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

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.

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

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

  2. 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

  3. 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

  4. U.S. Housing Starts1991–2011

  5. Value of Public Construction Put in Place 1993 – 2011

  6. Solving Industry-Specific Business Problems

  7. Sample Wage Determination BASEWAGE $30 + FRINGE BENEFIT $10 TOTAL HOURLY WAGE $40

  8. Employer Decides How toSatisfy 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

  9. The problem when performing Gov’t Work…….. All cash wages subject to payroll burden: • FICA 7.65% • 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

  10. How it works…Plumber, Ohio Pay Fringe in Paycheck Base Wage $34.52Fringe $10.33 Total Wage $44.85 Payroll Burden $11.21(25%) Bid Cost $56.06 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 $2.58/hr savings per person

  11. 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”!

  12. Sample Bidders List

  13. The Solution:

  14. 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)

  15. 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?

  16. Questions? John Allen– RVP Government Markets jallen@fbg.com 512-663-0709

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