Prevailing wage fringe: plans, cash and the credit

A wage determination lists a basic hourly rate and a fringe rate for each classification. The obligation is the total, and it can be met with any combination of cash wages and bona fide fringe benefits: all of it in cash, the basic rate in cash plus the fringe in plans, or any mix that adds up.

Cash paid above the basic rate can make up fringe, and creditable plan contributions above the fringe rate can count toward the basic rate.

Contributions to plans for medical or hospital care, pensions, compensation for occupational injury or illness, unemployment benefits, life, disability, sickness or accident insurance, vacation and holiday pay, apprenticeship and similar programs, and other bona fide benefits. A benefit that federal, state or local law already requires you to provide is not credited: workers' compensation, for one.

Divide the year's contribution by all the hours the worker worked in the year, public and private. An employer that pays $7,200 a year toward one worker's health plan, for a worker who works 2,000 hours, credits $3.60 an hour. Crediting the whole $7,200 against only the 600 hours on a public job ($12.00 an hour) overstates the credit.

Exceptions are narrow. A plan is excepted only when its benefit is not available without penalty throughout the year and any benefit for periods of private work is paid for wholly by private-work pay, and only after the Wage and Hour Division grants a written request. Defined contribution pension plans that meet both tests and vest within the first 500 hours need no request.

If the hourly value of plan contributions is below the fringe rate, the difference is paid as cash on the check. Cash fringe is taxable wages, with withholding and payroll taxes; employer contributions to health plans and qualified retirement plans generally are not.

For hours over 40 in the workweek, the premium is figured on the basic rate actually paid, never less than the determination's basic rate. Fringe, whether it goes to plans or is paid in cash, is paid for every hour at straight time, overtime hours included, and is never multiplied. On contracts over $100,000 the Contract Work Hours and Safety Standards Act requires the same 1.5 times the basic rate.

State prevailing wage laws set their own fringe and overtime rules for state and local public works, and some differ from the federal ones. Check the state's law before you price the job.