Prevailing wage requirements apply to most public construction work and significantly impact labor cost calculations. Understanding these requirements is essential for accurate bidding and legal compliance.
What Is Prevailing Wage
Definition
Prevailing wage is the minimum hourly wage (plus fringe benefits) that must be paid to workers on covered public construction projects. Rates are determined by government surveys of wages paid in the local area for each trade.
Purpose
Original Intent
- Protect local wage standards
- Prevent race to bottom on wages
- Ensure quality workforce
- Level bidding competition
Practical Effect
- Higher labor costs on public work
- Detailed recordkeeping required
- Enforcement through payroll audits
- Penalties for violations
Federal vs. State Requirements
Federal (Davis-Bacon Act)
Applies To
- Federal construction contracts over $2,000
- Federally-assisted construction
- Some federal loan programs
- Federal property work
Administration
- Department of Labor
- Wage determinations by county/project type
- Weekly certified payroll required
- Contractor and sub compliance
State Prevailing Wage Laws
Variation
- Most states have laws (some don't)
- Different thresholds
- Different rate determination methods
- Varying enforcement
Common Triggers
- State-funded construction
- Local government projects
- Public school construction
- Some affordable housing
When Both Apply
Federal Projects May Also Require
- State prevailing wage if higher
- Project labor agreements
- Local hire requirements
- Additional certifications
Finding Wage Rates
Federal Rates
Where to Find
- sam.gov wage determinations
- By county and project type
- Updated periodically
- Specific to project solicitation
Rate Types
- Building construction
- Residential construction
- Highway construction
- Heavy construction
State Rates
Varies by State
- State labor department websites
- Published rate schedules
- May differ from federal
- Update frequency varies
Wage Determination Interpretation
Understanding the Schedule
- Basic hourly rate
- Fringe benefit amount
- Total prevailing wage
- Classifications listed
Example
ELECTRICIAN
Basic Rate: $52.15/hour
Fringe Benefits: $28.50/hour
Total Rate: $80.65/hour
Calculating Labor Costs
Components
What's Included
- Base hourly wage
- Fringe benefits (health, pension, etc.)
- Overtime premiums
- Employer taxes on wages
Fringe Benefits
Options
- Pay as cash to worker
- Provide bona fide benefits
- Combination of both
Bona Fide Benefits
- Health insurance
- Pension contributions
- Vacation pay
- Apprenticeship training
Overtime
Federal Standard
- Time and a half after 40 hours/week
- Some states more restrictive
- Daily overtime in some jurisdictions
- Saturday/Sunday premiums vary
Calculation Overtime rate = Base rate × 1.5 + Fringe benefits (Fringes typically not multiplied)
Example Calculation
Electrician, 45-hour week
Prevailing Wage:
Base: $52.15
Fringe: $28.50
Total: $80.65
Weekly Cost:
Regular (40 hrs): 40 × $80.65 = $3,226.00
Overtime (5 hrs): 5 × ($52.15 × 1.5 + $28.50)
= 5 × $106.73 = $533.65
Weekly Total: $3,759.65
Compliance Requirements
Certified Payroll
What It Is Weekly payroll reports certifying prevailing wage compliance, submitted to the owner/agency.
Required Information
- Worker name and address
- Classification
- Hours worked (regular/OT)
- Rate of pay
- Gross and net pay
- Deductions
- Fringe benefit payment
Certification Signed statement that wages paid comply with prevailing wage requirements; false certification carries penalties.
Posting Requirements
On Site
- Wage determination posted
- Worker rights notice
- Contact for complaints
- Visible location
Recordkeeping
Maintain Records
- Payroll records
- Time records
- Benefit contributions
- At least 3 years (varies)
Classification Challenges
Worker Classification
Matching Work to Classification
- Must pay rate for work performed
- Highest classification if mixed
- Common source of violations
- Documentation important
Example Laborer doing finish carpentry work must be paid carpenter rate for those hours.
New or Unusual Classifications
When Rate Not Listed
- Conformance request process
- Document work performed
- Agency determination
- Until resolved, pay comparable rate
Apprentices
Requirements
- Registered apprenticeship program
- Approved ratio to journeymen
- Graduated pay scale per program
- Documentation maintained
Benefit Lower hourly rate for qualifying apprentices under approved programs.
Subcontractor Compliance
Prime Contractor Responsibility
You Are Responsible
- Sub compliance your problem
- Include requirements in subcontracts
- Monitor sub payrolls
- Can be liable for sub violations
Subcontract Provisions
Required
- Flow-down of prevailing wage requirements
- Certified payroll submission
- Compliance certification
- Audit rights
Monitoring
Best Practices
- Collect and review sub payrolls
- Verify classifications
- Spot-check calculations
- Maintain documentation
Common Violations
Underpayment
How It Happens
- Wrong classification
- Fringe benefit errors
- Overtime miscalculation
- Rate lookup errors
Consequences
- Back pay required
- Liquidated damages possible
- Debarment risk
- Criminal liability (willful)
Classification Violations
How It Happens
- Lower classification for same work
- Laborer doing skilled work
- Misunderstanding classifications
- Intentional misclassification
Prevention
- Train supervisors
- Document work assignments
- Match classification to work
- When in doubt, pay higher rate
Recordkeeping Violations
How It Happens
- Incomplete payrolls
- Missing certifications
- Inadequate time records
- Destroyed records
Prevention
- Standard procedures
- Backup systems
- Retention policy
- Audit preparation
Enforcement
Investigations
Triggers
- Worker complaints
- Random audits
- Competitor complaints
- Pattern detection
Process
- Notification of investigation
- Document requests
- Worker interviews possible
- Findings issued
Remedies
Administrative
- Back pay orders
- Liquidated damages
- Contract termination
- Debarment (severe cases)
Criminal
- Willful violations
- False certifications
- Fraud
- Rare but possible
Appeals
Process
- Administrative review
- Hearing rights
- Evidence presentation
- Further appeal possible
Bidding Considerations
Accurate Cost Estimation
Labor Cost Accuracy
- Use correct wage determination
- Include all fringe costs
- Calculate overtime accurately
- Don't forget employer taxes
Competitive Implications
Level Playing Field
- All bidders use same rates
- Compliance is the variable
- Non-compliant competitors undercut
- Enforcement protects compliant contractors
Risk Pricing
Consider
- Compliance costs
- Recordkeeping burden
- Audit risk
- Potential liability
Multi-Jurisdiction Projects
Federal and State
When Both Apply
- Generally pay higher rate
- Both payroll requirements
- Dual compliance needed
- Document carefully
Multiple Counties/States
Varying Rates
- Rate applies where work performed
- Track worker locations
- Complex projects challenging
- Systems needed
Technology and Compliance
Payroll Software
Features to Look For
- Prevailing wage rate tables
- Automatic calculation
- Certified payroll generation
- Compliance checking
Time Tracking
Best Practices
- Accurate time capture
- Classification tracking
- Location tracking (multi-site)
- Audit trail
Conclusion
Prevailing wage compliance is non-negotiable on public work. Violations result in back pay, penalties, and potential debarment—consequences that far exceed any savings from non-compliance.
Build accurate prevailing wage costs into your bids. Implement robust payroll and recordkeeping systems. Monitor subcontractor compliance. When in doubt about classifications or rates, err on the side of compliance.
The contractors who succeed on public work treat prevailing wage as a standard business requirement, not an obstacle. Proper systems make compliance manageable and protect your company from costly violations.
ConstructionBids.ai identifies prevailing wage requirements for each opportunity, helping you understand compliance obligations before bidding.
