EP 1180-1-1
1 Aug 01
compensation when calculating the hourly wage rate paid. The CO must ensure that reimbursements of
this nature are not included when the hourly wage rate is calculated from payroll records.
9-7. Fringe Benefit Adjustments.
a. General. The fringe benefits listed in area WDs most often consist of (1) a specified hourly rate for
health and welfare plans (health or life insurance, pension benefits, etc.); (2) a stated number of holidays;
and (3) a stated number of vacation weeks.
b. Health and Welfare rates (H&W). The allowable hourly adjustment is the difference between the
new hourly fringe benefit rate and the hourly rate of the benefits actually provided by the contractor during
the previous contract period. Historically, DOL has issued a `low' H&W fringe benefit rate ($.90
through 31 May 1997) and a "high' H&W fringe benefit rate (.56 since 1994). As a result of
protracted litigation initiated by the Service Employees International Union challenging the methodology
upon which these levels had been determined, the DOL changed to a `single benefit" level for H&W
fringe benefits in June, 1997. The `high" H&W fringe benefit rate will be `grandfathered' for contracts
(and follow-on contracts for substantially the same services) that currently require .56 per hour. The
single benefit level will be applied in the same manner as the lower rate. The lower level will be revised
by the DOL annually until such time as it equals the `grandfathered' .56 higher rate. As of June, 1998,
the single benefit rate was set at
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.39. COs should contact the CIR Specialist for guidance on the
application of the two rates.
(1) Low Rate: If the low rate is provided by the DOL, apply it to each hour paid by the contractor to
the employee, up to a maximum of 40 hours per week, including paid non-work hours such as holiday
and leave time.
(2) High (`Grandfathered') Rate: If the high rate is required by the WD, apply it to all hours worked,
including hours in excess of 40 per week, but not including holidays, leave time or any other paid hours
that were not actually worked. This high H&W level is applied and evaluated on an average of the total
fringe benefit cost to the contractor for all hours worked by all non-exempt service employees used on
the contract, not on an individual basis as is the lower H&W benefit level. As a result the contractor may
incur a benefits cost of less than .56 for some employees, while incurring a cost in excess of .56 for
other employees. Fringe benefits provided to exempt employees as well as the hours worked by these
individuals must be excluded in evaluating any claim involving the high fringe benefit level.
9-7
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