Jaime McGrath

(623) 322-7258

Wage and Welfare Bonds

A wage and welfare surety bond may be required of an employer who intends to participate in a collective bargaining agreement with the employees. These bonds may be required by a state governing agency or by a labor union.

What is a Wage and Welfare bond?

Wage and welfare bonds provide a form of protection for employees who work for an employer that participates in a collective bargaining agreement with the employees. These employees may be part of a labor union. The bond provides a surety backed guarantee that wages and benefits due the employees will be paid in accordance with the agreement.

In instances where the employer fails to meet the obligation to make the required payments, a claim can be made on the bond. The surety backing the bond would assess the claim. If the claim is found to be valid, the surety would make the necessary payments, up to the bond penalty amount, to settle the claim. The surety would then attempt to recoup its losses from the employer. A surety may cancel the bond if claim activity arises, unless prohibited from doing so. For this reason, it is usually in the employer's best interest to resolve payment issues before a claim is made on the bond.

Wage and welfare bonds are typically annually renewable bonds; i.e. they are issued for an initial one year term and renewed each successive year. However, for smaller bond amounts, usually less than $25,000, the surety may quote a one year and a three year bond term. These bonds are typically required for the duration of the collective bargaining agreement.

How much does a wage and welfare bond cost?

The cost of the bond varies widely depending on the qualification of the employer. The rate is determined by completing an analysis of the employer's financial strength, both the business and the business owner's financials, and credit strengths. A review of the bond language will indicate what the employer's obligation will be. This is also used to determine the rate of the bond. The surety performs this analysis to gauge the amount of risk that may be involved with backing the bond. Generally, rates for these bonds range from 3% to 20% of the bond amount annually. The range is wide and some employers could receive rates lower or higher than the mentioned range depending on how well they qualify.

In some circumstances where a surety may assess the risk on the bond is too high, collateral may be required as part of the quote to help mitigate some risk. In most cases, collateral is not required.

Do you need to purchase a Wage and Welfare bond for your business?

It could be your first bond or you may have bought many in the past. Maybe you're looking for faster service or a better rate. I can help.

With an application (ours or a competitor's), business and personal financials and a copy of the bond form, we can get this bond underwritten in no time. Contact me for more information or for an application!

By: Jaime McGrath

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(623) 322-7258

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SuretyBonds.Biz is a website for Viking Bond Service, Inc. producers to provide information about frequently requested surety bonds in their words. Viking producers specialize in surety bonds of all types. Since bonds are the sole product provided by Viking, the producers are an excellent resource for information and assistance.