Davis-Bacon Fringe Benefits

Since the 1964 amendments to the Davis-Bacon Act, the prevailing wage has had two parts: a basic hourly rate and a fringe benefit amount, each found separately by the Secretary of Labor and each printed on the wage determination. The statutory definition is at 40 U.S.C. 3141(2); the Department of Labor’s interpretation is subpart B of 29 CFR part 5, sections 5.23 through 5.31, much of it revised by the 2023 final rule. This page explains what the fringe figure is and how a contractor meets it. It does not say what any determination’s figures are; those are on SAM.gov.

The obligation is the sum

A contractor owes each laborer and mechanic, for every hour worked on the covered site, at least the basic hourly rate plus the fringe benefit amount for the classification. Section 5.31 states the three ways to discharge it: pay the basic rate in cash and make contributions to bona fide fringe benefit plans worth at least the fringe amount; pay the whole sum in cash; or any combination of the two. Davis-Bacon differs here from the Service Contract Act: under Davis-Bacon, cash paid above the basic hourly rate counts toward the fringe obligation, so a contractor that pays a higher hourly wage and no benefits can be in compliance, where an SCA contractor cannot offset its benefit obligation with extra wages. The fringe amount is ordinarily an hourly figure; where a determination expresses it as a percentage, the percentage is of the basic hourly rate (Fact Sheet 66E).

Overtime is computed on the basic hourly rate, not on the sum. Cash paid in lieu of fringe benefits is excluded from the premium calculation under both the Fair Labor Standards Act and the Contract Work Hours and Safety Standards Act, although the fringe amount itself is owed for overtime hours as for any other hour. Fact Sheet 66E cautions that a cash payment a worker receives consistently, including on work where no fringe obligation applies, is treated as part of the regular rate rather than as a payment in lieu of benefits.

What is bona fide

Section 5.29 repeats the statute’s list of benefits Congress found common in construction: medical or hospital care, pensions, compensation for occupational injury or illness, insurance for any of those, unemployment benefits, life insurance, disability and accident insurance, vacation and holiday pay, and the costs of apprenticeship or similar programs, with an open-ended clause for other bona fide benefits the Secretary recognizes as prevailing. Two conditions apply throughout. First, a benefit the contractor is required to provide by federal, state or local law, such as workers’ compensation or a state-mandated training fund contribution, earns no credit (5.29(f)). Second, the benefit must come through a fund, plan or program: either contributions made irrevocably to a trustee or third party not affiliated with the contractor, from which nothing can be recaptured (5.26), or the reasonably anticipated costs of an unfunded plan paid from the contractor’s own assets.

An unfunded plan, typically vacation or sick leave in construction, is creditable only if it could reasonably be expected to provide the benefit, is a legally enforceable commitment, is carried out under a financially responsible program, has been communicated to the workers in writing, and has been approved in advance by the Department of Labor on the contractor’s written request (5.28). The Secretary may require the contractor to set assets aside. Conventional funded plans need no approval (5.29(d)). The contractor’s own administrative costs of running a benefit, as distinct from fees a carrier or trustee charges to deliver it, are not creditable, nor are travel, subsistence, lodging or industry promotion fund payments.

Annualization

Section 5.25(c) requires that contributions be annualized: the credit per hour is the total contribution divided by all hours the worker worked in the period, on covered and private work alike, so that Davis-Bacon hours do not pay for a benefit the worker enjoys all year. If the contribution varies by worker, the credit is computed per worker. A contractor may ask the Wage and Hour Division for an exception where the benefit is not continuous in nature and does not compensate both private and covered work; contributions to a defined contribution pension plan with immediate participation and vesting within the first 500 hours are excepted without a request. Fact Sheet 66E lists failing to annualize, and counting administrative expenses, among the common violations it finds.

Apprentices and apprenticeship costs

Fringe benefits are paid to apprentices according to the registered program; where the program is silent, apprentices receive the full fringe amount for the journeyworker classification. The cost of an apprenticeship program is itself a creditable benefit under 5.29(g) only when the program is registered with the Office of Apprenticeship or a recognized state agency, only for costs reasonably related to the benefits actually provided (instruction, books, tools), and only against the obligation to workers in the apprentice’s own classification, annualized over that classification’s hours.

Where survey data fit

The fringe benefit figures on a determination come from the same Davis-Bacon surveys that produce the basic rates, described in how Davis-Bacon rates are determined. The wage tables on this site’s occupation pages report cash wages from the Bureau of Labor Statistics’ OEWS survey and carry no benefit component, so they cannot be compared directly with a determination’s total.