Attract employees and stay compliant with a competitive fringe package

There’s more to the compensation equation than wages or salary. Competitive health insurance, paid time off (PTO), and retirement benefits help companies stand out against a sea of businesses offering similar hourly rates. This is especially important in the construction industry: surveys show that 88% of companies who hire skilled workers are struggling to fill openings. A strong benefits package might encourage them to apply. 

More than that, fringe benefits may be required. Contractors typically have to offer fringe packages to comply with prevailing wage regulations and union agreements.

This guide helps contractors understand fringe packages by explaining what counts as a fringe benefit, their value to both employers and employees, and the interplay between fringe benefits and payroll.

What are fringe benefits?

Fringe benefits are compensation and perks that employers provide besides regular wages or salary. Common examples include:

• Health insurance
• Retirement plans
• PTO
• Transportation compensation or commuter benefits
• Professional development opportunities

While the law requires that companies provide some benefits like Social Security and Medicare, others are completely voluntary. Employers use optional perks like performance-based bonuses and extra PTO to build a more competitive compensation package, hoping to attract and retain talented people.

Fringe benefits in the construction industry

In the construction industry, companies must offer specific fringe packages in two scenarios: prevailing wage projects and working under a collective bargaining agreement (CBA). Prevailing wage regulations, like the federal Davis-Bacon Act, set a minimum fringe rate per hour for contracts. That can be through bona fide benefits or cash paid in lieu of benefits. CBAs, on the other hand, specify which benefit funds employers must contribute to, and can also be paid out in cash. 

Publicly funded projects

Publicly funded projects specify the amount employers must contribute toward employee benefits per hour worked. Employers can cover this directly through bona fide benefits plans or cash equivalents, also known as fringe pay. Some benefits count toward this requirement, including health insurance, retirement contributions, and PTO. But others, like bonuses and meal allowances, don’t.

Union workers

Unions negotiate workers’ terms of employment with construction companies. These arrangements are known as collective bargaining agreements (CBAs). Sometimes, CBAs require employers to contribute to specific fringe benefit funds, like health and welfare (H&W), pensions, and annuities.

What is fringe pay?

Contractors can pay employees the project’s fringe rate in cash equivalents rather than meeting the fringe requirement through contributions made via benefits packages. This pay is known as fringe pay, and it’s part of the employee’s paycheck. 

While this can simplify benefits administration, opting for fringe pay rather than bona fide benefits can be more expensive. Offering bona fide packages reduces companies’ tax burden through prevailing wage fringe credits. Working with a benefits broker can help on both fronts. They can negotiate discounted insurance packages and structure a plan that satisfies your fringe requirements on prevailing wage jobs.

Examples of fringe benefits commonly offered in construction

Every organization has its own fringe benefit package based on factors like company size, workforce structure, and union agreements or public works fringe requirements. 

Here are some of the most common fringe benefit examples.

Health insurance

Construction has one of the highest non-fatal injury rates of any industry. That means comprehensive medical coverage is extremely important to construction employees. Some employers go beyond basic health insurance and also offer dental, vision, and mental health services to support a healthier workforce and increase productivity.

Retirement plans

Construction roles are physically demanding, which can make participating in the workforce harder as employees get older. Employer contributions to retirement plans like 401(k)s and pension funds help employees plan for the day they put down the hammer.

PTO and sick time

Paid vacation days and sick days give employees time to recharge, avoiding safety incidents that might happen when employees try to push through sickness or injury. Employees also have lives outside of work and might need time off for personal commitments. 

This benefit is especially valuable in construction, where schedules can be unpredictable. Knowing they can count on paid time away from the job when they need it helps employees push through when the going gets tough.

Learning and development support

Providing tuition for trade certifications is a win-win for employers and employees alike; contractors get a better-qualified crew, while employees build their skills and improve their future job prospects.

