Business Tips

prevailing wage

What is prevailing wage, and how does it affect your company?

When it comes to owning or operating a construction company, landscaping company or any type of field service business, the amount of details you need to have in order can sometimes seem endless. Despite the list being long, it’s important to remember that some details, if overlooked, can damage your company more than others.

One aspect that certainly falls into that category is being sure you’re paying your workers the local prevailing wage on any publicly funded project.

Why? The cost of not doing so could potentially alter the financial future of your business. In fact, since the law went into place, the construction industry alone has piled on more than 105,000 violations. In 2018 alone, $304 million in back wages were collected, and $1.3 billion was garnered in the last five years.

No matter what your thoughts are on prevailing wage or Davis-Bacon as a whole, safeguarding your company against a potential violation could be one of the best decisions you make in 2019.

Here’s what you need to know.

What exactly is prevailing wage?

Defined, prevailing wage is the hourly wage, benefits and overtime paid to most of the workers, laborers and mechanics within a particular area. Each state has their own wage rate, all of which can be found online here.

For instance, if you’re working on a federally funded project in Florida, you’re required to pay your crew the prevailing wage as determined by the respective county your project is in, even if most of your workers live in Louisiana, Ohio or somewhere else.

Davis-Bacon was passed by Congress during the Great Depression to protect workers from unfair wages.

A quick history lesson. Back in 1891, Kansas became the first state to pass prevailing wage laws for public works, but prevailing wage as it’s known today came about within the Davis-Bacon Act of 1931.

For those unfamiliar, Davis-Bacon was passed by Congress during the Great Depression to protect workers from unfair wages, a common occurrence due to intense competition for federal contracts. Under the new law, all government-funded projects that exceeded $2,000 required laborers to be paid the local prevailing wage for hours worked.

In the context of today, the policy remains in place to ensure local construction industries don’t get displaced by outside forces. The rationale being that, without Davis-Bacon, companies from other locations would begin competing in a “race to the bottom” on publicly-funded contracts, resulting in area contractors losing bids and workers being paid significantly less than what they’re worth.

This helps to guarantee that federal projects, from highways to bridges, are being built by expert local craftsmen as opposed to less experienced, hired hands.

How prevailing wage can affect your business.

The U.S. Department of Labor’s Wage and Hour Division has reported over 119,000 violations of the Davis-Bacon Act since 1985 alone. Being proactive can help your company avoid a handful of harsh consequences of ignoring prevailing wage.

It should also be noted that often it isn’t even the owner of a company who is at fault for violating Davis-Bacon but an unaware subcontractor hired by the owner.

But no matter how the situation unfolds, the owner will still be the one who ultimately suffers the consequences—so you’ll want to make sure your business is bulletproof from the start.

Additionally, paying prevailing wages is only aspect of Davis-Bacon. You’re also required to submit certified payroll on all public projects. Simply put, your workers must be paid weekly and all records need to include employee name, address, job classification, rate of pay, the number of hours worked and total amount paid.

Lastly, the penalties for not enforcing Davis-Bacon don’t stop at paying fees. They many also include the termination of your contract, exclusion from all federal contracts for up to three years or withholding of funds altogether.

Remember, if a subcontractor violates prevailing wage or any other part of Davis-Bacon, your livelihood could be at stake.

Best practices to avoid a penalty.

#1.) Hire very carefully.

Remember, if a subcontractor violates prevailing wage or any other part of Davis-Bacon, your livelihood could be at stake. As a result, doing your research before hiring a subcontractor is critical. To start, take the time to look through a candidate’s reviews on Angie’s List, Yelp or Google Reviews.

When possible, choose to partner with vendors recommended by people you trust to avoid unpleasant surprises.

#2.) Make the process easy with ExakTime.

At ExakTime, our system comes equipped with features that make certified payroll seamless, including detailed reports and a drop-down menu to easily classify a job site as one in need of certified payroll.

On top of that, by having access to robust data and reporting with ExakTime, you’ll be able to more accurately bid on projects, giving you the wiggle-room in your budget to more precisely plan for the number of workers you’ll need for a project, set aside funds for equipment and more.

Visit our website to get started today.