When you think about workforce development, do you consider the connection between employee benefits and personal development? Dig just below the surface and you will discover a wealth of tools you can use to recruit and retain the best employees. Providing benefits on prevailing wage jobs costs you nothing out of pocket, and it can actually save your company money.
The Case for Offering Benefits
According to a recent survey by bankrate.com, 26 percent of Americans between the ages of 50 and 64 have no retirement savings. Of those over age 65, 14 percent have no retirement savings. A CNBC report revealed that more than half of workers in their twenties are not saving for their retirement. Alongside these reports are stories of retirees barely scraping by and the huge burden the failure to prepare for retirement is creating for Social Security.
In light of these trends, employers across all industries are taking a more paternalistic view of helping their workers save for retirement. Plan design features such as automatic enrollment and contribution increases are gradually becoming more common.
For government contractors who bid on and perform work subject to the Davis-Bacon Act, Service Contract Act, state prevailing wage laws and living and responsible wage ordinances, this approach makes sense both financially and socially. In fact, government contractors are uniquely well-positioned to offer both health and retirement plans.
Benefits Help Workers and Employers
Funds to pay for fringe benefits like retirement plans and health insurance are included in the wage determination for every job classification in prevailing wage contracts. The wage is expressed in two parts: a base wage and a set fringe amount intended to be used to provide benefits. The fringe is an employer contribution, so it is the business owner's decision as to how to meet the fringe obligation. When fringe benefit dollars are contributed to retirement plans or used to pay for health insurance and other benefits, these dollars are exempt from payroll costs. That means employers don't pay FICA, FUTA, SUTA, workers' compensation insurance and, in many states, general liability insurance on these dollars. Over the life of a contract, this adds up to significant savings on payroll. Those savings can be passed along, resulting in more competitive bids and increased chances of winning contracts, because the lowest qualified bidder usually wins on government contracts. The savings can also contribute to improved profits and cash flow.
Some workers may initially react negatively to having these dollars contributed to retirement plans, rather than having them paid as additional cash wages. Once they see their account balances grow, though, they appreciate having financial security for themselves and their families.
Additionally, a benefits company with experience in prevailing wage plan design can leverage these contributions for employees to help company owners and highly-compensated employees save more for their retirements. This creates tax savings both on an individual level and a company level.
Employer-Sponsored Health Insurance
Fringe benefit dollars can also be used to pay for health insurance for workers, which is a win on many levels. Government contractors who are subject to the employer shared responsibility provisions of the ACA can use fringe dollars to pay for health insurance for their workers. This keeps them compliant with the law and creates savings on payroll burden.
Offering health insurance is a powerful tool when it comes to recruiting the most qualified workers. While not all employers are required to offer health insurance to their workers, all individuals are required to have coverage or face financial consequences. Rather than navigate the web of health insurance on their own, the best workers will look for an employer who will relieve them of the confusion associated with exchanges and private carriers. When the employer uses the fringe to provide health insurance, their employees obtain coverage on a pre-tax basis, and health insurance prevents them from being one step away from a financial catastrophe should an illness or accident occur.
A 2014 survey conducted by United Benefit Advisors Employees found that employees in the construction industry are one of the least expensive demographics for employers to cover. Excess fringe benefit dollars on prevailing wage jobs can be funneled into retirement plans and supplemental benefits like life, dental, vision and disability insurance. This maximizes savings for employers and creates additional value and financial security for employees.
There was a marked decrease in the unemployment rate among construction workers in 2014, and industries are now competing for workers with construction skills. In order to attract and retain skilled workers, government contractors need to stay competitive with other industries when it comes to the benefits packages they offer their workers. Using fringe benefit dollars included in the wage determinations on prevailing wage contracts is a cost-effective way to provide valuable benefits and create opportunities for business owners to cut job costs and save more for their own retirement.
