The reason contractors save money by offering a bona fide benefit plan is that when the fringe portion of the prevailing wage is used to provide benefits for hourly workers, this amount is not subject to payroll costs such as FICA, FUTA, state unemployment taxes and workers compensation insurance. Although there are variances in the rates for the last two, conservatively these taxes represent an additional 25 cents on each dollar paid as cash wages.

Sample Calculation
Assume your company has 15 employees doing prevailing wage work. These employees work approximately 1,000 hours each per year. The fringe amount above the base rate is $10/hour and the average approximate additional payroll cost when paying fringe dollars as cash wages is 25%.