How to Calculate Davis-Bacon Wages and Stay Compliant

The Davis-Bacon Act (DBA), enacted in 1931, serves to protect local prevailing wages by requiring contractors and subcontractors on certain federal and federally-assisted construction projects to pay their laborers and mechanics no less than the locally prevailing wages and fringe benefits. This legislation applies to contracts exceeding $2,000 for the construction, alteration, or repair of public buildings or public works. The act aims to prevent contractors from undercutting local wage standards and to ensure fair compensation for workers. This article outlines the process of calculating these wages to help maintain compliance.

Understanding Davis-Bacon Wage Requirements

Davis-Bacon wages consist of two primary components: a basic hourly rate and fringe benefits. Both elements are specified in the applicable wage determination. The “prevailing wage” for a given classification of workers is the sum of these two components.

The U.S. Department of Labor (DOL) determines these prevailing wages for different crafts and locations through surveys of local wage rates. These rates reflect what similar workers in the region are paid for comparable work. The goal is to establish a wage floor that reflects local economic conditions.

The Davis-Bacon Act generally covers laborers and mechanics on federally funded or assisted construction projects over the $2,000 threshold. This includes construction, alteration, and repair work on public buildings or public works. The requirements also extend to projects receiving federal assistance through various financial instruments, collectively known as the Davis-Bacon “Related Acts.” Employers must ensure that the total compensation provided, whether entirely in cash or through a combination of cash and bona fide fringe benefits, meets the specified prevailing wage, which includes both the basic hourly rate and the fringe benefit amount.

Obtaining Applicable Wage Determinations

To determine the specific wage rates required for a project, contractors must obtain the relevant wage determination issued by the Department of Labor. These determinations are essentially lists of basic hourly wage rates and fringe benefit rates for various labor classifications within a defined geographic area and for a particular type of construction.

The primary resource for finding these wage determinations is the Wage Determinations Online (WDOL) website, part of beta.sam.gov. Contracting agencies also provide the applicable wage determination within the contract documents. If a contract is not awarded within 90 days of the bid opening, the wage determination may need to be updated.

When selecting the correct wage determination, consider the project’s location and the type of construction. The DOL categorizes construction into four types: building, residential, highway, and heavy construction. Selecting the appropriate type ensures the correct rates are applied. From the wage determination, contractors must extract specific job classifications, the corresponding basic hourly rates, and the required fringe benefit amounts for each classification.

Calculating Basic Hourly Rate and Fringe Benefits

Once the applicable wage determination is obtained, the next step involves calculating the actual wages paid to ensure they meet or exceed the prevailing rates. Each laborer and mechanic must receive at least the basic hourly rate specified in the wage determination for their classification. This direct cash payment forms the foundation of the compensation.

For fringe benefits, contractors have flexibility in how they meet the required amount. One option is to pay the entire fringe benefit amount directly to the employee as additional cash wages. This simplifies payroll administration by consolidating all compensation into a single cash payment.

Alternatively, contractors can provide bona fide fringe benefits, such as health insurance, retirement plans, vacation pay, sick leave, or apprenticeship program contributions. To credit these benefits towards the prevailing wage obligation, their hourly value must be calculated. This is done by dividing the total annual cost of the benefit by the total hours worked by employees participating in the plan, including both Davis-Bacon and non-Davis-Bacon hours.

A combination of cash payments and bona fide benefits can also be used. The sum of the basic hourly rate and the credited fringe benefits must equal or exceed the total prevailing wage.

When workers perform overtime hours, the basic hourly rate is multiplied by one and a half times for all hours worked over 40 in a workweek. The fringe benefit portion of the prevailing wage applies to all hours worked, but the fringe benefit amounts do not need to be included in the calculation of the overtime premium.

Reporting and Record-Keeping

Compliance with Davis-Bacon wage requirements extends beyond accurate payment to include diligent reporting and record-keeping. Contractors and subcontractors must submit certified payroll reports on a weekly basis to the contracting agency. The U.S. Department of Labor Form WH-347 is commonly used for this purpose.

These weekly reports must contain detailed information for each laborer and mechanic, including the employee’s name, correct classification, social security number, daily and weekly hours worked, actual hourly wages paid, and any deductions made. Information regarding fringe benefits paid or contributions made to bona fide plans must also be clearly documented.

Each certified payroll submission requires a signed “Statement of Compliance.” This statement attests that the payroll information is accurate and complete, and that each worker has been paid the required prevailing wage rate, including fringe benefits, for the work performed.

Beyond weekly reporting, employers are required to maintain accurate payroll and related records for a specified period. Additionally, the prevailing wage determination and a “Worker Rights Under the Davis-Bacon Act” poster must be prominently displayed at the job site.