Bona Fide Fringe Benefits: Tough Choices
I spend a substantial amount of my time each week talking with prospective new construction company clients about fringe benefit plans. Although no two contractors are the same, the conversations often follow a fairly routine pattern that almost always drives to specific decision points. These decision points often result in tough choices.
For example, we often talk with contractors who choose to pay prevailing wage fringe benefits as cash wages and are contemplating making a change to actually funding benefits. Although we enjoy discussing the tax advantages, the types of benefits that can be funded and the various tools available to make the process easy (web portals, etc.), they are not the primary decision points.
The tough choice is making a change that results in reducing employee’s take-home pay, at least temporarily. Most would agree that it’s not a decision to be taken lightly. After all, qualified hard working employees are the life blood of any business and perceived pay reductions don’t exactly go over easy.
So what are the big picture compelling reasons why a contractor would make the decision to fund a benefit plan rather than pay the prevailing wage fringe benefits as wages?
- More competitive bidding with higher margins (Competitiveness) – funding benefits can reduce labor cost by 30% or more
- Comply with government mandates efficiently – Affordable Care Act
- Help employees by providing needed benefits – health insurance, training, retirement savings, etc.
- Provide insurance coverage and income to seasonal employees during the layoff period – premium banking, supplemental unemployment benefits
The easy path is to continue with the status quo of paying the fringe obligation in the paycheck. But as everyone knows, the easy path doesn’t always lead to easy street!
Contractors that are striving to be more competitive (and more profitable), struggling to deal with ever expanding government regulations, and concerned about their employees long-term financial health and welfare, have the option to make tough choices that can potentially address all of these concerns.
How we can help
DirectAdvisors, established in 2001 and located in Albany, New York provides bona fide benefit plan consulting and third party administrative services to merit shop (non-union) construction companies that are subject to the Davis-Bacon Act, Service Contract Act and state prevailing wage regulations. Our clients are located throughout the United States and range in size from 10 to 3000 employees.
In 2015, our construction company clients contributed tens of millions of dollars of prevailing wage fringe benefit contributions to The DirectAdvisors Trust (health & welfare benefits) and retirement plans managed by our team.
Our solutions are free from any conflict of interest as we do not sell any financial or insurance products. We work with existing agents, brokers and insurance companies.