How to Determine Prevailing Wage Rates in Construction

As a cornerstone of labor regulations, prevailing wage not only shapes the financial landscape of the construction industry but also plays a pivotal role in ensuring fair compensation for workers. In the United States, prevailing wage rates for construction are determined primarily through the Davis-Bacon Act and related laws.

The Davis-Bacon Act

The Davis-Bacon Act, a federal law passed in 1931, was one of the earliest prevailing wage laws in the United States that requires contractors and subcontractors working on federally funded construction projects to pay their laborers and mechanics the prevailing wage rates and fringe benefits as determined by the U.S. Department of Labor.

These prevailing wages are determined by the U.S. Department of Labor and are based on surveys of wages and benefits paid in each particular locality. The intent of the act is to ensure that construction workers performing government work are paid fair wages, while also preventing unfair competition among contractors bidding for jobs based on low labor costs. The Davis Bacon Act is widely considered to be one of the most important labor laws governing construction industry wage standards and it serves as an effective tool for protecting the rights of workers across the country.

7 Steps to Determine Prevailing Wage Rates in Construction

In order to ensure fair compensation for your workers, here are seven steps to determine prevailing wage rates.

Step 1. Research Relevant Laws and Regulations

Prevailing wage rates are governed by federal and state laws, such as the Davis-Bacon Act in the United States. Familiarize yourself with these regulations, as they provide the groundwork for determining wage rates on public construction projects. State labor departments often play a central role in overseeing and enforcing prevailing wage laws.

Step 2. Identify the Project Location

Prevailing wage rates are highly location-specific. The rates for a specific trade in one city or county may differ significantly from those in another. Begin by identifying the precise location of the construction project, as this will be a crucial factor in determining the applicable prevailing wage rates.

Step 3. Consult Wage Determination Schedules

Government agencies, such as the U.S. Department of Labor, publish wage determination schedules that provide detailed information on prevailing wages for different trades in specific areas. These schedules are updated regularly and serve as valuable resources for contractors and subcontractors seeking to determine the appropriate wage rates for their projects.

Step 4. Understand Trade Classifications

Prevailing wage rates are often categorized by trade and occupation. Each trade classification corresponds to a specific set of skills and responsibilities. Contractors must accurately identify the trades involved in their projects and refer to the corresponding wage rates for each classification.

Step 5. Utilize Online Resources

In the digital age, online resources have become indispensable for contractors navigating prevailing wage requirements. State labor department websites, federal databases and industry-specific platforms offer easily accessible information on prevailing wage rates, making it simpler for contractors to stay informed and compliant.

Step 6. Contact Relevant Authorities

For the most accurate and up-to-date information on prevailing wage rates in the U.S., it's recommended to refer to the official resources provided by the U.S. Department of Labor and relevant state labor agencies. When in doubt, reaching out to the relevant labor department or government agency can provide clarity. These authorities are often willing to assist contractors in understanding prevailing wage rates, offering guidance on specific projects and trade classifications.

Step 7. Account for Fringe Benefits

Prevailing wage rates include not only hourly wages but also fringe benefits, such as health insurance, retirement contributions and other non-cash benefits. Contractors must ensure that they consider and account for these additional benefits when determining overall compensation for workers.

How Construction Accounting Software Can Help

Construction accounting software serves as a powerful ally in streamlining prevailing wage compliance within the construction industry. Software like Deltek ComputerEase automates complex payroll calculations, taking into account various factors such as job classifications, fringe benefits and geographic locations. By automating these intricate processes, the software ensures accuracy and consistency in wage determinations for diverse roles and projects. The integration of job cost tracking features aids in the precise allocation of labor costs to specific jobs or projects, simplifying compliance maintenance and generating accurate reports.

Additionally, the software manages fringe benefits, oversees real-time reporting for compliance monitoring, generates certified payroll reports, integrates with timekeeping systems, issues automated compliance alerts and facilitates efficient record-keeping. With these capabilities, construction accounting software not only minimizes the risk of errors but also significantly reduces the administrative burden associated with prevailing wage regulations, allowing contractors to focus on strategic project management and successful execution.