Among some employers, the terms “prevailing wages” and “minimum wage” occasionally get confused. “Minimum wage” specifically refers to the federal minimum wage for employees established by the Fair Labor Standards Act, as well as the minimum wage set by individual states. When there’s a difference between federal and state minimum age rates, employees must be paid the higher of these two rates.
“Prevailing wages” are rates of pay established by the U.S. Department of Labor, based upon a geographic location for a specific class of labor and type of project. The federal government and many states adopted prevailing wage standards to avoid situations where non-union employers or contractors could offer the lowest bid on a project by undercutting employee compensation and compromising or neglecting safe working conditions.
The Federal Davis-Bacon Act was first developed in 1927 by two Republicans – Representative Robert L. Bacon from New York and Senator James J. Davis from Pennsylvania and was signed into law on March 3, 1931 under the Hoover administration.
Representative Bacon introduced the first version of the bill in 1927 after a contractor employing African-American workers from Alabama was awarded a contract to build a Veterans’ Hospital in Long Island. He did so due to concerns about the conditions of the workers, displacement of local workers by migrant workers, and competitive pressure toward lower wages.
The submission of Certified Payroll Reports on a weekly basis is a requirement of working on Prevailing Wage projects.
If you are new to working on government construction projects; you and your staff, especially your payroll clerk, need to learn about:
- How prevailing wage is going to affect your business,
- How you need to classify/pay your employees,
- Ways that your company can pay the fringe benefit portion of the prevailing wage,
- And how to meet paper and/or electronic certified payroll reporting requirements.