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Employee Benefits for Non-Union Prevailing Wage Contractors

August 13, 2009 Written by: Written by John R. Dean, CPC, RHU


One key difference between union and non-union contractors is how they provide benefits to their employees. Unions generally provide benefits to the employees of signatory contractors. Open shop contractors are on their own to decide what, if any, benefits to provide to their employees. Although this gives the non-union contractor more responsibility, it also offers much more flexibility to determine and implement what benefits are most appropriate for their group.

Health insurance options may include HMO, PPO and POS options with varying premium costs, copayments, and benefit designs. If the contractor performs prevailing wage work, then a plan that accounts for premium payments on an hourly basis will be needed. “Hour-banking,” or the banking of any excess premium for the employees may also be desired for public works contractors to use the fringe dollars for these costs and to compete with union-sponsored plans.

Unlike union health plans, the non-union contractor can structure their benefit rates to reflect the number of dependents, if any dependents are covered. In other words, a union plan generally has the employees pay the same mandated rate regardless of whether the employee is covering any family members or not. This may or may not be a competitive rate for a worker covering a family, but will be very high for a worker who does not need to cover a spouse and children.

Ancillary benefits are generally very affordable and valued by employees as well. Non-union contractors may be able to choose dental and vision benefits and possibly even chiropractic coverage and life insurance.

Retirement plans are also common and can vary considerably in design. Union plans do not have options that allow an employer to implement a program that not only provides benefits to employees, but also helps company owners achieve their own retirement goals. Options for a retirement program might include 401(k), matching and profit sharing contributions. A prevailing wage contractor may deposit part of the fringe benefit package into such a plan if properly designed. These fringe contributions are usually 100% vested immediately, which is a big advantage for employees. If the union plan has a five-year vesting schedule, he or she will never see any of those retirement plan contributions unless they work for the union for at least that amount of time.

With more open shop contractors bidding on prevailing wage work, it is important for these employers to know their options. When unions attempt to persuade non-union employees to organize, they often tout their benefits. Offering a comparable, or even superior benefit package will not only help the employer retain quality employees, but also help them remain open shop. Not only do union employees have significant dollars going to benefit plans they do not have the opportunity to evaluate, but they are paying dues on top of that for the “privilege.”