The basic rule
A wage determination lists a basic hourly rate and a fringe benefit amount for each classification. For every hour worked, you owe at least the base rate in cash, plus the fringe amount in benefits, cash or a mix (40 U.S.C. 3142; 29 CFR 5.31).
Two checks per worker, per classification:
- Base rate paid ≥ required base rate.
- Base paid + plan credit per hour + cash in lieu per hour ≥ required base + required fringe.
Try it with the prevailing wage calculator.
Three ways to pay it
| Method | How it works | Good to know |
|---|---|---|
| Bona fide plans | Contributions to health, pension, vacation, training or similar plans | Credit is the hourly cost of the plan, usually annualized |
| Cash in lieu | Pay the fringe amount as extra cash on the paycheck | Taxed as wages; shown separately on the WH-347 (column 6C) |
| A combination | Plans cover part, cash covers the rest | Common when a health plan costs less than the required fringe |
You can also pay a base rate above the required one; the extra cash counts toward the total. But the base itself can never be below the required base.
What counts as a bona fide benefit
- Medical and hospital care, pensions, life and disability insurance, vacation and holiday pay, and registered apprenticeship training.
- Contributions must be made to a fund, plan or program for the workers' benefit, and paid regularly.
- Benefits required by other laws, such as Social Security, unemployment insurance and workers' compensation, do not count.
- Unfunded plans, where the contractor pays benefits directly rather than into a fund, need prior approval from the Department of Labor.
Annualization
You can only claim credit for the part of a benefit that pays for prevailing wage work. Since the 2023 rule, that is written into 29 CFR 5.25(c): the hourly credit is the plan's cost divided by all hours the worker worked, on both private and Davis-Bacon work.
Example: health insurance costs $9,360 a year for a worker who works 2,080 hours in total, 520 of them on a public job. The credit is $9,360 ÷ 2,080 = $4.50 an hour, not $9,360 ÷ 520 = $18.00.
Exceptions:
- Defined contribution pension plans (like many 401(k)s) are excepted automatically if they provide immediate participation and essentially immediate vesting, within the first 500 hours worked.
- Other benefits can be excepted only with the Wage and Hour Division's approval, and only if they aren't continuous in nature and don't pay for private work.
Fringe and overtime
The fringe is owed for every hour, including overtime, at its straight-time amount. Overtime under the Contract Work Hours and Safety Standards Act is 1.5 times the basic rate of pay, and amounts paid for fringe benefits, including cash in lieu, are left out of that calculation (29 CFR 5.32).
Example: base $52.40, fringe $31.20. An overtime hour costs $52.40 × 1.5 + $31.20 = $109.80, not ($52.40 + $31.20) × 1.5.
Fringe on the WH-347
- Column 6B, total fringe benefit credit: hours × the worker's total hourly credit from plans.
- Column 6C, payment in lieu of fringe benefits: hours × the hourly cash paid instead.
- Page 2, item 5: a table of each plan's name, type, plan number, funded or unfunded, and the hourly credit for each worker. If you pay cash only, check the box and use column 6C.
See the WH-347 instructions, or let the free builder work out the weekly columns from the hourly amounts.
California's fringe categories
California's determinations split the employer payments into health and welfare, pension, vacation and holiday, training, and other. On California's electronic certified payroll, contributions to plans are reported hourly by those categories, and DIR's guidance is that fringe paid directly to the worker goes into the hourly rate. More in California certified payroll.