Office of the Secretary of Labor § 4.175
the holiday in question, furnish holi- (iii) If an employee is off work for day benefits of two extra days’ pay. two weeks on vacation and received 80 (4) As stated in paragraph (a)(1) of hours of vacation pay, the employee this section, an employee’s entitlement must also receive payment for the 80 to holiday pay fully vests by working hours of health and welfare and/or pen- in the workweek in which the named sion benefits which accrue during the holiday occurs. Accordingly, any em- vacation period. ployee who is terminated before receiv- (iv) An employee entitled to two ing the full amount of holiday benefits weeks paid vacation who instead works due him must be paid the holiday bene- the full 52 weeks in the year, receiving fits as a final cash payment. the full 2,080 hours worth of health and (5) The rules and regulations for fur- welfare and/or pension benefits, would nishing holiday pay to temporary and be due an extra 80 hours of vacation part-time employees are discussed in pay in lieu of actually taking the vaca- § 4.176. tion; however, such an employee would (6) The rules and regulations for fur- not be entitled to have an additional 80 nishing equivalent fringe benefits or hours of health and welfare and/or pen- cash equivalents in lieu of holiday pay sion benefits included in his vacation are discussed in § 4.177. pay. (2) A fringe benefit determination § 4.175 Meeting requirements for calling for a specified benefit such as health, welfare, and/or pension ben- health insurance contemplates a fixed efits. and definite contribution to a ‘‘bona fide’’ plan (as that term is defined in (a) Determining the required amount of § 4.171) by an employer on behalf of benefits. (1) Most fringe benefit deter- each employee, based on the monetary minations containing health and wel- cost to the employer rather than on fare and/or pension requirements speci- the level of benefits provided. There- fy a fixed payment per hour on behalf fore, in determining compliance with of each service employee. These pay- an applicable fringe benefit determina- ments are usually also stated as week- tion, the amount of the employer’s ly or monthly amounts. As set forth in contribution on behalf of each indi- § 4.172, unless specified otherwise in the vidual employee governs. Thus, as set applicable determination such pay- forth in § 4.172, if a determination ments are due for all hours paid for, in- should require a contribution to a plan cluding paid vacation, sick leave, and providing a specified fringe benefit and holiday hours, up to a maximum of 40 that benefit can be obtained for less hours per week and 2,080 hours per year than the required contribution, it on each contract. The application of would be necessary for the employer to this rule can be illustrated by the fol- make up the difference in cash to the lowing examples: employee, or furnish equivalent bene- (i) An employee who works 4 days a fits, or a combination thereof. The fol- week, 10 hours a day is entitled to 40 lowing illustrates the application of hours of health and welfare and/or pen- this principle: A fringe benefit deter- sion fringe benefits. If an employee mination requires a rate of $36.40 per works 3 days a week, 12 hours a day, month per employee for a health insur- then such employee is entitled to 36 ance plan. The employer obtains the hours of these benefits. health insurance coverage specified at (ii) An employee who works 32 hours a rate of $20.45 per month for a single in a workweek and also receives 8 employee, $30.60 for an employee with hours of holiday pay is entitled to the spouse, and $40.90 for an employee with maximum of 40 hours of health and a family. The employer is required to welfare and/or pension payments in make up the difference in cash or that workweek. If the employee works equivalent benefits to the first two more than 32 hours and also received 8 classes of employees in order to satisfy hours of holiday pay, the employee is the determination, notwithstanding still only entitled to the maximum of that coverage for an employee would be 40 hours of health and welfare and/or automatically changed by the em- pension payments. ployer if the employee’s status should
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change (e.g., single to married) and tract, payable on the next regular pay- notwithstanding that the employer’s day for wages. Unless otherwise pro- average contribution per employee vided in the applicable wage deter- may be equal to or in excess of $36.40 mination, contributions made by the per month. employer for non-service employees (3) In determining eligibility for ben- may not be credited toward meeting efits under certain wage determina- Service Contract Act fringe benefit ob- tions containing hours or length of ligations. service requirements (such as having to (c) Employees not enrolled in or ex- work 40 hours in the preceding month), cluded from participating in fringe benefit the contractor must take into account plans. (1) Some health and welfare and time spent by employees on commer- pension plans contain eligibility exclu- cial work as well as time spent on the sions for certain employees. For exam- Government contract. ple, temporary and part-time employ- (b) Some fringe benefit determina- ees may be excluded from participating tions specifically provide for health in such plans. Also, employees receiv- and welfare and/or pension benefits in ing benefits through participation in terms of average cost. Under this con- plans of an employer other than the cept, a contractor’s contributions per Government contractor or by a employee to a ‘‘bona fide’’ fringe ben- spouse’s employer may be prevented efit plan are permitted to vary depend- from receiving benefits from the con- ing upon the individual employee’s tractor’s plan because of prohibitions marital or employment status. How- against ‘‘double coverage’’. While such ever, the firm’s total contributions for exclusions do not invalidate an other- all service employees enrolled in the wise bona fide insurance plan, em- plan must average at least the fringe ployer contributions to such a plan benefit determination requirement per cannot be considered to be made on be- hour per service employee. If the con- half of the excluded employees. Accord- tractor’s contributions average less ingly, under fringe benefit determina- than the amount required by the deter- tion requirements as described in para- mination, then the firm must