Wage and welfare bonds are known by several names, such as wage bonds, welfare bonds, and union bonds. They are a type of financial guarantee surety bond. Wage and welfare bonds are required to guarantee that an employer will honor the payments, contributions to funds, and benefits packages that they agree to provide to compensate employees from a union.
Wage and welfare bonds involve three parties.
Companies need wage and welfare bonds before they hire people who are members of a union. Usually the union bond will be a part of the collective bargaining process with the union that takes place before employees go to work for the business.
Unions require wage and welfare bonds in order to provide assurances to their members that they will be compensated according the collective bargaining agreement between the union and the employer.
Union members can make claims against wage and welfare bonds in the event that the company does not properly pay them the salary, wages, compensation, or other benefits due to them for the services they provide. The obligees’ benefits vary based on the union that requires the bond.
Each union sets their wage and welfare bond amount and conditions individually, and often collectively bargain agreements with businesses that wish to hire union members.
The cost of the wage and welfare bond varies based on the amount of the bond, determined by the agreement between the union and employer. With good credit, clients will usually pay a premium somewhere between 1% and 5% of the union bond amount.
In addition to the premium payment, many sureties will require that the principal post collateral, often in the full value of the bond. Sureties often require collateral because wage and welfare bonds are high risk bonds for the surety, as they typically account for more claims and more losses than many other surety bonds.
The underwriting process for wage bonds typically includes a review of financials along with the welfare bond application and a credit check. Many union bonds will also require collateral to secure the welfare bond, as well as excellent credit. Union bonds valued at $25,000 or less can sometimes be secured simply on the basis of a strong credit report and application. A Viking agent will let you know exactly what will be needed to get the best terms.
While union bonds typically take longer to underwrite than many other surety bonds, at Viking Bond Service we are committed to making the application and underwriting process as simple and fast as possible for our clients. Contact our dedicated team of union bond professionals and we will guide you through the process of securing your welfare bond smoothly and swiftly.
Quotes are available for clients with low credit. In many cases, a bond is not out of reach simply due to bad credit.
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