Wage and Welfare Bond

A wage and welfare bond is a surety bond meant to protect union members by ensuring they receive their full salary and benefits, as agreed in their collective bargaining agreement. A bond is usually a requirement as part of the hiring process for union employees and can also be a requirement by state governments. Like any surety bond, a wage and welfare bond is a three-party agreement between the principal (Employer hiring union workers), the obligee (The entity requiring the bond to be purchased, usually the union), and the surety company. The bond is a financial agreement from the surety company that the principal will fulfill their obligations to the obligee by following their agreement as outlined in the bond. Wage and welfare bonds are unique to each union because each union will have different requirements in their collective bargaining agreement. It’s best to confirm the bond amount, term, and specific requirements in the collective bargaining agreement before starting an application so you are sure what bond you need and what your obligations are on that bond.

Example Wage and Welfare Bond Form (Texas)
Example Wage and Welfare Bond Form (Texas)

How Much Does a Wage and Welfare Bond Cost?

The cost of a wage and welfare bond depends on the bonded amount needed and the rate that a business will pay for that bonded amount. The rates for a wage and welfare bond are usually between 2% and 20% of the bonded amount and can be impacted by various factors. The most significant factors are an applicant’s credit score and the business’s financial standing. Applicants with good credit scores and strong financial statements can expect to pay a price for their bond due to their low-risk profile. Our prices for a $30,000 wage and welfare bond start at $300.

Wage and welfare bonds are considered high-risk surety bonds, so surety companies are stricter with underwriting wage and welfare bonds than other surety bonds. To minimize the chances of a business not being able to get a bond due to these strict requirements, we’ve partnered with over ten surety partners. Our widespread partner network allows us to work with different companies with different requirements to find the best market rate for each customer. Let us know if you find a better quote, and we’ll do our best to beat that quote.


Wage and Welfare Bond FAQs

How Long Does it Take to Get a Wage and Welfare Bond?

Purchasing a wage and welfare bond is a quick and straightforward process that can be completed as fast as the same day. Larger bonds with more complicated obligations may take longer to process since the surety company will want to have a close understanding of the risks involved with a larger deal. The best way to expedite the process is by having all the requirements ready before starting an application; it’s common for a surety company to request a copy of the collective bargaining agreement, the business’s financial statements, and the owner’s personal finance statements. These will not be required for every wage and welfare bond, but having these documents ready will lead to fewer delays in the underwriting process.

When Does Someone Need a Wage and Welfare Bond?

If a business hires employees who are part of a union, they will need to purchase a wage and welfare bond as part of the union’s collective bargaining agreement. A business will know if a wage and welfare bond is needed because they cannot hire their employee until they provide proof of a wage and welfare bond to the union.

Who Requires a Wage and Welfare Bond?

The obligee for a bond is the entity that requires a business to purchase a bond. For a wage and welfare bond, the obligee will be the union the employee is a part of because the union wants to ensure that all its members will be treated according to their collective bargaining agreement. Not every union requires employers to show proof of a wage and welfare bond, but it is a very common requirement. It ensures that their union workers are being paid the correct amount, and if they aren’t, a claim can be filed on the bond.

What are the Different Kinds of Wage and Welfare Bonds?

Wage and welfare bonds are sometimes called:

  • Union bonds
  • Union wage and welfare bond
  • Wage and fringe benefit bond
  • Fringe benefit bonds
  • Wage fund bonds
  • Welfare fund bonds

The names of these bonds will differ depending on what is protected by the bond. Wage and welfare bonds protect union members in multiple ways: salaries, wages, welfare benefits, etc. A fringe benefit bond, on the other hand, would only protect union members against lost fringe benefits. The union requiring a bond should explicitly state which bond is required or will even provide a bond form for their specific requirements.

What Kinds of Claims Happen on a Wage and Welfare Bond?

If the employer of a union worker fails to follow the regulations set in the union’s collective bargaining agreement, a claim can be filed against the wage and welfare bond. The most common claims on wage and welfare bonds are caused by an employer failing to pay their employees the correct wage, or providing them with the required benefits. 

If an employer fails to follow the union’s collective bargaining agreement regulations, a claim can be filed against the wage and welfare bond. The surety company will then investigate the claim's validity and value to determine if and how much should be paid for this claim. Once their investigation is completed, the surety will pay up to the bonded amount for the claim if the claim is valid. For example, if a union worker were underpaid by $2,500, the surety company would pay the worker $2,500 to compensate for their lost wages. The employer would then be on the hook to repay the surety company $2,500. If the bond amount were $2,000 in this case, then only $2,000 would be paid out to the worker.