If you're working on federal, state, or local government projects, you're likely subject to prevailing wage requirements. These laws mandate that you pay your workers at least the "prevailing wage" for their trade in that geographic area — often significantly higher than market rates.
Getting prevailing wage wrong can result in back pay liability, penalties, debarment from future public work, and even criminal charges. Here's what you need to know.
What Are Prevailing Wages?
Prevailing wages are the hourly wage rates (plus benefits) that the government determines are "prevailing" for each construction trade in a specific geographic area. They're intended to prevent contractors from underbidding by paying substandard wages.
On covered projects, you must pay at least the prevailing rate to all workers performing covered work — regardless of what you'd normally pay them.
Key Prevailing Wage Laws
Federal: Davis-Bacon Act
The Davis-Bacon Act applies to federal construction contracts over $2,000. It requires payment of prevailing wages as determined by the Department of Labor for each trade in each county.
State Laws
Most states have their own prevailing wage laws (often called "Little Davis-Bacon" acts) that apply to state and local public projects. Thresholds, rates, and requirements vary by state.
Project Labor Agreements
Some projects have additional wage requirements through Project Labor Agreements (PLAs) negotiated with unions.
How Prevailing Wage Rates Are Structured
Prevailing wage rates have two components:
Basic Hourly Rate
The base wage for the trade classification.
Fringe Benefits
An additional amount for benefits like health insurance, retirement, and vacation. You can pay this as actual benefits or as additional cash wages.
For example, a prevailing wage determination might specify $45.00/hour basic rate plus $18.50/hour fringe benefits for electricians — a total of $63.50/hour that must be paid either as wages or a combination of wages and bona fide benefits.
Compliance Requirements
Correct Classification
You must classify workers according to the work they actually perform, not their job title. A "helper" who performs journeyman-level work must be paid journeyman rates.
Certified Payroll Reports
On most prevailing wage projects, you must submit certified payroll reports — detailed weekly reports showing each worker's hours, classification, wages, and deductions. These are sworn documents, and false statements can result in criminal charges.
Posting Requirements
Prevailing wage rates must be posted at the job site where workers can see them.
Apprenticeship Ratios
Use of apprentices may be limited to registered apprenticeship programs and specific ratios relative to journeymen.
Overtime Requirements
Overtime (typically over 8 hours/day or 40 hours/week) must be paid at 1.5x the basic rate.
Common Compliance Mistakes
Worker Misclassification
Calling a journeyman electrician a "helper" to pay a lower rate is a serious violation. The work performed determines the classification, not the title.
Inadequate Records
Failing to keep accurate time records makes compliance impossible to prove. Track hours by worker, by day, by project.
Missed Fringe Benefits
Fringe benefits are easily overlooked or miscalculated. Make sure your total compensation (wages + benefits) meets the full prevailing wage requirement.
Subcontractor Violations
You can be liable for your subcontractors' prevailing wage violations. Make sure your subs understand and comply with requirements.
How to Price Prevailing Wage Work
Prevailing wage projects require different pricing than private work.
Calculate True Labor Costs
Your burden rate (employer taxes, insurance, benefits) on prevailing wage work is typically higher. Calculate it accurately.
Account for Administrative Costs
Certified payroll reporting, compliance tracking, and potential audits add administrative burden. Price accordingly.
Don't Assume You Can Pay Less
Bidding based on non-prevailing rates and planning to figure it out later is a recipe for money-losing projects and compliance violations.
Enforcement and Penalties
Prevailing wage violations can result in:
Back Pay Liability
You'll owe workers the difference between what you paid and what you should have paid, plus interest.
Contract Termination
The government can terminate your contract for cause.
Debarment
Repeat violators can be barred from federal or state contracts for up to three years.
Criminal Penalties
Intentional violations or falsifying certified payroll can result in criminal charges.
SubPaid and Prevailing Wage Projects
SubPaid's time tracking and invoicing features help you maintain the detailed records required for prevailing wage compliance. Track hours by worker, by day, by project. Generate reports that support certified payroll requirements. Document everything in case of audit.
Frequently Asked Questions
Do prevailing wages apply to all workers?
Generally, they apply to laborers and mechanics performing construction work on the project site. Office staff, supervisors not performing manual work, and material suppliers are typically exempt.
What if I'm already paying above prevailing wage?
Then you're already compliant. Prevailing wage is a floor, not a ceiling.
How do I find the prevailing wage rates for a project?
For federal projects, check the DOL's Wage Determinations website. For state/local projects, check with the contracting agency — rates are typically included in bid documents.