The two parts of the prevailing wage
The basic hourly rate is the cash wage paid directly to the worker, and it does not include fringe benefits [29 CFR 5.24]. The fringe part covers your contributions to, or reasonably anticipated costs of, bona fide benefits. The law lists medical or hospital care, pensions, compensation for work-related injury or illness, unemployment benefits, life, disability, sickness, or accident insurance, vacation and holiday pay, and apprenticeship costs [40 U.S.C. 3141(2)(B)].
Some costs do not count toward fringe:
- Benefits you must provide under federal, state, or local law, such as workers' compensation insurance [29 CFR 5.29(f)].
- Travel, subsistence, and industry promotion payments, which are not normally fringe benefits [29 CFR 5.29(f)].
- Your own administrative costs of handling benefits, such as office staff time on claim forms [29 CFR 5.33(b)].
Some wage determinations state a fringe benefit as something other than an hourly rate. Then you may provide that benefit, another bona fide benefit, or an hourly cash equivalent [29 CFR 5.5(a)(1)(iv)].
Option 1: pay into bona fide plans
To take credit for contributions to a plan [29 CFR 5.26(a)]:
- the contributions must be irrevocable;
- the trustee or third party may not be affiliated with you;
- the plan may not let you recapture or divert the money.
Contributions must be made at least quarterly [DOL WHD: Fact Sheet #66E]. Regular contributions for a period longer than a week, but made at least quarterly, count as made during each week they cover [29 CFR 5.5(a)(1)(i)].
An unfunded plan, paid from your general assets, counts only after you request and receive the Secretary of Labor's approval [29 CFR 5.28(b)(5)].
Annualization: turning a plan cost into an hourly credit
Except as noted below, you must annualize plan contributions to find the hourly credit you can take [29 CFR 5.25(c)]. Divide the total cost by all hours the worker worked on both private and covered jobs during the period the cost covers. If contributions differ by worker, figure the credit for each worker separately [29 CFR 5.25(c)(1)].
Fictional example. You pay $9,360 a year for one worker's health coverage. The worker logs 2,080 hours that year: 1,040 on Davis-Bacon jobs and 1,040 on private jobs.
- Correct credit: $9,360 ÷ 2,080 hours = $4.50 per hour.
- Not allowed: $9,360 ÷ 1,040 Davis-Bacon hours = $9.00 per hour. That would load the whole cost onto covered work.
- If the wage determination's fringe is $8.00, you still owe $8.00 − $4.50 = $3.50 per hour, in other benefits or in cash.
Exceptions. An exception can be granted only if the benefit is not continuous in nature and does not pay for both private and covered work [29 CFR 5.25(c)(3)]. Contributions to a defined contribution pension plan that meets those two tests and provides immediate participation and vesting within the first 500 hours worked are excepted with no request needed. Any other exception needs a written request to the Wage and Hour Division [29 CFR 5.25(c)(2)].
Option 2: pay cash in lieu of fringe
You can skip plans and pay the fringe amount as cash on top of the basic hourly rate [29 CFR 5.31(b)(2)]. The regulation's own example: with a basic rate of $21.93 and fringe of $6.27, an employer with no benefit plans pays at least $28.60 an hour [29 CFR 5.31(b)(2)].
Option 3: mix them, or pay a "total package"
You can combine cash and plan contributions, as long as the total is at least the basic rate plus the fringe amount [40 U.S.C. 3142(d)]; [29 CFR 5.31(b)(3)]. Cash wages above the basic hourly rate may offset the fringe part of your obligation [DOL WHD: Fact Sheet #66E].
One caution about the total package. If you consistently pay a worker a higher rate, even on jobs where no fringe is required, that extra cash is part of the regular wage. It is not cash in lieu of fringe, and it counts when you figure overtime [DOL WHD: Fact Sheet #66E]; [29 CFR 5.32(c)(1)].
Overtime: fringe for every hour, no time-and-a-half on it
Fringe must be paid for all hours worked, including overtime hours. You do not compute half-time on cash paid in lieu of fringe [DOL WHD: Fact Sheet #66E]. Fringe contributions are left out of the rate used for overtime, but that rate can never be below the basic hourly rate in the wage determination [29 CFR 5.32(a)]; [40 U.S.C. 3142(e)].
