Wrapping your head around the Davis Bacon Fringe Benefits can be a bit of a challenge. Especially if you’re trying to work through complicated legal terms and jargon.
Here, we give you a super-simple breakdown of the DBA and the fringe benefits you should be aware of as a business head or owner.
The Davis Bacon Act (DBA) was introduced in 1938. Before its enactment, there were laws in place that required contractors to pay their employees a prevailing wage. However, after 1920, there was a steep decline in wages. To mitigate this decline, the DBA was introduced.
The act requires contractors that work on federal-government jobs to pay their employees a wage. It also stipulates that these contractors should provide employees with added fringe benefits. These Davis Bacon fringe benefits must be equal to what union shops would pay their employees for the same amount of labor.
The act was later amended. It now requires that every federal contract over $2,000 includes clauses that outline the minimum wage. This minimum wage limit defines the amount to be paid to employees based on the service they provide and other categories.
The main aim of the DBA is to ensure that laborers and construction workers receive a fair, livable wage. It also seeks to assure that these workers are afforded certain benefits like health care insurance and life insurance.
The DBA solidified the concept of prevailing wage and it set out work hour standards like a 40-hour workweek. The act later made provisions for overtime compensation.
The prevailing wage is essentially the minimum wage required by the DBA regulations. It comprises two components: the basic hourly rate and the fringe rate.
The prevailing wage (generally considered on an hourly rate) changes depending on the state, size, and value of the construction project. For example, a bulldozer operator may expect to earn a basic hourly wage of $14.00 and a fringe rate of $1.85. This would add up to a total of $15.85 per hour.
So, the contractor then has the freedom to adjust this hourly rate so that it either exceeds or equals $15.85. The contractor can also decide if he wants to pay a monetary wage of $12.00 and a fringe rate of $3.85.
Essentially, the ratio of wage to fringe rate is entirely up to the contractor as long as he meets the minimum prevailing wage. In this case, the minimum amount is $15.85.
To satisfy the DBA fringe benefits requirements, the contractor has a choice between two fringe benefits. These are funded and unfunded fringe benefits.
Funded fringe benefits include things like health care insurance, pensions, contributions to a retirement plan, or life insurance.
Unfunded fringe benefits are plans or programs that the contractor makes provision for. Unlike funded fringe benefits, unfunded fringe benefits are paid for by the contractor in full. These include things like paid time off, vacation time, sick days, and holidays.
The Davis Bacon Act was introduced to protect the interests and wellbeing of construction workers and contract laborers. Understanding how the DBA fringe benefits, and the DBA as a whole, works can affect your business.
This simple breakdown of the DBA is a great starting point to understanding how to best support your staff and remain DBA compliant. Read up on the perks that employees actually want to learn how else you can best support employees with fringe benefits.