Travel reimbursement and paid meals

Mileage reimbursements and per diems, like meal allowances, offset the costs of working at remote jobsites. Federal law doesn’t require employers to offer per diems, but travel costs can’t put workers’ wages below the federal minimum wage of $7.25 an hour. 

These aren’t required benefits, but they’re pretty standard in construction. Per diems cover the out-of-pocket costs that come with the work: meal money when a crew runs past 10 or 12 hours, a tool stipend for trades who bring their own gear, or a travel allowance for crews commuting an hour-plus to a remote site.

Bonuses

Performance bonuses are rewards for going above and beyond. In construction, bonuses are often tied to project milestones, whether that’s completing projects on schedule or under budget, or hitting safety targets. Employers may also offer attendance bonuses, which reduce unplanned absences and maintain momentum across teams. 

Attendance bonuses work similarly. When companies offer extra compensation to team members who show up every day, employees are less likely to take unannounced time off.

How do fringe benefits affect payroll and compliance?

While fringe benefits are an indirect form of compensation, they still affect payroll. Here are a few common tasks finance teams are responsible for:

• Determining tax-exempt versus taxable fringe benefits: Sorting out which fringe benefits are taxable and which aren’t helps contractors avoid under or overpaying their taxes.
• Tracking fringe contributions by classification and project: On prevailing wage jobs, fringe contributions need to connect to hours worked. Gaps in the data, including inaccurate or incomplete fringe benefit calculations, create certified payroll errors that put contractors at risk of penalties, failed audits, or debarment. Employers need to maintain clean records of how much they’re spending on fringe benefits for each employee. 
• Reporting the total value of taxable benefits: Contractors must report the total value of taxable fringe benefits each employee receives to the IRS. Cash paid in lieu of wages counts as taxable wages and is subject to payroll taxes, meaning there’s a real cost difference from bona fide benefit contributions. 
• Calculating fringe offsets for certified payroll: Miscalculated fringe offsets in certified payroll reports are the most common compliance errors in the industry. Contractors offering bona fide benefits on prevailing wage jobs need to calculate the per-hour value of each contribution. Then, they must document how it offsets the required fringe rate. 

The case for offering benefits packages

Here are a few of the ways benefits packages help contractors build strong, motivated teams:

• Attracts top employees: Offering better benefits than competitors makes contractors look more attractive to prospective hires. This is especially important in construction since companies will need to attract a projected 349,000 workers in 2026 to keep up with demand.
• Improves employee retention: The cost of replacing an employee ranges from 40% to 200% of their salary. Providing a strong benefits package improves the overall employee experience, reducing turnover. More than that, companies offering bona fide benefits packages earn fringe credits, which lowers their tax bill.
• Increases engagement: Companies with highly engaged employees have 78% less absenteeism and 14% higher productivity. Contractors can increase engagement by tailoring benefits packages to employee needs. For instance, they could offer additional accident insurance and tool allowances. Benefits that address real pain points tell employees that the company recognizes their individual value.
• Supports employees’ financial security and well-being: Benefits like health insurance, retirement contributions, and paid sick leave provide employees with a financial safety net. This helps them stay focused on their job instead of worrying about whether they’ll be able to afford a visit to the doctor if they get hurt at work.
• Strengthens company culture and loyalty: Employees who feel appreciated tend to pay that appreciation forward and value their company more. Fair compensation is one of the clearest ways to show people they’re valued.

Manage fringe benefits the easy way with Miter.

Fringe benefits attract qualified talent and keep contractors compliant with federal, state, and union requirements. But tracking contributions by classification, calculating fringe offsets against prevailing wage rates, and keeping certified payroll documentation clean across multiple crews and jobsites is a lot to manage. That’s especially true when fringe obligations vary project to project.

Miter Payroll is built for exactly that complexity. Payroll teams can configure fringe rates by classification and pay rate group, automatically calculate offsets when bona fide benefits reduce what’s owed, and generate fringe contribution reports and certified payroll documentation — all without leaving the platform. When an auditor asks for fringe documentation, it’s already there.