Hour Banking: The Ultimate Solution for DBA Contractors

Government contractors have options when it comes to how they spend fringe dollars on Davis-Bacon (DBA) contracts. Being able to strategically manage the fringe dollars within the confines of the DBA can save government contractors valuable tax dollars. It can also help them provide healthcare benefits for their workforce. However, working on a DBA contract comes with a hefty compliance checklist, representing a unique challenge for employers. Hour banking can be a savvy solution to these compliance challenges that benefits both the contractor and the employee.

It’s not uncommon for  cost-conscious contractors to turn to a third-party administrator (TPA) to take the guess work out of DBA compliance. Of the many different fringe benefit solutions available to DBA contractors, hour banking should be at the top of the contractor’s list. Read on to learn more!

A Brief Introduction to the Davis-Bacon Act

DBA governs all construction contracts with the federal government valued in excess of $2,000. A primary purpose of the DBA is to protect local communities from the economic upheaval caused by federal contracts. One of the law’s requirements is for  workers to be paid a local prevailing wage as well as fringe benefits, which can be paid in the form of cash or used to provide health and welfare benefits.

DBA compliance also requires that employees be paid at least once a week throughout the performance of the contract. Companies must maintain basic records to track the hours worked and payments made to all workers for an established set period of time. For additional details about the DBA, read here.

What is Hour Banking?

Hour banking is a method that allows employees to put any extra hours worked into a ‘bank’ that can then be used at a later time. It’s useful if/when the employee experiences an hour shortage to satisfy the health benefit coverage requirements. This practice can help  provide employees consistent coverage for fluctuations in the construction industry while still satisfying  the DBA’s compliance requirements. Beyond being a major benefit for the employee, hour banking can streamline the tracking and reporting requirements for the DBA contractor.

Here are the basics on hour banking: Benefits are provided and tracked by the hour, based on the hours an employee works. This method creates ease in accounting for total hours worked, properly tracks the hours to ensure that the employee gets the benefit in full (plus any interest accumulated), and prevents the contractor from overpaying on benefits. Not to mention, this direct “by the hour” method assists in creating a competitive bid.

The Advantages of an Hour Banking Solution

The benefit of an hour banking solution is a two-way street; both contractors and employees stand to gain. Employers see a benefit to the bottom line for providing as much tax-advantaged benefits as allowed, and employees enjoy a bit more security in an uncertain line of work. Hour banking can be effective for contractors working across multiple sites and with potentially varying fringe rates. It also works well on job sites that utilize seasonal employees or see a lot of turnover or rise and decline in worker numbers.

An hour bank solution puts workers at ease by allowing them to accumulate more benefits (up to six months!) and have a safety net for those unpredictable circumstances. As employers, government contractors are pulling double duty in making sure the job is done well and within compliance, while seeking  solutions that keep their employees safe and healthy.

Fringe Benefits. A No-Brainer.

The contractor that satisfies the DBA’s fringe benefit requirement with a bona fide health and welfare benefit maintains a competitive financial tax advantage over a contractor that is paying fringe dollars in cash. Additionally, the contractor has a number of different health and welfare benefit options that qualify as ‘bona fide’ under the DBA.

When contractors utilize those fringe dollars to provide employee benefits, the advantages go way beyond cost-effectiveness. Employee fringe benefit plans often translate to a healthier workforce and reduced absenteeism. Additionally, they may lead to increased employee satisfaction and productivity.

Contractors could always handle hour bank administration themselves. However, that would require not only the expertise but also the valuable resources to properly account for every fringe dollar. Such time and resources could be better spent out in the field or growing the business. Hour banking is a great solution for many contractors, and is why it’s one of Boon’s proudest offerings.

Learn more.

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