Cash in lieu of fringe benefits on California public works

How the rate splits, and why cash is allowed

A DIR wage determination (sample) lists a Basic Hourly Rate, employer payment columns (Health and Welfare, Pension, Vacation and Holiday, Training, Other), and a Total Hourly Rate. 8 CCR 16000 counts employer payments as part of the prevailing rate and lists "cash payments in lieu" of vacations and holidays among the benefits.

Those payments are a credit, not a duty. Labor Code 1773.1(c) calls them "a credit against the obligation to pay the general prevailing rate of per diem wages," and section 1 of AB 889 says contractors are "not required to provide benefits on a prevailing wage job." Whatever your plans do not cover, 8 CCR 16200(a)(3)(I) says you "must pay the difference directly to the employee." That cash is cash in lieu of fringe benefits.

The Manual's section 4.2.1 lets you credit the aggregate of permissible employer payments, not each column alone. Its example puts $20.00 an hour into a plan and pays the remaining $9.735 directly to the workers. Our calculator runs your numbers.

A worked example, per hour

Illustrative numbers, not a real determination: Basic Hourly Rate $42.00, Health and Welfare $10.00, Pension $8.00 (employer payments total $18.00), Total Hourly Rate $60.00. The Manual's section 4.2.2.1 says any mix works if the Basic Hourly Rate is met and the total reaches the Total Hourly Rate.

What cash in lieu cannot do

• It cannot lower the Basic Hourly Rate. Under 1773.1(c), credits "shall not reduce the obligation to pay the hourly straight time or overtime wages found to be prevailing." Subdivision (c) has one narrow collective bargaining exception, in (c)(1) to (3).
• It cannot cover Training on a craft marked #. The sample determination's footnote says # indicates an apprenticeable craft. For that craft, Labor Code 1777.5(m)(1) says the contractor "shall contribute to the California Apprenticeship Council" the prevailing training amount, with credit for payments to an approved apprenticeship program that can supply apprentices to the site. Manual section 3.3.2.2 says this "cannot be satisfied by paying the required hourly contribution directly to the worker." 8 CCR 16200(a)(3)(G) allows cash only if neither the program nor the Council will accept the funds. Section 1777.5(o) takes some contracts under $30,000 out of that section, and neither the statute nor the Manual says how Training is paid on them, so ask DIR. See our CAC training fund guide.

How cash in lieu shows on certified payroll

Labor Code 1776(a) requires payroll records showing "the actual per diem wages paid" to each worker, verified by a declaration under penalty of perjury. See our section 1776 guide.

California eCPR

DIR's eCPR FAQ says to enter the pre-tax hourly wage. Fringe paid directly to the worker goes in that wage, and you can put 0 in the matching box and "reflect the direct pay in the hourly base rate." Fringe paid into a fund goes in the contribution section, by the hour.

DIR's Upload eCPR guide differs. Its form has a "Paid Directly to Worker" check box, and in DIR's example with it checked, $2.00 sits under Training beside a $50.00 straight time rate, with a total straight time rate of $52.00. DIR does not say which source controls, so pick one method, use it every payroll, and check the form's totals against the paystub. See our eCPR payroll table guide.

Federal WH-347

DOL's WH-347 instructions split the money three ways. Column 6A is the hourly wage rate paid and leaves out cash in lieu. Column 6B is the total fringe benefit credit. Column 6C is the total cash provided in lieu of fringe benefits for the week. See our WH-347 guide.

What AB 889 changed on January 1, 2026

AB 889 is Chapter 626 of the Statutes of 2025, and the Governor approved it on October 11, 2025, per DIR's bill review and the bill history. Labor Code 1773.1 now carries the note "Effective January 1, 2026." Annualization existed before, per the bill's digest. The Manual, dated October 2023, still lists the Director exception the bill removed. The bill changed four things.

• It added 1773.1(e)(2): annualization applies to all employer payments not made directly to the worker, "regardless of whether any contributions are made or benefits are provided with respect to private construction."
• It removed the exception for a Director finding that annualization would not serve the public works law, and 1773.1(f) revokes every exemption issued before January 1, 2026.
• It allows full credit for a defined contribution pension plan with immediate participation and vesting within 500 hours worked, even if you pay less or nothing on private work.
• It puts the burden on you to show the credit was right, and lets the Labor Commissioner deny it if you do not produce your private construction hours and employer payments on request.

How the credit is computed

The bill's findings say to divide employer payments by all hours worked in the year on public and private projects, separately for each worker, using any consistent 12 month period.

Example: a worker's health plan costs you $7,200 for the year, and the worker logs 1,800 hours, 600 on public works. Divide by all 1,800 hours and the credit is $4.00 an hour, so cash in lieu is the $14.00 above. Divide by the 600 public hours alone and the credit looks like $12.00, which leaves cash $8.00 an hour short, or $4,800 over 600 hours, before penalties.

Cash sits outside this rule: (e)(2) reaches "all employer payments not made directly to the worker," and cash on the check is paid directly. If you claim a plan credit, the Labor Commissioner's Form PW 26, Statement of Employer Payments, lists what to document: plan name, administrator, classifications, contribution per hour, and payment frequency.

Handing it off

WellStanding prepares the WH-347 and the eCPR from the payroll export you already run, and a person reviews every filing. You review the finished filing and sign the certification in one step, and nothing is filed until you have signed. The certification is always yours; we never sign for you. See it on your own payroll, first filing free.

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