Meeting the
Fringe Requirements
29 CFR 4.17 Discharging fringe benefit obligations by equivalent means.
In general, the regulations permit an employer to discharge his obligation to
furnish the fringe benefits specific in an applicable fringe benefit
determination by furnishing any equivalent combination of “bona fide” fringe
benefits or by making equivalent or differential payment in cash…
The Problem with Paying Cash
Contractors paying the fringe rate in cash through wages are at a competitive
disadvantage on their labor costs because they incur additional expenses in the
form of payroll burden including FICA and higher Workers Compensation premiums.
This example demonstrates the savings as a result of providing benefits versus
paying the fringe in cash:
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No Benefits Paying Cash
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Providing Benefits
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Cash Wages:
Fringe Paid to Benefit Plan:
Payroll Burden:
Total Cost Per Hour:
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$19.35
$ 0.00
$ 2.90
$22.25
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$16.00
$ 3.35
$ 2.40
$21.75
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Total Annual Savings:
(Assuming 200 Employees & Full Time Employment Status)
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*Both wages and hours worked are based on assumptions.