In the world of government contracting, winning contracts are made within the narrowest of margins. The competitive and cost-conscious contractor is always looking for a winning edge, a solution that can help shave off dollars and cents to offer a more competitive bid. Many contractors have found success in offering bona fide fringe benefits to employees rather than paying out the fringe amount in cash!
If you’re new to the concept of bona fide fringe benefits, or how this simple solution can create savings for your business, you may have questions. Boon has the answers! Read on to learn more about why offering employee benefits keeps you competitive.
Fringe Benefits are a Tool in Your Contractor Arsenal
The Wage and Hour Division of the U.S. Department of Labor (DOL) sets the health and welfare rate for each contract subject to the McNamara-O’Hara Service Contract Act (SCA) and the Davis-Bacon Act (DBA). In addition, certain states, counties, or cities may determine the health and welfare requirement for contracts within those locations or for employees working in a specified geographical location. Generally, employers have the option to pay the fringe amount out in cash, as additional compensation, or to apply the fringe towards a bona fide benefit plan(s). Generally, an employer has discretion over how to apply the fringe dollars, but it can vary by contract or geographical location.
Click here for details on the 2020 fringe amount for employers subject to the SCA.
The SCA and DBA allow fringe benefit dollars to be applied towards an array of benefits including, medical plans, ancillary benefits, and retirement offerings. Contractors can also mix and match their benefit offerings, provided the plans work together within the applicable fringe amount. This flexibility often makes fringe benefits an appealing solution to government contractors, since it provides employee benefits to the workforce and also saves the contractor money through reduced payroll taxes.
Fringe Benefits Provide Cost-Savings
When a contractor elects to put the required fringe dollars towards employee benefits, there is a tax advantage compared to contractors that pay in cash. Choosing to pay the fringe as compensation adds to the overall payroll tax burden for both the employee and employer. Paying the fringe amount through employee benefits allows the employer to offer additional value, but not in a way that increases the employee and employer FICA and FUTA payroll taxes.
Providing fringe benefits goes beyond the cost-savings. Offering health benefits rather than cash can also lead to less expenditures overall, including reduced absenteeism and an overall healthier, more productive workforce. That’s some serious “bang for your benefit!”
By now, you may be jumping forward to the administration and compliance concerns that generally come with offering employee benefits. Contractors sometimes choose to pay the fringe amount in cash because of the perceived hassle in handling the administrative tasks needed to maintain compliance. But administrative compliance doesn’t have to be complicated!
It Doesn’t Have to be Complicated
Compliance does require a higher level of accounting and precision. If you’re a government contractor that doesn’t have the expertise or resources to properly track and account for the fringe benefit dollars, help is available to keep you in compliance.
Boon is experienced in offering government contractors employee benefits that comply with the bona fide fringe requirements of the SCA and DBA. We can also provide compliance assistance for the administration of hourly health and welfare benefit plans.
At Boon, we create benefit plans based on the unique needs of the government contractor. Our plans are compliant and offer a comprehensive benefit package, supported by a team that is ready to meet all of your administrative needs.
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