Prevailing Wage (Davis-Bacon) Explained: A Contractor’s Guide

What is the prevailing wage, and how does it impact your business? Learn about rates, rules, and compliance in our guide.

prevailing wage
Frequently Asked Questions
What is prevailing wage, and why is it important?

Prevailing wage refers to the hourly rate of pay, including fringe benefits, that workers on public works projects must be paid, as determined by government agencies. These rates are based on the wages commonly paid to workers in similar roles within a specific geographic area. The purpose of prevailing wage laws, such as the Davis-Bacon Act, is to ensure fair compensation, prevent undercutting of local wage standards, and promote high-quality workmanship on federally and state-funded projects. By requiring contractors to pay standardized wages, these laws help maintain a level playing field in the bidding process and protect workers from exploitation.

How is prevailing wage determined for different job roles?

Prevailing wage determination involves collecting wage data from surveys conducted by the U.S. Department of Labor or state agencies. This data reflects the wages and fringe benefits paid to workers in various job classifications, such as electricians, carpenters, and HVAC technicians, within a specific region. For Davis-Bacon projects, wage determinations are published on the SAM.gov website, providing the required wage rates for federal projects. States with prevailing wage laws follow a similar process, often tailoring their rates more closely to local conditions. These rates ensure workers are paid fairly based on their job type and location.

How long does prevailing wage determination take?

The prevailing wage determination time varies depending on the agency conducting the survey and the scope of the project. For federal projects under the Davis-Bacon Act, wage determinations are updated annually, though specific rates may be revised more frequently based on economic shifts. State prevailing wage determinations may be updated quarterly, semi-annually, or annually, depending on local laws. The process involves extensive data collection and analysis to ensure accuracy, so it can take weeks or months to finalize rates. Contractors should always check for the latest rates before bidding on public projects.

Who is exempt from Davis-Bacon wages?

Certain workers and projects may be exempt from Davis-Bacon prevailing wage requirements. For example, projects that fall below the $2,000 federal funding threshold are not subject to Davis-Bacon wages. Additionally, administrative staff, executives, and workers not directly involved in construction activities (e.g., clerical or support staff) are typically exempt. Apprentices and trainees in registered programs may also be paid less than the prevailing wage for their classification, provided they work under the proper supervision and their rates comply with program guidelines.

How do you calculate Davis-Bacon wages, including fringe benefits?

To calculate Davis-Bacon wages, start with the basic hourly rate listed in the applicable wage determination for the worker’s job classification. Next, add the value of any required fringe benefits. If the employer provides these benefits (e.g., health insurance, retirement), the amount can be deducted from the fringe rate. If not, the employer must pay the total fringe amount as additional wages. For example, if an HVAC technician’s wage determination lists $30/hour with $7/hour in fringe benefits, the total hourly compensation would be $37/hour. If benefits are not provided, the full amount must be paid in cash.

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