Illinois DOL Revises
Prevailing Wage Formula
Eff. 1/1/14 Fringe Benefits
Piece of rate of hourly wages
to be “annualized”
Up until now non-union contractors on public works jobs could either the prevailing wage in cash or a mix of cash and allowable fringe benefits. Illinois lawmakers have redefined “general prevailing rate of hourly wages” in the Illinois Prevailing Wage Act to refer to “annualized fringe benefits”. This affects non-union employers who had set up benefit plans for their workers based on the prevailing wage benefit.
Effective the first of the year, an IDOL auditor looking over a contractor’s compliance with the prevailing wage will scrutinize fringe benefit contributions made under a defined contribution plan and will calculate all contributions over all hours worked in a given period.
The IDOL gives this example: If a contractor contributes $520 per month for single insurance coverage and the employee works 2080 hours (40 x 52 weeks) then the effective annual contribution rate is determined by dividing $6240 ($520 x 12) by 2080 which equals $3.00 per hour. If the health and welfare portion of the prevailing wage is $5.05 per hour, the contractor can take a credit of $3.00 per hour and must pay $2.05 ($5.05-$3.00) additional on the hourly base wage. The same formula will be applied to Pension, Annuity, 401k plans, Training, and Vacation in some localities that are funded by the contractor.