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What is a Wage and Welfare Bond?

Wage and Welfare Bond

Wage and welfare bonds are known by several names, such as wage bonds, welfare bonds, fringe benefit 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.

Unions often require wage and welfare bonds when negotiating agreements with other companies. This bond helps unions have peace of mind that the employer will honor promised payments and contributions to the union. In the event of an employer failing to come through on its contractual obligations, the bond can be used to pay claims for salaries and other forms of compensation for employees. Each wage and welfare bond is unique, based on the requirements of the 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.

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. The bond serves to provide peace-of-mind to unions and is an important part of the collective bargaining process.

How Much Is a Wage and Welfare Bond Written for?

Each union sets their wage and welfare bond amount and conditions individually. The amount is often based on collective bargaining 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 types surety bonds. This is because they involve direct financial reimbursement, primarily to cover lost wages.

There are a variety of factors that can affect the premium amount, all relating to the likelihood of a claim being made. Viking Bond Service is committed to serving clients with the surety coverage they need, with the lowest premiums possible. We also offer a poor credit surety bond program for those who are looking to recover from financial hardship.

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.

When it comes to getting the surety bonds that you need, Viking Bond Service, Inc has the expertise to provide you with the solutions for any situation. With our years of experience as an industry leader, we can help businesses of any size have the peace-of-mind that a surety bond provides. Viking Bond Service can help businesses connect the dots between employees and owners, while ensuring reliability on all sides. Give us a call at 1-888-278-7389 or complete an application online to get your wage and welfare bonds taken care of.

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