Contractor Challenges

Generally, all government contractors have the same two goals – compliance with the requirement of the various rules and regulations that apply to their government contract and competiveness within their industry. There are however, unique challenges that government contractors face in determining how to expend the "health & welfare" portions of the wage determination. Below are common problems contractors face when funding their wage determination projects.

The Problem with Paying Fringes in Cash

Contractors paying the fringe rate in cash through wages are truly at a competitive disadvantage on their labor costs because they incur additional expenses in the form of payroll burden including FICA, FUTA, SUTA, as well as higher Workers Compensation premiums. These expenses cannot be credited toward the fringe contribution and must be paid in addition to, therefore raising your effective cost by as much as $0.60 a man hour or more.

The Problem with Utilizing a Traditional Benefit Plan

Government contractors who attempt to utilize a traditional benefit plan for their employees working on wage determination contracts quickly realize that benefits for wage determination employees require completely different tracking and administration than those employees on non-government contracts. Consequently, trying to implement the same benefit plan on these two different populations becomes problematic from both an administrative and compliance perspective.

The Problem with Self Funding a Benefit Plan

Government contractors cannot alter, eliminate, or save any part of their hourly health and welfare wage determination contribution. It must be spent in full. This inability to reduce – or cut – premium expense diminishes the relative value of cost vs. benefit, and greatly elevates the already important issue of service, to both the contractor, and especially to their employees. Under most circumstances self insuring the health & welfare portion of the fringe can actually result in a higher cost per hour.

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