One of the biggest challenges I hear from contractors is this: “How do I explain to my employees that their prevailing wage fringe dollars are going into employee benefits instead of cash?” It’s a fair question. Many workers see more cash in their paycheck as an obvious win. But prevailing wage laws were designed so that fringe dollars would fund benefits — providing workers with long-term security, not just extra money today.

As an employer, your role is twofold: staying compliant while also helping your employees understand the value of these benefits. That can feel like a tough conversation. But if you approach it the right way, it’s a chance to show your team that you care about their future and that you are building more consistency in your workforce.

Why do employee benefits matter for employees?

Retirement security

Prevailing wage jobs are often physically demanding. Construction, electrical work, plumbing, or paving are not careers most people can comfortably pursue into their later years¹. That’s why saving for retirement matters. When fringe dollars go into a 401(k), employees are building something they can count on when the work slows down or when their bodies simply can’t keep up. Extra cash in a paycheck disappears quickly, but retirement contributions grow, compounding year after year into a real safety net.

Health protection

Health benefits are another piece employees often overlook until the day they need them. Employer-paid insurance reduces out-of-pocket expenses, provides families peace of mind, and supports both financial well-being and overall health. It’s not just for emergencies — it’s a way to ensure workers can stay safe and stay healthy enough to do their jobs over time.

Higher wages on prevailing wage projects

Prevailing wage jobs typically pay higher base wages compared to private work. When your company wins more public projects, employees also benefit from improved benefits packages and higher overall wages.

With benefits in place, your employees avoid what’s often called “the wage roller coaster”. Without a plan, workers bounce between lower private rates and much higher prevailing wage totals, making it difficult for families to budget or feel financially stable. By putting fringes into benefits, contractors can win more prevailing wage jobs, which provides greater consistency. Employees still receive a boost from higher base wages, but they also enjoy more stable hours, in addition to the long-term benefits.

Why do employee benefits matter for employers?

Prevailing wage benefits aren’t just good for employees — they’re good for your business.

When you put fringe dollars into benefits instead of cash, you end up reducing your payroll burden. That means you pay less in payroll taxes, workers’ comp premiums, and liability. The cost savings allow you to bid more competitively, win more jobs, and grow the prevailing wage side of your business. Growth for the company means growth for your employees, as well. More prevailing wage work means more hours, more stability, and higher overall earnings for your team. It also reduces tension between crews. If one group works on private jobs and another works on prevailing wage projects, paychecks can look dramatically different when fringes are paid in cash, causing frustration and resentment among your teams. By moving fringes into benefits, compensation feels more consistent across crews, which helps maintain harmony on the jobsite and prevents employees from feeling like they’re on opposite sides of the pay scale.

Most importantly, benefits help you keep your best employees and attract new ones. Skilled labor is in short supply. When your crew sees that you’re investing in their health, retirement, and their stability, they are far more likely to stay loyal to your company. Offering benefits also helps you stand out to new hires in a competitive labor market. This advantage can help your business continue to grow year after year.

Having the Conversation

It’s no secret. Even with all these advantages, these conversations can be tough. Employees are used to seeing cash in their checks, and benefits may seem unclear at first. But how you communicate with your team can make all the difference.

Here are a few ways to frame it:

• Lead with care: Make sure your employees understand that you’re doing this because you genuinely want them to be taken care of. Not just today, but for the future as well.
• Highlight protection: Retirement savings and health coverage protect their families. These are things that cash, no matter how much, can’t replace.
• Connect it to opportunity: Explain that by lowering labor costs, your company can win more prevailing wage work. This means steadier work and higher base wages overall.
• Address stability: Use the wage rollercoaster example to illustrate how benefits reduce ups and downs and create a more predictable income throughout the year.

The Bottom Line

Prevailing wage can feel complicated, but at its core, it’s about protecting workers and helping contractors compete fairly.

Yes, your employees may have questions, and it does take effort to explain why benefits matter. But when you frame the conversation around security, protection, and opportunity, your team will be able to see the bigger picture. You’re not taking anything away; you’re investing in their health, their retirement, and their future.

At the same time, you’re building a stronger, more competitive business that avoids the wage roller coaster, reduces internal tension, keeps your best people², and attracts the next generation of skilled workers. That’s how you create lasting value for both a stable workforce and a thriving business.

If you’re considering implementing a benefits plan for your team, you don’t have to go through the process alone. Reach out to the Beneco team today. We can assist you in developing a strategic plan and provide resources to educate your group on how benefits can positively impact them in the long run.

 

 

1”Labor Force Statistics from the Current Population Survey” 18b Employed persons by detailed industry and age, U.S. Bureau of Labor Statistics (2024) https://www.bls.gov/cps/cpsaat18b.htm
²”Seven in ten workers would be willing to switch jobs for better benefits” Nuveen Economist Impact – Benefits 2.0 (2024) https://www.nuveen.com/global/campaigns/benefits-2-0