When a contractor agrees to participate in a government project, it comes with a lot of extra responsibilities and paperwork. Completing prevailing wage reports (or certified payroll reports) is one of the joys and privileges of taking on these types of projects. Processing these reports gets complicated, and it’s easy to make mistakes.
The brass tacks on prevailing wage
A prevailing wage specifically applies to contractors and subcontractors who are working on government-funded or government-assisted construction jobs and refers to the minimum amount of money that they must pay their employees for work related to that project. Like the minimum wage, it sets a payment floor for workers, but unlike minimum wage, it can vary widely by location and the work performed.
Currently, only 18 states do not have prevailing wage laws: Alabama, Arizona, Colorado, Florida, Georgia, Idaho, Iowa, Kansas, Louisiana, Mississippi, New Hampshire, North Carolina, North Dakota, Oklahoma, South Carolina, South Dakota, Utah, and Virginia. Contractors in the other 32 states need to make it a priority to know and understand the prevailing wage laws of their state and any city or county in which they plan to work.
The Davis-Bacon Act is the critical prevailing wage law that applies to “contractors and subcontractors performing on federally funded or assisted projects in excess of $2,000 for the construction, alteration, or repair (including painting and decorating) or public buildings or public works.” This means that most employees working on a construction project will be subject to prevailing wage requirements. Even if the project occurs in a state that doesn’t have prevailing wage laws (for a complete list, click here), this act is still in force if the project receives federal funding.
Laws and rates are often updated yearly. Contractors need to be up-to-date with current local wage rates and any changes that occur.
How it causes trouble
Trying to keep great track of anything is tough in field-based positions, and managing hours and work classifications is no different. This becomes especially tricky when an employee is acting in a dual capacity. A worker is often hired to do one job at a specific rate but is later pulled into a different role for a few hours later in the week. In this case, the contractor has to record the time spent doing each job, as it’s likely that the classifications pay different rates.
Second, contractors must be diligent in making sure that their employees are represented accurately. The subcontractor and general contractor are responsible for ensuring that the certified payroll report matches who was on the job site and for how long. If the job site sign-in sheet doesn’t match the payroll report, it raises a red flag.
Keep current records and employee information, have your documents and contracts organized and easy to access (for three years minimum), and keep in contact with subcontractors so that work classification changes aren’t overlooked. If a contractor is ever investigated or audited, they will want to be able to show they did their due diligence for each and every job.
How to avoid trouble
As mentioned above, stay up-to-date with any prevailing wage rate changes in the appropriate state and county. This is beneficial for two reasons. First, it lessens the possibility of mistakes. Second, if a contractor is ever audited, leniency is often more likely to occur if the person in question has made a good faith effort in the areas listed above.
Certified payroll reports can feel like one of those areas in which to play constant catch-up. One of the ways to avoid this common pitfall is to ensure that the general contractor and subcontractor have good communication about the expectations before the project even begins. A ten-minute call between a project engineer (or whoever is managing certified payroll on the general contractor side) and the subcontractor can save a world of headache later on. Many subcontractors are new to prevailing wage and don’t realize what they are responsible for. Making sure they are educated on the front end is a much more collaborative approach than waiting to see what they turn in when the reports are due.
It’s wise to commission someone in the office to be an expert in prevailing wage. This could be a business manager, project engineer, or administrative assistant - any role that makes sense for the company’s size. Having one person get down to the nitty-gritty details about how to fill out the 20+ boxes on that form is definitely worthwhile.
Contractors and subcontractors must be aware of their local prevailing wage laws, as well as the rates in any places they are planning to work on a governmental public project. They must also commit to recording and reporting their payment practices to prove that they are abiding by the Davis-Bacon Act. It’s good business practice to stay current with employee records, keep an organized system of contracts, and double-check the work classifications of subcontractors regularly. Stay ahead of the game - become an expert and connect with subcontractors early to avoid error-ridden reports.
July 14th, 2021 | best practices