Contractors often tell us, taking credit toward fringe benefits (a.k.a. employer payments) on prevailing wage jobs is too much work. But is it costing you even more money than you think? Let’s explore the pros and cons of paying cash vs. contributing to bona fide plans.
PROS to paying Cash:
- It’s Easy: Not only do you not have to rack your brain on 5th grade math you don’t remember, but you also avoid the risk of getting it wrong and owing more in restitution and potential penalties.
- Employees like $$$: Instant gratification is the name of the game for many.
CONS to paying Cash:
- Employer Increased Costs: If we pay the fringe benefits to the employee their earnings increase, which in turn increases your payroll tax bill, and other bills that are based on employee earnings, such as workers compensation, and overtime premiums.
- Employee’s Lose on Benefits: If we don’t put that money into health insurance and retirement plans, our employees and their families miss the opportunity to receive good medical care and save for their future.
For the following reasons we feel the benefit of using bona fide plans outweigh the administrative burden (which really isn’t as bad as it may seem):
- Healthier employees and families create loyal employees who value the benefits your company offers.
- Employees that are better prepared for retirement and less stressed about what the future holds.
- You save by paying less in employment taxes and WC premiums.
- Fringe Benefits can also bring greater tax benefits as you can categorize them as a benefit expense.
TPPS can assist you with identifying bona fide fringe benefit plans, help you take proper credit on your current plans, and help with any other labor compliance question or concern you may have. Just Ask Us!