Prevailing Wages

What Is a Prevailing Wage?

A 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 prevailing wages specific to government contracts exceeding $2,000. These wages ensure fair compensation for workers and help maintain a level playing field for contractors bidding on public projects.

While the prevailing wage concept may seem similar to the minimum wage, there are significant differences. The prevailing wage applies only to government work and includes wages and benefits, whereas the minimum wage sets the lowest legal hourly pay for non-government jobs without necessarily including benefits. Furthermore, prevailing wages vary from state to state and may reflect local labor market conditions and standards.

The penalties for failing to adhere to prevailing wage laws are steep, with fines averaging around $20,000 per violation​​—so it's crucial for HR and payroll professionals to understand the prevailing wage regulations. Ignoring prevailing wage laws can result in costly fines, damaged reputations, and disrupted 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, which helps promote economic stability and equity.

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 the local cost of living and labor market conditions. Additionally, prevailing wage laws help to close racial wage gaps by providing equitable pay across different demographics, fostering a more inclusive and fair workplace.

Increasing Work Quality

Prevailing wages boost worker productivity by providing adequate compensation, which enhances morale and motivation. These laws also encourage apprentice training programs, helping to cut down on 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 is built to last. Additionally, prevailing wage laws help attract a more skilled and dedicated workforce, further improving the quality and reliability of the 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 on public projects. These rates are determined based on surveys that gather 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, ensuring that prevailing wages are fair and representative of local labor market conditions.

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

For a more detailed look and to determine the specific prevailing wage rates for your area, visit SAM.gov's Wage Determinations page.

Prevailing Wage Determination by State

The threshold for prevailing wages on public projects generally starts at $2,000, meaning any government contract exceeding this amount requires workers to be paid the prevailing wage.

However, the specific rates and thresholds can change from state to state due to different rules for workers, costs of living, and laws in other places. Some states have set higher thresholds or implemented more stringent requirements to ensure workers are compensated somewhat in line with the local cost of living and prevailing wage rates.

In states with higher living costs, prevailing wage rates are often set significantly above the federal minimum wage to reflect the 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 thresholds may only adhere to the federal minimum wage standards, potentially resulting in lower compensation for workers on public projects.

Understanding these variations is important for contractors, HR 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 improved project outcomes and worker satisfaction.

22 States Without Prevailing Wage Laws

Not all states have enacted laws establishing prevailing wage thresholds for public projects. In these states, no specific regulations require government contractors to pay wages that match local standards for similar work. This can lead to variations in how workers are compensated for public projects compared to states with prevailing wage laws.

Here is a list of the 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 following prevailing wage laws is critical for government contractors, HR professionals, and business owners. These laws ensure that workers receive fair wages, promote inclusivity, and improve the quality of work on public projects. By following prevailing wage regulations, you can avoid financial penalties, improve worker productivity, and help close wage gaps.