Prevailing Wage FAQ’s

What does the Davis Bacon Act require?

The Davis-Bacon Act, and various state related acts, require contractors to pay all laborers and mechanics working on covered construction contracts the locally prevailing wage and fringe benefit for the work they perform.

How do I meet my wage and fringe obligation under the Davis Bacon Act?

A contractor or subcontractor performing work subject to the Act can discharge its prevailing wage obligation by paying cash, making payments or incurring costs for “bona fide” fringe benefits, or a combination of these methods.

Please note: This decision is at the discretion of the contractor not the employee.

What is annualization?

Annualization is the time frame (annual) over which contributions to benefit plans are divided to calculate the credit a contractor can take against the fringe benefit in the prevailing wage schedule. Total annual contributions per employee are divided by total annual hours worked by each employee, on both public and private jobs. In the absence of actual hours worked, use 2080 hours (40 hrs./wk. x 52 weeks).

I pay the fringe benefits as cash (W2 income) to my employees. Is this the best way to meet the prevailing wage law requirements?

No, if you pay fringe benefit as W2 income, you are paying unnecessary payroll taxes (FICA, FUTA & SUTA) and possibly other payroll related burdens, such as workmen’s compensation and liability insurance.

Contact us for a complimentary savings analysis.

What are examples of “bona fide” fringe benefits?

Certain benefits are recognized as common in the construction industry and examples include health, pension, life insurance, severance, vacation and holiday pay, and certain apprenticeship programs. The Department of Labor does not restrict the types of fringe benefits that can be considered “bona fide” or the dollar amount a contractor contributes towards such benefits.

Please note: State Recognition may vary.

What are some common payroll deductions that an employer cannot use to meet its Davis Bacon Act obligation?

A contractor cannot take credit toward discharging its prevailing wage obligation for any benefit required by a federal, state or local law, such as, workers compensation, unemployment compensation or social security contributions. Furthermore, a contractor cannot offset the fringe benefit rate by an employee’s use of a company vehicle or tool.

What are the requirements for overtime on Davis Bacon Act covered work?

The Contract Work Hours and Safety Standards Act (CWHSSA), which covers most federal construction contracts, requires laborers and mechanics to be paid at one and one-half times their basic rate of pay for hours worked on covered contracts in excess of 40 in a week. Fringe benefits must also be paid for hours in excess of 40 in a week but they are paid at the straight rate not at time and a half.

Please note: State and Municipal work may have a different interpretation, as such, see applicable wage determination.

I am happy with my existing medical and retirement plan, but I am concerned that I am not in compliance with the Davis Bacon or Service Contract Act, can PSA help?

Yes! PSA can audit your existing programs to determine if your company is in compliance. If you are not, PSA can show you how to keep your existing program and comply with the Davis-Bacon and Service Contract Acts. (See Prevailing Wage Optimizer).

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