FI Fringe Rates and Your Budget: What You Need to Know

I love being charged fees! Said no one ever.

Paying some kind of fee is like taking a trip to the dentist–it’s a part of life, like paying taxes and tolls or rent, but hey we don’t have to be happy about it. FI fringe rate fees are no exception.

Seasoned SD families know FI fringe rates are part of the budget experience. But it’s easy for new self-direction participants to overlook the impact an FI’s fringe rate will have on their budgets bottom line.

Let’s cut through some of the confusion about fringe rates, what they are, what they do etc. so you don’t make a mistake that could cost you hundreds–if not thousands–of dollars each budget year!

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What are fringe rates?

An FI’s (Fiscal Intermediary) fringe rates are almost exclusively based on employee-related costs. They include hiring and retaining your staff. For example, you might choose to compensate your staff with benefits like health and dental insurance, and you might provide them with holiday pay or vacation time that’s the fringe rate at work baby!

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Do I really need to pay fringe rates?

I’ll keep it short and sweet for you. Yes! Everyone who has an SD budget and chooses to self-hire staff must pay a fringe rate.

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How do I know how much I will pay in FI fringe rates?

The amount you pay in fringe rates is based on two things: your chosen FI’s fringe rate and your self-hired staff’s pay rate and hours. The higher the pay rate and hours, the higher your total fringe fee.

And, since each FI sets its own fringe rate, the amount you pay depends on who your FI is. It’s also important to remember that fringe rates aren’t etched in stone either, so a fringe rate that starts high will more than likely only increase.

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How much is too much when it comes to fringe rates?

When you’re pursuing self-direction, you’re probably thinking more about the staff you will hire or the classes you will put your child in rather than how much you’ll have to pay in fringe rates. Trust me I get it! Fringe rates aren’t fun to think about. Still, if you forget to factor them in, that budget PRA might not look so great when your $25 an hour 40hr work week staff has eaten up all of your child’s budget!

When it comes to picking an FI based on fringe rates, I recommend that you figure out what you’re getting for that fee. Is your staff getting holiday pay? Paid time off? Sick days? In other words, if that FI’s fringe rate isn’t offering real benefits, you need to look elsewhere! (🎶🎶 what have you done for me lately oooh ooooh oh yeah 🎶🎶) If you’re asking “well Chantel what do you suggest?” And I had to give you a number, I personally don’t like going above a 25% fringe rate (even for my own kiddos budget.)

Here’s an example of why:

Let’s say Jack and Jill are weighing their options between 2 FI’s for their child’s self-direction budget. Both FI’s offer sick days, holiday pay, and paid vacation for staff. For both of them, staff will be paid $20/hr and work $40/hrs a week @ 52wks/per year.

The only difference between the two FI's is their fringe rates. FI ABC is 25% and the rate for FI 123 is 27%. You might be thinking, 2% isn’t that big of a deal Chantel. Oh, but it is!

Jack and Jill's total annual staff salary with FI ABC would be $104,000. With FI 123 at the 27% fringe rate, their annual total staff salary rises to $105,664.

If Jack and Jill chose the FI with the higher fringe rate, that 2% difference means they’d ‘give up' an extra $1,464 each budget year. You can probably think of some other things you could do for your child with that kind of money! I know I can!

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Do I still have to pay a fringe benefit after my budget is approved?

There’s nothing more exciting than getting your budget approved, walking out of the launch meeting with the help and support your child needs, and knowing that you were the CEO of your child’s business.

It just feels complete. But does that mean you’re also finished with paying FI fringe rate fees?

I hate to be the bearer of bad news, but you still have to pay the FI’s fringe rate in your budget even after it’s approved. Sorry, this is not a one-time fee!

Well that's all folks! I hope I was able to clear things up for you. If you learned something don't be stingy, please share with someone who could use this info!

See you on the next post!

Chantel