The benefit of a plan for prevailing wage bids.
Trying to maintain a skilled, reliable workforce in today’s construction climate can be a challenge even for the most discerning employer. Trying to bid competitively on Davis-Bacon and prevailing wage jobs can be an even greater challenge. However, with the help of a SUB plan, like BCT, both of these objectives are within the informed contractor’s reach.
Supplemental Unemployment Benefit (SUB) plans have been around since the 1950’s. Large industrial employers, to supplement the state unemployment compensation benefits received by laid-off workers, have historically used them quite effectively. However, with today’s distressed construction industry, SUB plans are being reevaluated as a valuable and reliable tool in creating a better and more profitable way to bid David-Bacon, prevailing wage, and publicly funded work. The current use of SUB Plans goes well beyond that of the old-line industries and traditional environment. If properly structured, these plans can yield significant tax and financial advantages to employers and employees.
The U.S. Department of Labor allows the contractor to choose how he fulfills the minimum wage obligation. In most cases, when the employer adopts a SUB plan, he is allowed to receive credit for fringe benefits rather than adding it as cash to the employee’s paycheck. This difference of the added labor burden from FICA, FUTA, SUTA, medicare, workers’ compensation, liability, and insurance, when treated as a fringe benefit instead of additional wages, is exempt. The savings on the additional labor burden guarantees the contractor more competitive bidding on David-Bacon and prevailing wage jobs with a richer-looking bottom line. The BCT SUB plan allows the contractor to comply with prevailing wage laws by taking the difference between the stated prevailing wages/fringe benefits and the employees’ total compensation packages and depositing it into an interest bearing money market account for the employees. The difference is not paid in extra hourly wages, but into their SUB Plan accounts instead. When interest and tax advantages are taken into account, employees are more likely to receive greater benefit dollars using a SUB plan than if they had been paid in additional wages.
Because BCT‘s SUB plan is a “bona fide” fringe benefit plan which complies with all IRS and U.S. Department of Labor Regulations, it can be used with confidence to minimize the extra labor burden and taxes, giving the contractor a competitive edge while bidding on government, Davis-Bacon, and prevailing wage work. With the BCT SUB plan, the contractor is able to take full fringe benefit credit. What would otherwise be paid to the employee as cash fringes can be allocated to the BCT SUB Trust. The SUB Plan allows the contractor to comply with prevailing wage laws, saving money on the additional labor burden and taxes with no loss in the bottom line. Most specialty contractors experience 6 to 15 percent average labor cost savings when using this type of SUB Plan. Classifications, such as road and bridge builders, where the average labor burden ranges between 30 and 45 percent, experience even greater savings.
The SUB plan not only offers options for the employer, it also provides a significant and valuable asset for employees, namely, income security. It allows them to receive consistent pay all year long. Vast alterations in their weekly earnings are no longer a concern for them. During times of unemployment or interrupted work, the employee can request supplemental unemployment benefits from his Trust account. In the event that an employee works less than 36 hours and is qualified to receive benefits, the employer simply fills out a payout request form from the online account and requests the funds via direct deposit or in paper check form. This allows the employee to draw as little as 4 hours or as many as 40 hours per week at their normal rate of pay with no withdrawal penalties. The benefits contributed for each employee are invested into an interest bearing money market account in a fully insured and bonded bank. The employees’ benefits are individually accounted for in their own designated accounts. They can review and print their supplemental unemployment benefit account balances at any time by accessing the secure website. Typically, they avoid paying higher payroll taxes because they are not receiving a drastically elevated wage. In addition, they are gaining interest on the money in their account. Experience proves that with the interest and lack of higher payroll taxes they can actually make greater benefit dollars with a SUB Plan. Because employees are eligible to draw on their benefits when they are needed most, during periods of unemployment or interrupted work, they are less likely to feel the need to search for other employment during those times. Thus, the employer is able to maintain a skilled, reliable, and consistent workforce more easily.
BCT Benefits is a not-for-profit, third-party administrator offering a SUB plan to contractors nationwide. It was founded by a contractor who saw first-hand how prevailing wage policies were dictating profits and discouraging qualified contractors from taking on good projects. He realized the need to act in order to keep his company solvent in the reduced economic environment. After researching the finer points of prevailing wage, he discovered the benefits of the SUB plan.
Contractors who use the initiative and foresight of companies such as BCT own the tools to realize additional profits, while ensuring that employees receive full payment of prevailing wages. As the BCT founder says, “As a contractor, BCT has enabled me to provide my employees with a priceless benefit during this economic downturn. I want to let other contractors know that they have options, and a SUB plan such as the one BCT offers can be a win-win solution when it comes to keeping a business afloat and taking care of employees.”
Do not let another prevailing wage project disappoint you. ■
About The Author:
Rachel Snyder is the national sales manager for BCT Benefits Supplemental Unemployment Plan. For more information, call 877.WAGE.BCT, or visit
Modern Contractor Solutions, June 2013
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