How to Calculate Davis-Bacon Prevailing Wages

The Davis-Bacon Act (DBA) is a federal law establishing fair wage requirements for laborers and mechanics working on federal and federally-assisted construction projects. Passed in 1931, its purpose is to ensure contractors pay employees no less than local prevailing wages and fringe benefits for comparable work. This prevents undercutting local labor standards and wages in the pursuit of government contracts. The Davis-Bacon Act applies to contracts exceeding $2,000 for the construction, alteration, or repair of public buildings or public works. Its provisions also extend to many federally assisted construction projects through “Related Acts,” encompassing grants, loans, and other financial assistance.

Determining the Correct Wage Determination and Classifications

Calculating Davis-Bacon wages begins by identifying the wage determination (WD) applicable to a project. A wage determination is a listing of wage rates and fringe benefits for worker classifications that the U.S. Department of Labor (DOL) has determined to be prevailing in a geographic area. These determinations are published and accessible through the System for Award Management (SAM.gov) website, the official site for all Davis-Bacon General Wage Determinations since 2019.

To locate the correct wage determination, consider the project’s physical location (typically a county) and the type of construction. The DOL categorizes construction into four main types: building, heavy, highway, and residential. Ensuring the use of the most current wage determination is important, as these determinations are periodically updated.

Once identified, the next step is matching workers to their classifications within that determination. Classifications represent categories of work (e.g., electrician, carpenter, laborer) based on actual duties, not just job title. Misclassification can lead to underpayment penalties, so it is important to align the worker’s tasks with the descriptions provided in the wage determination.

Calculating the Basic Hourly Rate

Each wage determination specifies two main components for the prevailing wage: a “basic hourly rate” and a “fringe benefit” amount. The basic hourly rate represents the direct cash payment made to the laborer or mechanic for each hour worked. This rate is part of the total compensation required under the Davis-Bacon Act.

To calculate basic cash wages, multiply hours worked by the basic hourly rate for the worker’s classification on the wage determination. For instance, if a carpenter works 40 hours in a week and their classification’s basic hourly rate is $30.00, their basic cash wage for that week would be $1,200.00. Accurate timekeeping is important for this calculation, as all hours worked on the job site are subject to Davis-Bacon requirements.

Integrating Fringe Benefits into Total Compensation

Beyond the basic hourly rate, Davis-Bacon wages also mandate a specific amount for “fringe benefits.” These are supplementary forms of compensation beyond direct cash wages. To be “bona fide,” fringe benefits must be provided through a legally enforceable plan, fund, or program, often communicated in writing. Examples of bona fide fringe benefits include contributions to health insurance, pension plans, vacation pay, sick leave, and life insurance.

Contractors have flexibility in how they meet this fringe benefit requirement. One approach is to contribute the specified fringe benefit amount directly into bona fide benefit plans (e.g., health or retirement accounts). Alternatively, contractors can pay the entire fringe benefit amount directly to the employee in cash, added to their basic hourly rate. It is also possible to use a combination of both methods, paying part into a plan and part as cash.

When calculating the total required hourly compensation, the basic hourly rate and the specified fringe benefit amount from the wage determination are combined. For example, if the basic hourly rate is $30.00 and the fringe benefit amount is $8.00, the total required hourly prevailing wage is $38.00. If a contractor provides non-cash benefits, such as health insurance, the hourly value of these benefits can be credited towards the fringe benefit obligation. However, payments required by other federal, state, or local laws, such as Social Security or Workers’ Compensation, are generally not counted as Davis-Bacon fringe benefits.

Applying Wages to Specific Worker Categories

Davis-Bacon wage calculation can vary for apprentices and trainees. These individuals may be paid less than the full prevailing wage rate specified for journeyworkers, provided specific conditions are met.

Apprentices must be registered in an apprenticeship program approved by the U.S. Department of Labor’s Employment and Training Administration (ETA) or a state apprenticeship agency recognized by the ETA. For these registered apprentices, their wages are typically calculated as a percentage of the journeyworker’s prevailing wage rate, with the specific percentage increasing as they progress through their training program. This percentage is outlined in their approved apprenticeship program.

It is important that the ratio of apprentices to journeyworkers on a project adheres to the limits specified in the apprenticeship program or local prevailing practice. Workers not part of an approved program (e.g., “pre-apprentices” or “unregistered apprentices”) must be paid the full prevailing wage rate for their work, regardless of skill level.