What is the prevailing wage?

The prevailing wage is the minimum hourly wage, plus benefits, that must be paid to laborers and mechanics employed on public works projects. This wage rate is determined based on the wages paid to similar workers in the area where the project is located. The  Davis-Bacon Act  mandates specific prevailing wages for government contracts over $2,000. These wages ensure fair compensation for workers and help maintain a level playing field for contractors bidding on public projects.

 Although the concept of prevailing wage may sound similar to  minimum wage , there are important differences. Prevailing wage applies only to government work and includes wages and benefits, while minimum wage sets the minimum legal hourly wage for non-government jobs, which do not necessarily include benefits. In addition, prevailing wages vary from state to state and may reflect local labor market conditions and standards.

Noncompliance with prevailing wage laws carries stiff penalties, with  fines averaging around $20,000 per violation  – so it's important for HR and payroll professionals to understand prevailing wage regulations. Ignoring prevailing wage laws can result in hefty fines, a damaged reputation, and disruptions to business operations.

Benefits of Prevailing Wage Laws

Prevailing wage laws benefit many stakeholders, including workers, contractors, and communities. These laws ensure that workers on public projects are paid fairly, promoting economic stability and equality.

Promoting fair wages

Prevailing wage laws promote fair wages by setting a standard pay rate for laborers and mechanics working on government-funded projects. This ensures that workers receive compensation that reflects local cost-of-living and labor market conditions. Additionally, prevailing wage laws help reduce the  racial pay gap by providing equal pay across different demographics  , promoting a more inclusive and fair workplace.

Increasing the quality of work

Prevailing wages increase the productivity of workers by providing adequate compensation   , which boosts morale and motivation. These laws also encourage apprenticeship training programs, helping to reduce the shortage of skilled construction workers. By attracting a better-trained and more experienced workforce, prevailing wage laws improve the overall quality of work on public projects, ensuring that infrastructure lasts longer. Additionally, prevailing wage laws help attract a more skilled and dedicated workforce, further improving the quality and reliability of completed projects. This ensures that public infrastructure is built efficiently and meets high standards of excellence and durability.

How to Determine Prevailing Wage Rates

The Department of Labor (DOL) sets prevailing wage rates to ensure fair compensation for workers working on public projects. These rates are determined based on surveys that collect wage data from local contractors, unions, and other stakeholders within specific geographic areas. The goal is to reflect the average wages paid to workers in similar roles in the same locality, to ensure that prevailing wages are fair and represent local labor market conditions.

You can use the DOL's Wage Determinations Online (WDOL) website to find prevailing wage rates. This platform provides access to wage determinations for various types of construction and other government-funded projects in different regions. The Department of Labor sets rates for different regions by considering factors such as the type of construction, location, and specific job classification.

For more detailed information and to determine specific prevailing wage rates for your area,   visit SAM.gov’s Wage Determination page .

Prevailing wage determination by state

 Prevailing wage limits on  public projects typically start at $2,000, meaning any government contract over that amount requires workers to be paid the prevailing wage.

However, specific rates and limits may vary from state to state due to different regulations for workers, cost of living, and laws in other locations.   Some states have set higher limits or imposed more stringent requirements to ensure that workers receive compensation somewhat in line with local cost of living and prevailing wage rates.

In states with a high cost of living, prevailing wage rates are often set well above the federal minimum wage to reflect local economic conditions. This ensures that workers can maintain a reasonable standard of living. On the other hand, states without prevailing wage laws or with lower limits may only follow federal  minimum wage  standards, resulting in potentially lower compensation for workers on public projects.

Understanding these variations is important for contractors, human resources professionals, and business owners. Ensuring compliance with state-specific prevailing wage laws helps avoid legal repercussions and promotes fair treatment and compensation for workers, which can lead to better project outcomes and employee satisfaction.

There are 22 states where there is no wage law

Not all states have enacted laws setting prevailing wage limits for public projects. In these states, no specific regulation requires government contractors to pay wages that match local standards for similar work. This can lead to variations in the compensation paid to workers on public projects compared to states with prevailing wage laws.

Here is a list of states that do not have prevailing wage laws:

• Alabama
• Arizona
• Arkansas
• Florida
• Georgia
• Idaho
• Indiana
• Iowa
• Kansas
• Kentucky
• Louisiana
• Michigan
• Mississippi
• new Hampshire
• North Carolina
• North Dakota
• oklahoma
• South Carolina
• South Dakota
• Utah
• West Virginia
• Wisconsin

Understanding and complying with prevailing wage laws is important for government contractors, human resources professionals, and business owners. These laws ensure that workers receive fair wages, promote inclusiveness, and improve the quality of work on public projects. By complying with prevailing wage regulations, you can avoid financial penalties, improve worker productivity, and help reduce the wage gap.