer better benefit coverages or add extra benefit options for their workers.