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

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 Starts1991–2011

Value of Public Construction Put in Place 1993 – 2011

Solving Industry-Specific Business Problems

Sample Wage Determination

BASEWAGE

$30

FRINGE BENEFIT

$10

+

TOTAL HOURLY WAGE

$40

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

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

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 $34.52Fringe $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”!

Many pay for health premium or retirement contributions “on top”!

Sample Bidders List

Fairchild Hall Rehabilitation Project Jan 8, 2011

1 Scotts Industrial Electric, 3178 Bincrete Lane (999) 298-7481 $674,595.00

2 Heatherville Electric, 360 Industrial Drive (999) 743-1220 $675,900.00

3 Johnson Electric, 1145 Bellbrook Ave (999) 372-8205 $681,000.00

4 Chappelle Electric ,1985 Founders (999) 222-2290 $732,442.00

5 Caret Electric Company, 3925 Pansini Lane (999) 669-3399 $735,000.00

6 Kastle Electric, 4501 Libby Blvd (999) 254-2681 $740,300.00

7 BBW Electrical Contractors, 3400 Kettering Blvd (999) 293-6138 $745,897.00

8 Debra/Kuempel ,1948 W.Phyllis Lane (999) 531-5455 $770,000.00

9 Schamberger Electric, 6901 Americana Pkwy (999) 863-1844 $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 [email protected]

512-663-0709