Some Important Facts Regarding Prevailing Wages
Federal laws were involved when the prevailing wage was being established. This act came to help workers because it makes sure the contractors and subcontractors pay them a prevailing hourly wage. Such a wage is paid to workers if only they work on a construction project that is funded by the government. Departments of labors are the ones that determine the prevailing wage for all the projects. However, a prevailing wage that is paid to workers depends on the wages paid to workers who were employed on a similar project in the same area. In the past, contractors low balled their proposed costs on a project at the expense of their workers’ wages, and that’s why the cat was created to prevent such situations. These days, a lot of states have created their prevailing wage laws for all the state funded projects. Sometimes this act extends to projects that are not funded by the state also.
Even though the prevailing wage is taken like a worker’s hourly wage, it is made up of two parts. Fringe benefits and a basic hourly rate are the two parts that make up a prevailing wage. The basic hourly rate is paid to every worker who is employed in the construction project funded by the government. Fringe benefits are different from basic hourly rates because they are like bonuses. They are added to the worker’s wage. Fringe benefits are made p of life and health insurance benefits, vacation, and holiday pay, or even apprenticeship training programs. Fringe benefits are incomes that are added to the wage of workers.
Fringe benefits are added to the wages of workers by many contractors because it is the best way to comply with the law. Even though it might be a benefit to the workers, it is costly to the contractor. It is costly to contractors because the wages paid to employees are subject to payroll taxes. Some of the payroll taxes that are subjected to wages are like social security taxes, federal and state unemployment taxes, and also workers’ compensation insurance. More to that, the general liability insurance can also be included in such taxes sometimes. The rate of fringe benefits varies because of some factors. Payroll taxes are additional costs to the contractor, but they have to comply with the laws.
If the contractor chooses to the fringe benefits to fund the bona fide plan of his or her employees, the payroll taxes do not include it. Because of that reason, the contractor can save a lot of cash every year. The existing benefits program of workers can be improved when the contractor uses the fringe benefits properly. A lot of employers prefer to pay the fringe benefits in cash because they are paid out to the operational account of the business. Employees or workers are looking for better compensation packages, especially these days, because of the increasing economic crisis. When those benefits are paid to companies, the current programs are boosted because better benefit coverage are offered to their employees.