Contractors and subcontractors performing services on prime contracts over $2,500 are required to pay service employees wages and fringe benefits which are no less than locally “prevailing wages” as determined by the US Department of Labor.  If the previous contractor had a collective bargaining agreement with its employees, the subsequent contractor must pay wages and fringe benefits at the rate in the agreement, including prospective increases. The Department of Labor issues wage determinations on a contract-by-contract basis in response to specific requests from contracting agencies. These determinations are incorporated into the contract.

For contracts equal to or less than $2,500, contractors are required to pay the federal minimum wage of $6.55 an hour (as of July 24, 2008) as provided in Section 6(a)(1) of the Fair Labor Standards Act. Contractors must also, under the provisions of the Contract Work Hours and Safety Standards Act and the Fair Labor Standards Act, pay employees at least one and one-half times their regular rate of pay for all hours worked over 40 in a workweek.

Win More Service Contract Act Projects

The Problem

Many contractors pay the fringe benefit portion of the prevailing wage as additional cash wages, believing it’s the easiest way to comply with the law.  But choosing this alternative costs you money you don’t have to pay.

The Solution

Allocating this amount to a bona fide benefit plan or plans results in significant cost savings.  When the fringe portion of the prevailing wage is used to provide benefits for hourly workers, this amount is not subject to payroll costs such as:

• FICA
• FUTA
• State unemployment taxes
• Workers compensation premiums
• Public Liability Premiums

With The Contractors Plan from Fringe Benefit Group, you can provide valuable benefits such as retirement, medical, dental, vision and life insurance plans for your employees – and, at the same time reap these benefits for your company:

• Reduce payroll burden
• Narrow the gap between wages paid on private work and government contracts
• Shave dollars off your bids, making them more profitable and increasing your odds of winning
• Increase profits
• Increase your ability as a company owner to contribute to your own retirement accounts using our expert plan design
• Get support from our in-house team of compliance experts

Use our calculator to see how much we can save you.