Government contracts require understanding the requirements for businesses performing the work. For HR in California, prevailing wage is one of the concepts to master.

In addition to setting up and maintaining a certified payroll process, construction companies must pay their employees the appropriate local prevailing wage. This also means having a prevailing wage reporting process. 

Understanding the Concept of Prevailing Wage

When contractors are working with federal contracts and projects, they are subject to regulations requiring certified payroll and providing prevailing wages according to the Department of Labor (DOL) requirements. 

The DOL's website establishes the legal basis for these requirements,

"Prevailing wage requirements of various laws applicable to government contracts are enforced by the Wage & Hour Division.

The Davis-Bacon and Related Acts (DBRA) require payment of prevailing wages to laborers and mechanics employed on federal and federally-assisted construction projects.

The McNamara-O'Hara Service Contract Act requires payment of prevailing wage rates and fringe benefits to service employees employed on contracts to provide services to the federal government."

In California, there are similar requirements for contractors working on state government projects. These requirements include paying the prevailing wages in California. Understanding the specifics of established prevailing wage in California is critical for contractors working with state government contracts. According to the state of California's Department of Industrial Relations (DIR),

"All workers employed on public works projects must be paid the prevailing wage determined by the Director of the Department of Industrial Relations, according to the type of work and location of the project. The prevailing wage rates are usually based on rates specified in collective bargaining agreements."

The DIR also notes that,

"In addition, contractors and subcontractors on most public works projects are required to submit certified payroll records (CPRs) to the Labor Commissioner using DIR's electronic certified payroll reporting system."

One of the concerns for contracting company's HR in California, prevailing wage is determined by a number of factors.

Prevailing Wage In California

According to our blog where we covered this topic in a previous post,

"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 job, it "prevails." Thus it becomes the standard rate for a government contract. This rate varies from county to county."

Among other things, the California prevailing wage laws require that any work over eight hours a day, or more than 40 hours per work week, must be paid at the California overtime rate, which is 1.5 times the regular prevailing pay rate.

In addition, if an employee works over 12 hours in a single day, or over eight hours on the seventh day of a work week, that employee must be paid double time.

California state law also requires that worker's pay on public works projects must equal,

“[T]he general prevailing rate of per diem wages for work of a similar character in the locality in which the public work is performed, and not less than the general prevailing rate.”

So, what is the prevailing wage?

Prevailing wages in California are determined by the Director of the DIR. As per Cal Labor Code § 1773, the director sets the prevailing wage rate according to,

“[C]ollective bargaining agreements and rates predetermined for federal public works, within the locality and the nearest labor market.” 

If it is determined that those rates do not equal the rates that are “actually prevailing in the locality” the Director can then obtain additional information from “local labor organizations, employers, and employer associations” about the type of work in question. Once this is established, the rate set cannot be less than the “actually prevailing rate.”

Determining Prevailing Wages on Your Project

Prevailing wages differ based on a worker's job classification and a typical construction firm employs people with many different skills. So how do you determine which rate a given employee should earn?

The good news is that you don't need to do all the research yourself. The California Department of Labor provides current prevailing wage rate schedules based on information gathered in many locales. These can be found here https://www.dir.ca.gov/OPRL/DPreWageDetermination.htm.

Once you have the necessary information, setting up your certified payroll with the correct prevailing wages is relatively easy and simply requires accurate reporting.

This may be easier said than done, though.

Fortunately, Time2Pay software from Accuchex makes determining and managing prevailing wages easier. Setting up your certified payroll in Time2Pay allows you to input prevailing wages for job types and then assign various crew members to be paid at those rates.

Because the prevailing wages can vary from place to place, and you may have projects in several locations, having the built-in ability to control this information is critical. Accuchex includes relevant information, such as the job location and the wages paid when processing your weekly certified payroll, and this information keeps your company in total compliance with the state and/or federal reporting and payroll requirements.

Once you've determined the prevailing wages in your job site locale, setting up your payroll process 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.

And Accuchex can help with navigating this often complicated arena of government contracting with support that is invaluable for construction firms of any size.

Supporting Your Certified Payroll Process

Accurate and timely management and compliance practices are required for construction industry HR professionals. This is especially true for tasks such as certified payroll. Maintaining this can be challenging, but there are options.

Accuchex is a reputable workforce management services provider and can not only assist you with the burden of your ongoing compliance demands, but can potentially prove to be a more cost-effective solution, as well.

Click the button below to learn what how we can help you certified payroll management best practices. For more immediate information, feel free to call Accuchex Payroll Management Services at 877-422-2824.