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Wage & Welfare Bonds

What Are Wage and Welfare Bonds?

wage and welfare bond

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.

  • The principal is the business that will employee union members.
  • The obligee is the beneficiary party who requires the bond. In this case, the union.
  • The surety underwrites and issues the surety bond.

When Do I Need a Wage and Welfare Bond?

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.

Why Do I Need a Wage and Welfare Bond?

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.

Benefits for the Obligees:

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.

How Much Is a Wage and Welfare Bond Written for?

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.

How Much Does a Wage and Welfare Bond Cost?

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.

What Do You Need to Secure a Wage and Welfare Bond?

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.

Get Your Union Bond Fast

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.

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