What is prevailing wage?

Prevailing wage is the minimum hourly rate, including fringe benefits, that contractors must pay each trade on publicly funded construction. Federal projects fall under the Davis-Bacon Act; many states have their own versions, sometimes called little Davis-Bacon laws, that apply to state and local work. The rates are set by trade and by geographic area and are published with the bid documents.

Where it applies

Federal and federally assisted construction above a contract threshold, and state or local projects where state law requires it. The rules on which projects qualify, which workers are covered, and how apprentices are treated are specific and change, so a contractor bidding public work should confirm the requirements for each job rather than assume.

What it means day to day

• Classification. Every worker is paid at the rate for the trade they are performing, which can change hour by hour on a job.
• Fringe benefits. The published rate includes a fringe amount that can be paid in cash or through qualifying benefit plans.
• Certified payroll. The contractor submits weekly payroll reports certifying compliance. Errors are expensive and, if deliberate, criminal.
• Bidding. Because everyone pays the same rates, public work is won on productivity, planning, and overhead rather than on wages.

Why it matters to a builder

Prevailing wage work levels the field between union and non-union contractors and makes public work accessible to smaller companies that can manage the paperwork. It is also a discipline: a contractor that can run certified payroll cleanly usually runs the rest of the business cleanly too.

Related terms: surety bond.