The Bipartisan Infrastructure Deal is set to be one of the largest infrastructure bills in the U.S. History - injecting $550B+ of federal investment into infrastructure projects across America. With this investment comes new opportunities available to contractors to grow their existing businesses or expand their services into the Public Works arena.
Most of this new work will be subject to Davis-Bacon regulations and procedures. Over the next few weeks, we’ll go over everything that you need to know about complying with Davis-Bacon in a series of articles. So if you haven’t worked on these projects before, or if you’d just like to brush up your know-how, these materials will get you up to speed on what to expect with federal jobs.
Let’s get started!
What is Davis-Bacon?
Davis-Bacon is a set of federal laws that require contractors to pay a certain level of wages to their workers on federally funded projects. These projects are often called “prevailing wage” projects because that is what the wages are based on - the prevailing wage for that type of work in that particular location. Many states have adopted similar laws to regulate state funded projects, and some states have special names for these laws while others simply call them “prevailing wage.”
The intent of these laws is to ensure that laborers and mechanics on federally funded projects make a fair wage. It levels the playing field between the contractors bidding the project, because everyone has to pay their workers a similar amount.
Most contractors want to get into federally funded projects because they are so lucrative. However, they come at a price. There’s a lot of paperwork and documentation required, and the bookkeeping and payroll processing can be difficult and confusing. Many contractors don’t get involved in these projects simply because the documentation is too hard. Luckily, there are options to help streamline these processes and make compliance a breeze.
Complying with Davis-Bacon
Davis-Bacon laws require contractors to submit weekly reports showing that they have paid their workers the correct wages and fringe benefits according to the wage determinations for the type of work being performed. These reports, called “certified payroll reports,” track each employee’s time, wages, fringe benefits, and deductions to show that they were paid appropriately. On federal projects Form WH-347 is used to report weekly payroll on a project. Many states use similar reports for their prevailing wage projects.
How do you know how much to pay your workers? The contracting authority, the federal or state agency the project is for, will provide you with determinations for each of the trades on the site, based on the completion of the project and when the project was sent out to bid.
The wage determination tells you how much you must pay in hourly wages as well as fringe benefit amounts for each type of worker. If you do not already pay your workers the amount required, you must start paying them the amount shown in the determination when they work on the project.
If you don’t pay your workers the amount shown on the wage determination, or if you misclassify a worker, or if your reporting is not correct, you could be subject to fines, paying back pay, withheld payments, contract termination, and even debarment from future contracts. Davis-Bacon compliance is not something to take lightly!
Most common mistakes with Davis-Bacon
According to the Department of Labor, these are the most common mistakes contractors make on Davis-Bacon projects:
1. Misclassification of laborers and mechanics.
2. Failure to pay full prevailing wages, including fringe benefits, for all hours worked, including overtime.
3. Inadequate record-keeping, such as not counting all hours worked or not recording hours worked by an individual in two or more classifications during the same day.
4. Failure to maintain a copy of bona fide apprenticeship program and individual registration documents for apprentices.
5. Failure to submit certified payroll reports weekly.
6. Failure to post the Davis-Bacon poster and applicable wage determinations on the jobsite.
In our experience, contractors may have only limited (or no!) information about the correct pay rates for a job. It’s also easy to get confused about what classification to use when the work being performed is found across multiple trades. Some contractors may not know that the project is subject to Davis-Bacon or prevailing wage, because the message got lost or they don’t know the correct bid advertisement date. And finally, some are using incorrect forms to report their wages and hours.
Check out our article on common mistakes to get tips and tricks to prevent these problems.
Managing fringe benefits
Fringe benefits are contributions irrevocably made to a trustee or third-party in a “bona fide” fringe benefit fund plan or program. Some common fringe benefits include:
- Life insurance
- Health insurance
- Pension or 401(k)
- Sick leave
Only certain approved benefits are considered part of the fringe portion of wages, so companies have to be careful about what they claim to pay.
If you don’t pay enough in fringe benefits to meet the wage determination amount, you must pay the additional in cash to your employee. So, if you’re not taking credit for all of your fringe benefits, you could be paying your employees more than you need to. Properly accounting for all fringe benefits can save you thousands of dollars per year.
Using technology to streamline Davis-Bacon reporting
While Davis-Bacon reporting can be confusing, technology can help streamline payroll processing and help ensure that your reports are accurate.
Integrated time tracking applications with payroll services can save you time and eliminate errors. When time is tracked and classified accurately, it’s easy to manage record-keeping and ensure that you’re paying workers who worked under multiple classifications in the same day correctly.
With so many labor classifications and levels of apprenticeship, even small companies can have multiple pay rates on the same project. Tracking these rates and ensuring that everyone gets paid correctly is time intensive, especially if your payroll service doesn’t support prevailing wage. Construction specific payroll software helps ensure less errors and makes reporting a snap.
Creating the necessary reports each week can also be extremely time-consuming. Software allows you to create accurate reports with the push of a button. Data is stored securely online, and reports are generated and shared directly with the contracting body, making compliance reporting as simple as sharing a link. You’ll never have a payment withheld due to a delayed report again.