Learn About Prevailing Wage
If you are a construction company owner looking to broaden the profitability reach of your company, you should consider seeking federal contracts. However, it is important to note that these contracts are often complex, and have their own set of rules guiding them. One of these rules is the prevailing wage. A lot of contractors have a problem implementing the prevailing wage. Most contractors do not know if they should pay the prevailing wage as benefits, or as cash. The prevailing wage is the minimum wage contractors are required by law to pay their employees. It is important to note that the prevailing wage is applicable in demolition, maintenance, and construction projects that have been initiated or have a connection with either the Government or any public agency. The prevailing wage law comes into play if you are undertaking a Government project whose cost is greater than two thousand dollars. It is important to note that several states have their own prevailing wage laws, and as such, you may see some differences in the law if you undertake projects in different states.
Wage rates under the prevailing wage law are set by the Department of Labor, and they apply to all Government-funded projects. What happens when paying the prevailing wage is that contractors are expected to divide the wage rate into fringe benefits, as well as an hourly rate. If a particular project is funded by a state, then the state is the one that determines the hourly rate, as well as the fringe benefit amount for the very employee. However, if a project is funded by both federal and state funds, then the rules state that contractors need to go with the higher wage rate of the two.
Construction contractors are required to pay the base rate in cash. They have two options when it comes to paying the fringe benefits. They can either pay them in cash or create a bona fide benefit plan for the employees. The benefit plan could include several things. Some of them are medical and life insurance, retirement benefits, and paid vacation days and other paid time off. You find a lot of contractors today choosing to pay all the prevailing wages in cash. This is because they all perceive the bona fide plan to be too much of a hassle. While this is true because of the complexities of implementation, you can benefit a lot from the bona fide plan. Keep in mind that all the cash you pay your employees is subject to tax. This means that the more you pay in cash, the more you will incur in terms of payroll costs. You can, however, eliminate the added costs by paying the fringe benefits through a bona fide plan. Your employees also benefit a lot when you choose the bona fide plan. This is because you add on to their retirement savings. This is important because it means that they will not have to rely solely on social security when they retire.