Prevailing Wage Compliance Strategies for Construction Contractors

Introduction

Prevailing wage compliance is essential for government construction contractors. The Davis-Bacon Act and related state laws require paying workers minimum wage rates on covered projects. Violations result in penalties, back wages, and potential debarment.

This guide provides strategies for maintaining compliance, from understanding requirements through establishing effective systems.

Why Compliance Matters

Legal Requirement: Federal and state laws mandate compliance
Financial Risk: Back wages plus penalties for violations
Debarment Risk: Serious violations can end government work
Reputation: Compliance demonstrates responsibility

Understanding Requirements

Know what laws apply and what they require.

Davis-Bacon Act (Federal)

Applies to federal construction contracts over $2,000
Requires paying locally prevailing wages
Includes wage and fringe benefit rates
Requires certified payroll submissions
DOL enforces compliance

State Prevailing Wage Laws

Most states have their own laws
Thresholds vary by state
Rates may differ from federal
Some states have no prevailing wage law
Check each state where you work

Related Acts

Act	Application
Copeland Act	Anti-kickback protections
Contract Work Hours	Overtime requirements
Related Acts	Federally-assisted programs

Wage Determinations

Wage determinations specify the minimum rates for each craft.

Finding Wage Determinations

Federal: SAM.gov wage determinations
State: State labor department websites
Contract documents should include applicable determination
Verify correct determination for project location and type

Understanding the Rates

Each classification includes:

Basic hourly rate: Minimum cash wage
Fringe benefits: Health, pension, etc.
Total rate: Basic + fringe minimum

Pay at least total rate through combination of cash and bona fide fringes.

Worker Classification

Classify workers by actual work performed
Workers may work in multiple classifications
Track time by classification worked
Pay highest applicable rate for mixed work

Certified Payroll

Certified payroll documents compliance with wage requirements.

WH-347 Requirements

Federal certified payroll (WH-347) includes:

Employee name, address, last 4 SSN
Work classification
Hours worked daily and weekly
Hourly rate and gross wages
Deductions and net pay
Contractor certification statement

Submission Requirements

Submit weekly for each week worked
Due within 7 days of pay period end
Include all workers on covered project
Subcontractor payrolls also required
Maintain records for 3 years

Certification Statement

By signing, you certify:

Information is correct and complete
Required wages were paid
No kickbacks occurred
Classifications are accurate

Common Violations

Avoid these common compliance failures.

Wage Violations

Paying less than required rate
Incorrect worker classification
Not paying overtime properly
Improper fringe benefit calculations
Missing apprentice ratios

Payroll Violations

Late or missing certified payrolls
Incomplete or inaccurate information
Missing subcontractor payrolls
Falsified information

Consequences

Violation	Consequence
Wage underpayment	Back wages + liquidated damages
Willful violations	Criminal penalties possible
Repeated violations	Debarment from federal contracts

Compliance Systems

Establish systems to ensure consistent compliance.

Pre-Project Setup

Identify applicable wage determination
Set up job in payroll system with correct rates
Train project staff on requirements
Communicate requirements to workers
Post wage determination at job site

Ongoing Compliance

Accurate time tracking by classification
Regular payroll audits
Timely certified payroll submission
Monitor for wage determination updates
Address issues immediately

Technology Solutions

Payroll software with prevailing wage capability
Electronic time tracking
Automated certified payroll generation
Compliance tracking dashboards

Training

Payroll staff on prevailing wage processing
Project managers on requirements
Foremen on proper time tracking
Regular refresher training

Subcontractor Compliance

Prime contractors are responsible for subcontractor compliance.

Prime Contractor Obligations

Include prevailing wage requirements in subcontracts
Provide applicable wage determination
Collect and submit subcontractor certified payrolls
Monitor subcontractor compliance
Withhold for subcontractor violations

Subcontract Requirements

Flow down Davis-Bacon clauses
Include certified payroll requirements
Specify submission deadlines
Reserve right to withhold for violations

Monitoring Subcontractors

Review certified payrolls for completeness
Verify rates meet requirements
Spot check work classifications
Address issues promptly

Frequently Asked Questions

Can I pay higher than prevailing wage?

Yes, prevailing wage is a minimum. Many contractors pay above prevailing rates to attract quality workers. You cannot pay less.

How do I handle workers who perform multiple classifications?

Track time by classification worked. Pay the appropriate rate for each. If you don't track time split, pay the highest applicable rate for all hours.

What if the wage determination changes during my project?

Generally, the wage determination locked at bid opening or contract award applies for the project duration. Check contract terms—some require periodic updates on multi-year projects.

Can apprentices be paid less than journeyman rates?

Yes, if properly registered in an approved apprenticeship program. Pay must match the program's percentage of journeyman rate. Apprentice-to-journeyman ratios apply.

Conclusion

Prevailing wage compliance requires systematic attention but is manageable with proper systems. Understand requirements, establish reliable processes, train your team, and monitor continuously. The investment in compliance prevents costly violations.

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