How to Calculate Fringe Benefits on Prevailing Wage Projects

What Counts as a Fringe Benefit

Under the Davis-Bacon Act, the prevailing wage has two parts: the basic hourly rate and the fringe benefit rate. The fringe portion covers employer contributions to health insurance, pension/retirement plans, vacation and holiday pay, apprenticeship training funds, and other bona fide benefits.

The wage determination published on SAM.gov lists both components separately. For example, a Carpenter classification might show a basic rate of $42.50/hr and a fringe of $18.75/hr. The contractor must provide the full $18.75 in fringes, either as actual benefit plan contributions or as cash paid directly to the worker.

Cash vs. Bona Fide Plans

Contractors have two options for meeting the fringe requirement:

• Bona fide benefit plan: Pay the fringe amount into qualifying benefit plans (health insurance, 401k, union trust fund, etc.). The plan must meet DOL requirements under 29 CFR 5.28. This is the most common approach for union contractors.
• Cash-in-lieu: Add the fringe amount directly to the worker's hourly cash wage. The worker receives the full prevailing wage (base + fringe) as taxable cash. This is common for non-union contractors who do not sponsor benefit plans.
• Combination: Pay part of the fringe into plans and the remainder as cash. For example, if the fringe rate is $18.75 and you contribute $12.00 to health insurance, you owe the remaining $6.75 as cash added to the hourly rate.

The Overtime Fringe Rule (Most Common Mistake)

This is where most contractors get it wrong. On overtime hours, the basic hourly rate is paid at 1.5x (time and a half). But the fringe benefit rate is paid at straight time, even on overtime hours.

Example: A Laborer with a basic rate of $35.00/hr and fringe of $14.00/hr:

• Straight time: $35.00 (base) + $14.00 (fringe) = $49.00/hr
• Overtime: $52.50 (base at 1.5x) + $14.00 (fringe at 1.0x) = $66.50/hr

A common mistake is calculating overtime fringe at 1.5x ($21.00), which overpays the worker and inflates your costs. The DOL is clear on this: fringe is always at the straight-time rate regardless of the hours worked. This rule comes from 29 CFR 5.32 and has been confirmed in multiple DOL rulings.

Reporting Fringes on the WH-347

The WH-347 form has specific columns for fringe benefit reporting:

• Column 6(a): Basic hourly rate (excluding fringe)
• Column 6(b): Fringe benefit rate (the amount per hour)
• Column 6(c): How fringes are paid. Check the box for "Cash" or "Plan" or both.

If you pay fringes as cash-in-lieu, you check the "Cash" box and the total in column 6(a) + 6(b) should equal the worker's actual cash wage per hour. If you pay into plans, check "Plan" and the plan contributions should be documented on the Statement of Compliance (page 2 of the WH-347).

The Annualization Method

Some contractors contribute to benefit plans on a monthly or annual basis rather than hourly. In that case, you can use the annualization method to calculate the hourly equivalent:

Hourly fringe credit = (Annual plan contribution) / (Total hours worked in the year)

For example, if you pay $6,000/year for a worker's health insurance and they work 2,080 hours/year (40 hrs/wk x 52 weeks), the hourly credit is $6,000 / 2,080 = $2.88/hr. If the required fringe is $14.00/hr, you still owe $14.00 - $2.88 = $11.12/hr as additional cash or plan contributions.

Common Fringe Calculation Errors

Counting FICA as fringe

Employer FICA contributions (Social Security 6.2% + Medicare 1.45%) are not fringe benefits under Davis-Bacon. Neither are workers' comp premiums, FUTA, or SUTA. These are legally required costs that do not offset the fringe obligation.

Not adjusting for rate changes mid-project

Wage determinations can be modified during the life of a project. If the fringe rate changes in a new modification, you must pay the updated rate for all work performed after the effective date. Check SAM.gov regularly for modifications to your project's wage determination.

Splitting fringes unevenly across classifications

Each classification has its own fringe rate. A Carpenter's fringe rate is different from an Electrician's. You cannot average fringes across your whole crew. Each worker's fringe obligation must be met individually based on their specific classification's wage determination.