What Is Fringe Pay? Benefits, Cash, and Underpayment

Fringe pay is the benefits portion of the prevailing wage that contractors must deliver to workers on federally funded construction and service contracts. On these jobs, the Department of Labor sets two numbers for each job classification: a basic hourly rate and a separate fringe benefit rate. The fringe rate is a dollar amount per hour your employer owes you on top of the basic rate, and it can be paid through benefits like health insurance and retirement contributions, paid straight to you as cash, or split between the two.¹

If a wage determination lists a laborer’s basic rate at $27.94 and the fringe rate at $13.00, the contractor owes a total of $40.94 per hour for every hour that worker is on the covered project.² How that $13.00 arrives is up to the employer, but the full amount has to arrive.

What Counts as a Fringe Benefit

Federal regulations recognize a specific set of benefits that an employer can credit toward the fringe obligation:

Employer contributions toward medical, hospital, dental, or vision care, including insurance premiums.
Pension plans and defined-contribution retirement accounts, such as 401(k) contributions.
Life insurance, disability and sickness insurance, and accident insurance.
Vacation pay, holiday pay, and sick leave.
Contributions to a registered apprenticeship or similar training program, in amounts reasonably related to the actual cost of instruction, books, and materials provided to the contractor’s employees.
Other bona fide benefits provided through a legitimate fund, plan, or program.

These count for fringe credit only when the employer is not already required to provide them under another federal, state, or local law.³ Apprenticeship contributions qualify only if the program is registered with the Department of Labor’s Office of Apprenticeship or a recognized state apprenticeship agency.⁴

What Doesn’t Count

Anything the employer must legally pay anyway does not count toward the fringe requirement. Social Security and Medicare taxes (FICA), federal and state unemployment insurance, and workers’ compensation insurance are all excluded, because every employer owes them regardless of a prevailing-wage contract.⁵ A state-mandated apprenticeship fund contribution is excluded for the same reason.⁴ If you see these items listed as “fringe” on a pay stub, they don’t satisfy your employer’s obligation.

Benefits or Cash: Both Are Legal

A contractor without a formal benefits plan can pay the entire fringe amount to you as cash, added to the basic hourly rate for every hour on the covered project. A mixed approach works too. If the wage determination requires a $21.93 basic rate and a $6.27 fringe rate, an employer providing $4.00 per hour in health insurance can pay the remaining $2.27 in cash, plus the $21.93 basic rate, and still hit the required $28.60 total.¹

How the fringe is delivered affects your paycheck. Employer contributions to qualifying benefit plans are generally exempt from Social Security tax, Medicare tax, and federal unemployment tax. Cash paid in lieu of benefits is treated as regular wages and is subject to income tax, FICA withholding, and unemployment taxes, so the same dollar amount ends up smaller in your take-home pay when it comes as cash.⁶

Which Contracts This Applies To

Fringe-pay obligations attach to specific categories of federal work, not to private employment generally. The Davis-Bacon Act covers federal construction, alteration, or repair contracts over $2,000 and applies to laborers and mechanics.⁷ The Service Contract Act covers federal service contracts over $2,500 where the principal purpose is furnishing services through service employees, such as custodial staff, security guards, and administrative support on federal installations.⁸

For most Service Contract Act workers, the Department of Labor sets a single health and welfare fringe rate that applies across contracts. As of the July 2025 determination, that rate is $5.55 per hour, or $5.09 per hour on contracts subject to Executive Order 13706, which provides paid sick leave.⁹ The rate is updated periodically. Davis-Bacon fringe rates, by contrast, vary by classification and county.

How to Check What You’re Owed

Start with the wage determination attached to your contract. Wage determinations are published on SAM.gov, and you can search by contract number or by geographic area.¹⁰ The document lists each job classification (electrician, laborer, plumber, and so on) with its basic hourly rate and its fringe rate.

Compare those numbers against your pay stub. Confirm the basic hourly rate matches, and then look for the fringe. If your employer pays it as cash, it should appear as a separate line so you can see both components. If your employer delivers it through benefits, the plan contributions on your behalf should equal at least the fringe rate for every covered hour; when they fall short, the difference has to be made up in cash or additional plan contributions.

You have the right to review the certified payroll records that contractors must submit weekly to the contracting agency for every week of covered work.¹¹ These records show each worker’s job classification, hourly rates including fringe contributions or cash equivalents, and total hours worked.¹² Contractors must keep them for at least three years after the prime contract is completed. Two common problems to look for: the wrong job classification (a lower-paid one) assigned to the work you actually did, and FICA or workers’ comp counted as “fringe” when they don’t qualify.

If You’re Being Shortchanged

You can file a confidential complaint with the Department of Labor’s Wage and Hour Division by calling 1-866-487-9243 or submitting a request online.¹³ If the investigation finds back wages are owed, the Division will request that the contractor pay the full amount.

Don’t wait too long. You generally have two years from the date wages were owed to file a claim. If the underpayment was willful, meaning the employer knowingly underpaid, the deadline extends to three years.¹⁴

When a contractor comes up short, the federal agency can withhold accrued contract payments to cover what workers are owed, plus interest calculated at the rate used for underpaid federal taxes, compounding daily.¹⁵ The Department of Labor pays workers directly from those withheld funds. If the withheld amount isn’t enough, you have the right to bring a civil action against the contractor and its sureties.¹⁶

1
eCFR. 29 CFR Part 5 Subpart B – Interpretation of the Fringe Benefits Provisions of the Davis-Bacon Act – Section 5.31
2
SAM.gov. Wage Determination WA20200002
3
Office of the Law Revision Counsel. 40 USC 3141 – Definitions
4
U.S. Department of Labor. Fact Sheet 66E: The Davis-Bacon and Related Acts – Compliance With Fringe Benefit Requirements
5
eCFR. 29 CFR 5.29 – Specific Fringe Benefits
6
Internal Revenue Service. Employer’s Tax Guide to Fringe Benefits (2026)
7
Office of the Law Revision Counsel. 40 USC Subchapter IV – Wage Rate Requirements
8
Office of the Law Revision Counsel. 41 USC Chapter 67 – Service Contract Labor Standards
9
U.S. Department of Labor. All Agency Memorandum 250 – SCA Health and Welfare Fringe Benefit
10
SAM.gov. Wage Determinations
11
eCFR. 29 CFR 5.5 – Contract Provisions and Related Matters
12
eCFR. 29 CFR 3.4 – Submission of Certified Payroll and the Preservation and Inspection of Weekly Payroll Records
13
U.S. Department of Labor. How to File a Complaint
14
Office of the Law Revision Counsel. 29 USC Chapter 9 – Portal-to-Portal Pay
15
eCFR. 29 CFR Part 5 – Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction
16
Office of the Law Revision Counsel. 40 USC 3144 – Authority to Pay Wages and List Contractors Violating Contracts