As of November 2026, the CWHSSA overtime clauses apply to contracts over $100,000 [29 CFR 5.5(b)]. They require at least 1.5 times the basic rate of pay for hours over 40 in a workweek [29 CFR 5.5(b)(1)]. Missing it can add liquidated damages of $33 per worker for each calendar day of unpaid overtime, as of November 2026 [29 CFR 5.5(b)(2)].
Fictional example. Electrician: basic rate $35.00, fringe $12.00, all fringe paid in cash. The worker works 45 hours, and CWHSSA applies.
- Straight time: 40 × $35.00 = $1,400.00
- Overtime: 5 × ($35.00 × 1.5) = 5 × $52.50 = $262.50
- Cash in lieu: 45 × $12.00 = $540.00
- Total: $1,400.00 + $262.50 + $540.00 = $2,202.50
Fringe is paid on all 45 hours, once. The overtime premium is figured on $35.00, not on $47.00.
Apprentices
Pay apprentices fringe benefits as their registered apprenticeship program says. If the program does not specify fringe benefits, pay the full fringe amount listed on the wage determination for the classification [29 CFR 5.5(a)(4)(i)(B)].
Reporting fringe on the WH-347
- Column (6A): the hourly rate actually paid. Leave out cash in lieu of fringe [DOL WHD: Form WH-347 instructions].
- Column (6B): total hours times the worker's total hourly credit for plans, from page 2 [DOL WHD: Form WH-347 instructions].
- Column (6C): total hours times the hourly cash paid in lieu of fringe [DOL WHD: Form WH-347 instructions].
- Statement (5) on page 2: "Fringe benefits have been paid in cash and/or to bona fide fringe benefit plans, funds, or programs" [DOL WHD: Form WH-347 (Rev. January 2025)]. If you claim plan credit, check it and fill in the "Hourly Credit for Fringe Benefits" table: each plan's name, type, and number, funded or unfunded, each worker's hourly credit, and the total. If you pay fringe only in cash, check box 5 but leave the table blank. More than six plans need an addendum [DOL WHD: Form WH-347 instructions].
In the electrician example, column (6A) shows $35.00 straight time and $52.50 overtime, (6B) is empty, and (6C) is 45 × $12.00 = $540.00. For every field on the form, see how to fill out the WH-347.
Your payroll records must show the rates of fringe contributions or costs, or the cash paid instead [29 CFR 5.5(a)(3)(i)(B)].
Common mistakes
- Dividing a plan's cost by Davis-Bacon hours only [29 CFR 5.25(c)(1)].
- Counting workers' compensation or other benefits required by law [29 CFR 5.29(f)].
- Calling a rate you always pay "cash in lieu" to lower overtime [DOL WHD: Fact Sheet #66E].
- Putting cash in lieu inside column (6A) [DOL WHD: Form WH-347 instructions].
- An amount in (6B) with an empty fringe table on page 2 [DOL WHD: Form WH-347 (Rev. January 2025)].
- Claiming credit for an unfunded plan without DOL approval [29 CFR 5.28(b)(5)].
FAQ
Do I owe Davis-Bacon fringe benefits on overtime hours?
Yes. Fringe is owed for all hours worked, including overtime, but you do not pay half-time on cash in lieu of fringe [DOL WHD: Fact Sheet #66E]. Overtime is figured on a rate no lower than the basic hourly rate [29 CFR 5.32(a)].
Can I pay all fringe benefits in cash?
Yes. You can pay the basic rate plus the fringe amount in cash [29 CFR 5.31(b)(2)]. Report the cash part in column (6C), not (6A) [DOL WHD: Form WH-347 instructions].
How often do I have to pay into a benefit plan?
At least quarterly [DOL WHD: Fact Sheet #66E]. Regular contributions made at least quarterly count toward each week they cover [29 CFR 5.5(a)(1)(i)].
Do retirement plan contributions have to be annualized?
Contributions to a defined contribution pension plan are excepted if the plan provides immediate participation and vests within the first 500 hours worked, among other conditions [29 CFR 5.25(c)(2)]. Other plans are annualized unless the Wage and Hour Division grants an exception [29 CFR 5.25(c)].