Michigan Minority Contractors Assn. Davis-Bacon and Prevailing Wage Overview.

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Presentation transcript:

Michigan Minority Contractors Assn. Davis-Bacon and Prevailing Wage Overview

Agenda ●Define Government Markets Niche ●Demonstrate the Market Opportunity ●Review Industry Specific Business Problems & Solutions ●The Contractors Plan powered by Fringe Benefit Group ●Questions & Answers

Government Markets ●Construction & Maintenance Contractors Bidding Work Subject to Prevailing Wage Laws ●Federal & State Davis Bacon Act ●Federal Service Contract Act ●Required or Available Fringe Benefit Allocation ●Non-Union or Split Shop

U.S. Housing Starts 1991–2011

Value of Public Construction Put in Place 1993 – 2011

Solving Industry-Specific Business Problems

Sample Wage Determination BASE WAGE $30 FRINGE BENEFIT $10 + TOTAL HOURLY WAGE $40

Employer Decides How to Satisfy the Wage Obligation ●Contractors typically pay the “base” amount in cash and then choose how to pay the “fringe” portion; ➔ For vacation and holidays, ➔ Into an approved apprenticeship program, ➔ Furnish “bona fide” fringe benefits, or ➔ As cash, and have it treated as wages

The problem when performing Gov’t Work…….. All cash wages subject to payroll burden: ➔ FICA7.65% ➔ FUTA & SUTA*2.00% ➔ General Liability*2% - 15% ➔ Workers’ Comp*10% - 40% The actual payroll burden can be 11%-60% This increases your labor costs!!! *varies by company & state

How it works… Plumber, Ohio $2.58/hr savings per person Pay Fringe to “Bona Fide” Plan Base Wage $34.52 Total Wage $34.52 Payroll Burden $ 8.63 (25%) “Bona Fide” Plan $10.33 Bid Cost $53.48 Pay Fringe in Paycheck Base Wage $34.52 Fringe $10.33 Total Wage$44.85 Payroll Burden$11.21 (25%) Bid Cost $56.06

Plumbing Contractor ●About 75% of this contractor’s work is government ➔ 2080 annual hours x 75% = 1560 hours ●There are 25 hourly employees ●The hourly savings by removing the fringe from payroll is $2.58 ●The annual savings: ➔ 1560 hours x 25 EEs x $2.58 hour = $100,620 Many pay for health premium or retirement contributions “on top”!

Sample Bidders List Fairchild Hall Rehabilitation ProjectJan 8, Scotts Industrial Electric, 3178 Bincrete Lane (999) $674, Heatherville Electric, 360 Industrial Drive (999) $675, Johnson Electric, 1145 Bellbrook Ave (999) $681, Chappelle Electric,1985 Founders (999) $732, Caret Electric Company, 3925 Pansini Lane ( 999) $735, Kastle Electric, 4501 Libby Blvd (999) $740, BBW Electrical Contractors, 3400 Kettering Blvd (999) $745, Debra/Kuempel,1948 W.Phyllis Lane (999) $770, Schamberger Electric, 6901 Americana Pkwy (999) $788,500.00

The Solution:

What Makes a Fringe Benefit Plan “Bona Fide?” ●Specified in writing and communicated to covered employees ●Irrevocable contributions ●Group benefit plan ●Contributions made to a third party or trust ●Convey a benefit to the person actually performing the work ●Accounted for on an hourly basis (weekly payroll reporting form WH347)

Does this make sense for you? ●Union or non-union (merit, open or split shop)? ●Bidding or working on prevailing wage projects? if so, what % of your work is prevailing wage? ●How do you handle the fringe portion of the wage determination? ●How many hourly employees?

Questions? John Allen– RVP Government Markets