Accuchex Blog

Certified Payroll & Prevailing Wages Clarified for Construction Companies

Posted by Tristan Ruhland on Aug 8, 2016 7:00:00 PM

Winning government contracts is often an essential part of a construction firm's business goals. Entering into government work, however, requires an understanding of the many requirements placed upon businesses performing the work.

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Before you can dig deeper, you must first familiarize yourself with the reasons behind the need to certify the legal compliance of your weekly payroll.  Construction companies must submit a certified payroll partially to confirm that you are paying your employees the appropriate local prevailing wage.

It's not simply a matter of paying employees a standard hourly rate. Instead, where the government is concerned, labor compensation must occur at a rate the government determines using local factors. This has a significant effect on the way you process your payroll. As with preparing a certified payroll, Accuchex offers a robust capability for employers in Time2Pay when it comes to paying out prevailing wages and designating which employee receives what wage. First, let's take a moment to learn a little more about the facts behind this procedure.

What is a "prevailing wage"?

Before we discuss what the factors determining a prevailing wage are, it's important to understand what this term means. Just as certified payroll reports have roots in the Davis-Bacon and Related Acts, so do prevailing wages. In fact, they were a key reason for drafting the legislation. Simply put, it is a standard wage designed to stop contractors from using less costly out-of-state labor while leaving a local workforce unemployed. It guarantees that businesses appropriately compensate the builders they employ. However, it also ensures that compensation is what they would receive for doing similar work in the area. Documenting compliance and proving payment of the appropriate wage is a core function of the certified payroll.

Overall, a prevailing wage rate is the sum of several different measures. These include the basic hourly rate of pay, benefits one might normally expect in the position, and expected overtime. If more than half of a county's workers in its largest city receive a certain wage for a particular job, it "prevails." Thus it becomes the standard rate for a government contract. This rate varies from county to county and state to state. Prevailing wages are usually updated annually, though some states may adjust more frequently.

Need more info on prevailing wages? Download our complimentary guide  on construction payroll.

How do you determine a prevailing wage?

Since prevailing wages change based on one's job classification, it's easy to see that this introduces some complexity into the payroll process. After all, a construction firm employs people with many different skills. How exactly do you know which rate a given employee should earn? Thankfully you won't need to do all the research and math yourself. The Department of Labor compiles its own prevailing wage rate schedules based on information gathered in many locales. Individual states may use these schedules or develop their own. You may have to request information on the local prevailing wage from the relevant state department to receive a current determination. Once you have the information necessary, setting up your payroll is largely just a matter of accurate reporting. That can be easier said than done, though.

7 points to consider about payroll in the construction industry

How Time2Pay makes managing prevailing wages easier

Because there are so many different kinds of workers on a construction site, it's unlikely that an entire crew will receive the same prevailing wage. An iron worker will have a different rate than a carpenter or a roofer. Paying the correct wages — and by extension, creating an accurate certified payroll — depends heavily on matching employees to the proper job codes and wage rates. Otherwise, there is a risk of paying an incorrect wage and introducing errors into the information reported to the government. Strict accuracy is critical for compliance. Accuchex's Time2Pay brings simplicity to this process. Setting up your payroll and assigning prevailing wages to particular employees is uncomplicated.

In the process of setting up a payroll in Time2Pay, you have the ability to input prevailing wages for job types and then assign construction crew members for payment at that rate. The prevailing wage can vary from place to place and you may perform work in several locations. Therefore, the ability to control this information is built-in. Accuchex includes this relevant information, such as the job location and the wages paid when processing your weekly certified payroll. This information allows your company to be in total compliance with the necessary reporting and payment requirements defined by the law.

The reliable revenue and steady work that stem from government contracts, especially long-term jobs, makes strict compliance a fair price to pay. Once you understand prevailing wages, setting things up in Time2Pay is easy. After setup, it's just a matter of maintaining accurate records of the prevailing rate in your operating areas and keeping your payroll up to date. Accuchex offers assistance in navigating this often complicated area of government contracting. This support is invaluable for construction firms of any size.

Do you need to talk to a payroll specialist to get a better understanding of local prevailing wages? Or, do you have any questions related to payroll management or outsourcing your payroll? Please do not hesitate to connect with us online for a complimentary certified payroll demonstration or contact us at (415) 883-7733.

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Topics: Prevailing wages, Certified payroll, Certified Payroll Software

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