How to Calculate Fringe Benefits on Prevailing Wage Projects

Take a determination setting a base rate of $48.10 and a fringe rate of $14.00. The obligation for an hour of that classification is $62.10 in total value. You can discharge the fringe portion by contributing to bona fide benefit plans, by paying it in cash, or by a combination. What you cannot do is deliver less than the total. The regulation frames this in terms of "rates of contributions or costs anticipated for bona fide fringe benefits or cash equivalents thereof" — the phrase "cash equivalents" being what permits paying it in money instead.

Fringe credit is an hourly figure, because the obligation is hourly. If you contribute to a health fund at $5.20 per hour worked, that is $5.20 of hourly credit toward the $14.00. Contributions made on some other basis — monthly, per employee, annually — have to be converted to an hourly figure before they can be compared to the determination, and that conversion is where most of the difficulty lives. See the annualisation section below.

If you make up part or all of the fringe in cash, that cash is additional to the base rate, not part of it. Paying $48.10 and calling $14.00 of it fringe does not discharge anything — it underpays the base by $14.00 and delivers no fringe. This is why the WH-347 gives cash in lieu its own column (6C), separate from the hourly wage rate in (6A). A payroll that folds cash in lieu into the base rate can reconcile perfectly against its own totals while failing against the determination, which is exactly the kind of error that survives internal checking.

A common and expensive confusion. 29 CFR 5.5(b)(1) requires overtime "at a rate not less than one and one-half times the basic rate of pay". The multiplier applies to the base rate. The fringe obligation continues for overtime hours — those are hours worked — but at its ordinary hourly value rather than at time and a half. So for the example above, overtime is one and a half times $48.10, plus $14.00 of fringe for that hour. Multiplying the full $62.10 overstates the obligation; omitting fringe on overtime hours understates it.

Here is the part that needs care. Where a benefit covers both prevailing wage work and private work, the hourly credit you can claim on a covered job is generally limited to what the contribution actually works out to across all the hours the benefit covers — not just the covered hours. The logic is straightforward once stated: if a contribution buys a year of coverage and half the year is private work, claiming the whole contribution against only the prevailing wage hours would have public work subsidising private work. Plans where contributions are not made per hour worked — pension, vacation, some health arrangements — are where this bites.

Because the answer depends on the plan's structure, the contribution basis, and the mix of work, and getting it wrong in either direction has consequences: overstating the credit underpays the worker, understating it costs you money you did not need to spend. It is genuinely technical, it is a common subject of enforcement attention, and it is the part of this topic where a contractor is best served by their benefits administrator or counsel rather than by an article. What we will say is that if you are claiming credit for a plan whose contributions are not calculated per hour worked, annualisation is a question you should have asked.

The January 2025 WH-347 asks you to substantiate the credit rather than just state it. Page 2's table takes each plan by name, type and number, a tick for funded or unfunded, and the hourly credit claimed for each worker under it — six plan columns per sheet, with a total hourly credit column that has to agree with the figure in (6B) on page 1. If your records do not currently hold plan numbers and types, that is a gap to close before it appears on a form you are signing.

For each worker, add the individual plan credits and any cash in lieu, and compare with the total credit you are claiming. Then compare base rate plus total credit against the determination for that classification. Two additions, no interpretation, and between them they catch the majority of fringe errors before anybody else sees them. Anything that survives both is a question about the underlying plan rather than about the payroll, which is a much better place to be.