A Supplemental Unemployment Benefit (SUB) Plan is a prevailing wage fringe benefit plan used when a contractor is assigned to a project that is subject to the Davis-Bacon Act and/or State Prevailing Wage Law. The SUB Plan pays employees when they need it most, while they’re not working or working less than full time. The Plan can pay employees when they have a short work period, which is defined as working less than 40 hours in a week or less than 173 hours in a month. Short work periods can be caused by layoffs, bad weather, illness, lack of work, equipment down time or any number of reasons.
If a contractor is not directing excess fringe dollars to a SUB Plan or other bona fide employee benefits, then those dollars are likely being paid to employees on their paychecks which means an employer is subject to pay all applicable payroll taxes and workers compensation premiums on those dollars. However, by directing the excess fringe dollars to a SUB Plan, the employer now saves the payroll burden (payroll taxes and workers compensation) which is no longer required to be paid on those dollars. This payroll savings is what allows the contractor to be much more competitive when bidding on public works jobs as the overall labor costs will now be lower. The SUB Plan is truly a mutually beneficial plan for both the employer and the employee as a result.