New Year’s Resolution #1: I will correctly account for my fringe benefit costs

January 5, 2023

At a glance

  • Contractors who win FAR Part 15 Negotiated Contracts must distinguish and segregate direct costs from indirect costs.
  • Indirect costs represent those expenses not readily identifiable with a particular project.
  • Indirect costs have subgroups, such as fringe benefits, overhead and G&A.

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The full story:

Doing business with the government requires contractors who bid and win FAR Part 15 Negotiated Contracts to distinguish and segregate direct costs from indirect costs.

Indirect costs represent those expenses not readily identifiable with a particular project. Common practice is to further categorize indirect costs into subgroups, which are also called “pools” and usually constitute fringe benefits, overhead and G&A.

Here, we explain what fringe benefits are and provide examples of some common types of fringe benefits.

What are fringe benefits?

Fringe benefits are costs related to employing your labor force. Common examples of fringe benefit costs include:

  • Paid time off (PTO) / vacation
  • Holiday labor cost
  • Other paid leave labor costs (e.g., jury duty, family leave, etc.)
  • Employer payroll taxes (e.g., FICA taxes, state unemployment taxes, etc.)
  • 401(k) employer match or contribution
  • Health insurance and similar benefits

The bottom line

As you can imagine, this is not a definitive list of all potential costs. For more guidance, contact Aprio’s Government Contract Consulting Services team.

Related Resources/Assets/Aprio.com articles/pages

Aprio Government Contracting
Aprio Government Contracting Compliance

This is not a definitive list of all potential indirect costs. For more guidance, contact Aprio’s Government Contract Consulting Services team.