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Wage and Welfare Bonds

Wage and Welfare Bonds are a type of commercial surety bond. These bonds are often required by Unions to guarantee that a company pays their contractual dues to the Union. These dues are negotiated by Collective Bargaining.


Parties to a Wage and Welfare Bond


The Union that is requiring the Wage and Welfare Bond is the Obligee. The company that owes the Union dues and that is required to give the Union the bond is the Principal. The Surety is the third party bond company that is guaranteeing the Principal's payment to the Obligee.


Parties to a Wage and Welfare Bond - This shows the relationship between the labor union, surety bond company and contractor on a Wage and Welfare bond. The background is an American flag and construction tools.


Obtaining a Wage and Welfare Bond


Getting a Wage and Welfare Bond often depends on the size of the bond and the Principal's current payment status. Smaller bonds can be purchased in minutes here for those with good personal credit. Click on the button below to purchase a Wage and Welfare Bond instantly in minutes.


Wage and Welfare Bond Instant Purchase


Larger Wage and Welfare Bonds must be approved by an underwriter. In most cases, a Principal will need to provide financial information to get approval for larger bonds.


Is the Principal Current on Payments?


One of the most important factors in underwriting Wage and Welfare Bonds is whether the Principal is current on their payments. If a Principal is significantly behind on their payments, a bond becomes more challenging to get. 


Is the Principal a Current Customer?


For principals that are current customers of the surety bond company and obtaining other bonds such as Contract Bonds, obtaining Wage and Welfare Bonds is usually very easy. Again, this assumes the Principal is current on their Payments to the Union. If the Principal is not current, they should be prepared to explain why and how they plan to get caught up on Payments.


What Do Wage and Welfare Bonds Cost?


Wage and Welfare are considered high risk bonds. Therefore, the best principals generally pay 1% - 2% of the bond amount per year. However, principals that have credit challenges or are behind on payments should expect to pay up to 3% per year.


Can You Get Wage and Welfare Bonds When Behind on Payments?


Principals that are behind on payments are still able to get bonds. However, it depends on the reasoning and circumstances for the delinquencies. It will also depend on the Principal’s financial condition and their ability to get caught up on payments. In some cases, the Principal may be asked to post collateral to the surety bond company in order to obtain Wage and Welfare Bonds.

Claims on Wage and Welfare Bonds


Claims on Wage and Welfare Bonds occur when the Principal fails to make their contractual payment to a union. Usually, the union will first give the Principal the opportunity to get caught up before making a claim on the bond. Once the bond company is notified of a claim, they must first investigate to make sure a valid claim has occurred.

If there is a valid Wage and Welfare Bond claim, they will ask the Principal to first get caught up. If the Principal can not resolve the claim, the bond company must pay and they will then seek indemnity from the Principal and indemnitors. Unfortunately, Wage and Welfare Bond claims may be a precursor to other potential claims such as Performance Bond Claims or Payment Bond Claims.


Wage and Welfare Bonds Require Indemnity


Like all surety bonds, Wage and Welfare Bonds require indemnity to the surety bond company. This means that if the bond company suffers a loss on the bond, they can turn to the company and other indemnitors for reimbursement. These bonds should not be confused with insurance. You can read more about indemnity here


Wage and Welfare Bonds are Not Contract Bonds

Even contractors who do not regularly need Construction Bonds may need Wage and Welfare Bonds. However, Wage and Welfare Bonds are not considered Contract Bonds. A contractor may still need to obtain other contract bonds such as performance bonds and payment bonds.


Wage and Welfare Bonds are required for most contractors that work with unions. These bonds can be challenging to obtain for many agents. These and other bonds can be purchased instantly through Axcess Surety here.

Our surety bond experts are standing by to answer questions regarding Wage and Welfare Bonds or any other type of surety bond. Contact us anytime. You can also visit our Surety Bond FAQ page for answers to common questions.