make up graph (a)(2) of this section, the employ- the deficiency by making cash equiva- ees excluded from participation in the lent payments or equivalent fringe ben- health insurance plan must be fur- efit payments to all service employees nished equivalent bona fide fringe ben- in the plan who worked on the contract efits or be paid a cash equivalent pay- during the payment period. Where such ment during the period that they are deficiencies are made up by means of not eligible to participate in the plan. cash equivalent payments, the pay- (2) It is not required that all employ- ments must be made promptly on the ees participating in a fringe benefit following payday. The following illus- plan be entitled to receive benefits trates the application of this principle: from that plan at all times. For exam- The determination requires an average ple, under some plans, newly hired em- contribution of $0.84 an hour. The con- ployees who are eligible to participate tractor makes payments to bona fide in an insurance plan from their first fringe benefit plans on a monthly basis. day of employment may be prohibited During a month the firm contributes from receiving benefits from the plan $15,000 for the service employees em- during a specified ‘‘waiting period’’. ployed on the contract who are en- Contributions made on behalf of such rolled in the plan, and a total of 20,000 employees would serve to discharge the man-hours had been worked by all contractor’s obligation to furnish the service employees during the month. fringe benefit. However, if no contribu- Accordingly, the firm’s average cost tions are made for such employees, no would have been $15,000÷20,000 hours or credit may be taken toward the con- $0.75 per hour, resulting in a deficiency tractor’s fringe benefit obligations. of $0.09 per hour. Therefore, the con- (d) Payment of health and welfare and tractor owes the service employees in pension benefits. (1) Health and welfare the plan who worked on the contract and/or pension payments to a ‘‘bona during the month an additional $0.09 an fide’’ insurance plan or trust program hour for each hour worked on the con- may be made on a periodic payment
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basis which is not less often than quar- (3) Holiday or vacation pay obliga- terly. However, where fringe benefit de- tions to temporary and part-time em- terminations contemplate a fixed con- ployees working an irregular schedule tribution on behalf of each employee, of hours may be discharged by paying and a contractor exercises his option to such employees a proportion of the hol- make hourly cash equivalent or dif- iday or vacation benefits due full-time ferential payments, such payments employees based on the number of must be made promptly on the regular hours each such employee worked in payday for wages. (See § 4.165.) the workweek prior to the workweek in (2) The rules and regulations for fur- which the holiday occurs or, with re- nishing health and welfare and pension spect to vacations, the number of hours benefits to temporary and part-time which the employee worked in the year employees are discussed in § 4.176. preceding the employee’s anniversary (3) The rules and regulations for fur- date of employment. For example: nishing equivalent fringe benefits or (i) An employee works 10 hours dur- cash equivalents in lieu of health and ing the week preceding July 4, a des- welfare and pension benefits are dis- ignated holiday. The employee is enti- cussed in § 4.177. tled to 10/40 of the holiday pay to which a full-time employee is entitled (i.e., § 4.176 Payment of fringe benefits to 10/40 times 8=2 hours holiday pay). temporary and part-time employ- (ii) A part-time employee works 520 ees. hours during the 12 months preceding (a) As set forth in § 4.165(a)(2), the Act the employee’s anniversary date. Since makes no distinction, with respect to the typical number of nonovertime its compensation provisions, between hours in a year of work is 2,080, if a temporary, part-time, and full-time full-time employee would be entitled to employees. Accordingly, in the absence one week (40 hours) paid vacation of express limitations, the provisions of under the applicable fringe benefit de- an applicable fringe benefit determina- termination, then the part-time em- tion apply to all temporary and part- ployee would be entitled to 520/2,080 time service employees engaged in cov- times 40=10 hours paid vacation. ered work. However, in general, such (4) A part-time employee working a temporary and part-time employees regularly scheduled workweek of 20 are only entitled to an amount of the hours would be entitled to one-half of fringe benefits specified in an applica- the health and welfare and/or pension ble determination which is propor- benefits specified in the applicable tionate to the amount of time spent in fringe benefit determination. Thus, if covered work. The application of these the determination requires $36.40 per principles may be illustrated by the month for health insurance, the con- following examples: tractor could discharge his obligation (1) Assuming the paid vacation for towards the employee in question by full-time employees is one week of 40 providing a health insurance policy hours, a part-time employee working a costing $18.20 per month. regularly scheduled workweek of 16 (b) A contractor’s obligation to fur- hours is entitled to 16 hours of paid va- nish the specified fringe benefits to cation time or its equivalent each year, temporary and part-time employees if all other qualifications are met. may be discharged by furnishing equiv- (2) In the case of holidays, a part- alent benefits, cash equivalents, or a time employee working a regularly combination thereof in accordance scheduled workweek of 16 hours would with the rules and regulations set forth be entitled to two-fifths of the holiday in § 4.177. pay due full-time employees. It is im- material whether or not the holiday § 4.177 Discharging fringe benefit obli- falls on a normal workday of the part- gations by equivalent means. time employee. Except as provided in (a) In general. (1) Section 2(a)(2) of § 4.174(b), a temporary or casual em- the Act, which provides for fringe bene- ployee hired during a holiday week, but fits that are separate from and in addi- after the holiday, would be due no holi- tion to the monetary compensation re- day benefits for that week. quired under section 2(a)(1), permits an
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